Remedies

Unlike a landlord’s claim for damages against a tenant, there are no statutory restrictions on a tenant’s claim for damages against a landlord. Consequently, the measure of the tenant’s damages is derived from common law. Probably the three most significant cases in this respect are Calabar Properties Ltd v Stitcher [1984] 1 WLR 287, Wallace v Manchester City Council [1998] 3 EGLR 38 (which concerned residential property) and Earle v Charalambous [2006] EWCA Civ 1090 (which also concerned residential property).

In summary, the approach is to identify what sum will put the tenant back into the position it would have been but for the breach of covenant by the landlord. Linked with that is a comparison of the building as it was during the period of the landlord’s breach with what it should have been had there been no breach. There are distinctions that apply where the tenant remains in occupation and where the tenant leaves.

Tenant remains in occupation

On the face of it, the measure of damages in this instance is assessed by valuing the premises in their condition where the landlord is in breach and comparing this with the value the premises would have had to the tenant had the covenant been satisfied. In a similar way where the landlord claims damages against a tenant, the cost to the tenant of remedying the landlord’s breach may be an indicator of the damages due to the tenant, plus an amount for inconvenience and discomfort.

One way of approaching such damages is to assess a notional reduction in the rent. Another is to allow a global amount for discomfort and inconvenience. For example, where part of a building cannot be used, the court may attribute a part of the rent to it and multiply that by the period of time it is out of use. The court may, however, be concerned to adopt such an approach on the basis of the true rental value of the building, rather than the actual rent payable, although there have been exceptions. In the case of a long residential lease at a low rent, the court allowed damages calculated by reference to the amount for which the property could have be let by the tenant (Earle v Charalambous [2006] EWCA Civ 1090).

Although the case of Wallace v Manchester City Council [1998] 3 EGLR 38 concerned residential property, the concept of damages for inconvenience has been applied to commercial property and an amount allowed for inconvenience to a corporate tenant’s staff and customers (see Credit Suisse v Beegas Nominees Ltd [1994] 1 EGLR 76, where £40,000 was awarded).

The tenant may also claim for ill health and loss of profits. Further, if the tenant’s belongings have been damaged as a result of the landlord’s breach, or if the tenant’s demised property is damaged then a claim might be made for the consequential loss. For example, if the roof, for which the landlord has responsibility, leaked and the water penetration then damaged the tenant’s furniture and internal wall decorations.

If the tenant has been forced to carry out the work itself, then the resultant cost could be the subject of a claim (see under Tenant carries out the work (self help)). However, credit might have to be given for that part of the cost that the tenant would have had to pay to the landlord if it had properly carried out the work when due.

Tenant leaves and returns or sells or sublets

If the damage consequent on the landlord’s breach is such that the tenant has to leave the building, occupy (and pay for) alternative accommodation, and then return to deal with any redecoration or similar activity, then all the resultant costs (provided they are reasonable) can form part of its claim for damages against the landlord.

If the tenant has lost profits as a result of the landlord’s breach, there may be a claim, but it depends on whether such losses could be said to have been contemplated by the parties.

If the tenant sells its leasehold interest before the work is carried out, and if there is a difference in the price that would have been achieved if the landlord had complied with its covenant, then that difference will be a measure of the tenant’s damages.

If the tenant had wanted to sell, but could not, as a result of the landlord’s breaches, then the tenant may be able to claim any loss of premium and any costs associated with retaining the building (including outgoings, rent and service charges - see Credit Suisse v Beegas Nominees Ltd).

If the tenant had wanted to sublet and could not, or was only able to do so at a reduced rent, there may be a further claim. However, a landlord could argue that such a claim is too remote and that it cannot be held responsible for such loss. As so often is the case, the outcome will depend on the particular circumstances.

To maximise its chances of making a successful claim for damages against the landlord, the tenant should make the landlord aware of the problem as soon as possible and give it every opportunity to take remedial action, including allowing the landlord access to the premises demised to carry out the work. Some leases require the tenant to give notice to the landlord of alleged disrepair for which the landlord has a responsibility. In such cases, the landlord will not usually be liable to the tenant until the required notification has been given. The tenant should also ensure that the landlord is aware of the potential loss it may suffer without action. For example, the tenant may not be able to sell at the price it would otherwise have achieved or might not be able to use the whole or part of the building for its normal and permitted purpose.