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Dealing with a commercial tenantís disrepair: what are a Landlordís remedies?

( 29 March 2017 )

The remedies available to a landlord when a tenant is in breach of repairing obligations or other obligations relating to the physical condition of a commercial property, will depend on the specific terms of the lease and whether or not the contractual term of the lease has come to an end. There are also other commercial considerations which will affect how and when a landlord takes any action.

Re entry or forfeiture

Modern commercial leases should contain a clause entitling the landlord to re enter in the event of a breach of covenant. The landlord must first serve a notice specifying the breach and requiring the tenant to remedy the breach, it if it is capable of remedy, and to pay compensation; this notice may galvanise the tenant into action and if not, the landlord can take issue a claim for possession and for damages for the disrepair.

In a difficult climate a landlord may be reluctant to forfeit a lease for breach of a repairing covenant if the tenant is complying with its other covenants and paying rent on time. However, putting off tackling what might be a big repair bill is not necessarily a sensible approach.

Self help

Most modern commercial leases will contain a clause entitling a landlord to enter the property during the term of the lease, carry out the repairs and then recover the cost of doing so from the tenant as a debt; this is known as ‘Jervis v Harris clause.’ There are advantages to a self help approach particularly if a landlord is concerned about protecting the value of its investment or about potential liability to third parties as a consequence of the disrepair. However, generally landlords tend not to favour this approach and would prefer, if forced to carry out repair works before recovering the cost from the tenant, to do so without the tenant in occupation. 

Specific performance

It is, in principle, possible for a court to Order a tenant to comply with repairing covenants but because damages will in most cases be an adequate remedy, the cases where this will be appropriate are few and far between. 

Damages

A landlord has a right to claim damages for breaches of the tenant’s covenants relating to the physical state of the premises when the lease ends; these are known as dilapidations claims. The starting point is that a landlord is entitled to the reasonable cost of doing the repair works plus loss of rent for the period until the works have been completed. However, the law is complex and professional help will be required.

A landlord will normally need to arrange for a surveyor experienced in dealing with dilapidations claims; he will inspect the property to establish the extent of the breaches and to document them in a schedule of dilapidations. In claims for damages at the end of the lease, or ‘terminal dilapidations,’ it is recommended that this schedule is served at least six months before the end of the lease term. If the landlord and tenant are intending to enter into a new lease it is important that dilapidations are addressed before the renewal lease is completed to avoid any arguments about the extent of the tenant’s repairing obligations under the new lease.

 

For further information relating to the points raised in this article, please contact Johanne Spittle or a member of the property litigation team.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

blog post found at http://social.luptonfawcett.com/blog/dealing-commercial-tenants-disrepair-what-are-landlords-remedies

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