Where a landlord or tenant breaches their repairing covenants on a let property, the other party is entitled to compensation for the loss they suffer. Normally, once the responsibility is accepted, agreeing the amount payable is a relatively straightforward matter. Occasionally, however, the arguments are more complex, as was the case in a dispute which recently ended up in the Court of Appeal.
In the case in point, the tenant had breached its repairing covenants and the landlord sought damages. The tenant argued that the sum awarded should be based on the reduction in the value of the freehold as a result of the tenant’s failure to repair the property. This was because the property was ‘ripe for development’ and so it was very likely that a new owner would redevelop it, making most of the repairs for which compensation was sought unnecessary. The lower court accepted this line of reasoning and set the damages at £50,000. The landlord was unhappy with this decision, claiming that the correct amount of damages was the cost of the necessary remedial work. The landlord appealed.
The Court of Appeal ruled that in the particular circumstances that applied in this case, the judge had been justified in concluding that any purchaser would acquire the premises with a view to redeveloping them. Such a purchaser would not need to undertake much of the repair work and therefore the correct measure of compensation was the reduction in the value of the property due to its lack of repair.
