Responding to dilapidations claims

In many instances, interim dilapidations remedies such as forfeiture and repairs notices (commonly known as ‘Jervis v Harris’) are used by the landlord to get the tenant to the negotiating table for other reasons. These reasons may include the desire for a variation in the terms of the lease; to apply pressure during a rent review; or to obtain an early surrender. The tenant needs to be aware of the possibility that there may be other reasons for the landlord’s action, so that it can decide how it should respond to the approach. In some instances, it might elect to ignore the landlord’s notice, in the belief that it does not mean to pursue it. However, this is a high-risk strategy, which might result in considerable expenditure or even forfeiture of the lease and the loss of possession of the building.

Forfeiture

For more general information see Forfeiture.

From a tenant’s point of view, where a section 146 notice (see under Forfeiture) is served and the Leasehold Property (Repairs) Act 1938 applies, the landlord can proceed straight to forfeiture (recovery of possession of a building) by such means as is lawful unless the tenant serves a counter-notice within the required time (usually 28 days). Therefore, a tenant in receipt of a section 146 notice should act on it, seeking appropriate legal advice immediately.

Assuming that the forfeiture action is legitimate, the tenant must consider whether it really wants to allow the lease to become forfeit. In the event that a landlord succeeds in obtaining forfeiture, it is still likely to have a claim for the damages caused by any breaches of covenant, and there is therefore likely to be little financial gain in not responding to the dilapidations claim. The tenant must consider which of the works that it feels have been validly stated by the landlord in the notice and need to be carried out.

Complying with any notice period stipulated in the section 146 notice is clearly important (the landlord does not have to specify such a period), but it would be prudent too for the tenant to enter into a dialogue with the landlord both to discuss the nature of the allegations and to explain the steps that are being taken to mitigate the items in contention. If the tenant is taking reasonable steps to comply with the notice, such as putting contractors on site to action the works, it is less likely that a court will grant forfeiture, especially if the tenant can show that it has kept the landlord informed.

Relief from forfeiture

Where a landlord has forfeited or is seeking to forfeit a lease, the tenant can generally seek the reinstatement of the lease by a process known as ‘relief from forfeiture’. Subtenants and mortgagees may also be entitled to seek such relief. However, relief, which may be agreed by the landlord (with a confirmatory court order or new lease) or ordered by the court, is usually conditional on the breaches complained of being remedied and the landlord’s costs being reimbursed, including compensation for losses that would not be resolved by the tenant doing the works. This is not always the case, however, and there will be (perhaps limited) circumstances where relief is given without that condition. If new breaches have occurred since the forfeiture was effected, then the court might also require those to be remedied.

Although there are various provisions concerning relief from forfeiture where the breach is non-payment of rent, where the breach is of the terms as to the condition of the building, the tenant, subtenant or mortgagee may only seek relief from forfeiture under section 146 of the Law of Property Act 1925.

An application may be made as soon as the section 146 notice has been served and may be made even though the landlord has forfeited by peaceable re-entry. If forfeiture is effected by court proceedings, then an application must be made before the landlord executes any order for possession. If the order has been executed and the landlord has actually recovered possession, then the right to relief from forfeiture in these circumstances is lost. Moreover, the court has discretion as to whether and how it grants relief from forfeiture such that any application should be made swiftly.

There is a great deal of complexity surrounding the status of the tenancy in the period between the commencement and service of forfeiture proceedings and the hearing of the tenant’s application for relief from forfeiture. Although the forfeiture is not confirmed until the eventual court order, it becomes effective as at the date of service of the proceedings. If the tenant’s application for relief is successful, then in most circumstances relief is effective as at the service of proceedings. In the interim period, however, it would seem that the landlord may have difficulty enforcing some or all of the terms of the tenancy. However, if there are breaches of the terms of the tenancy during that period, then once relief is achieved, those breaches may be retrospectively enforced.

Repairs notices

For more general information see Repairs notices.

Usually a repairs notice (under the principles of Jervis v Harris [1996] Ch. 195) will stipulate a specific time period for the tenant to undertake the required works. In practice tenants faced with a Jervis v Harris claim will often carry out the work themselves without the landlord having to do so itself. The motivation for the tenant is that it retains control of the manner in which the work is carried out and its cost. If at the end of the specified time period the tenant has not carried out the required works, the landlord will be entitled to enter the property, undertake the works itself and recover the costs as a debt. Where the landlord has issued a repairs notice the tenant will probably find it more difficult to defend its position. This is because the landlord only needs to prove that a breach of the tenant’s obligations has occurred, and not necessarily that damage has flowed from it. In addition, the defences of the Leasehold Property (Repairs) Act 1938 do not apply. If the relevant schedule is correctly prepared and served, this makes such an approach a powerful tool for the landlord, and the tenant will, essentially, be forced to execute sufficient works to comply with the covenants.

The tenant should check the repairs notice carefully. If it contains inappropriate items of breach and/or the landlord executes or intends to execute inappropriate remedies, this will allow the repairs notice to be resisted and, in the event the landlord enters to do works, could open the landlord to a claim from the tenant for breach of quiet enjoyment, trespass or even that the landlord has peaceably forfeited the lease.

Again, it would be prudent for the tenant to enter into dialogue with the landlord about the nature of the allegations and the proposed approach to mitigating them. It is possible that if the tenant has started its works, the court will not support the landlord entering to carry these out. Additionally, the Health and Safety Executive (HSE) will have difficulties in accepting two independent contractors on the same site seeking to do the same works, as this would be a breach of the Construction (Design and Management) Regulations 2015 (CDM).

If the tenant decides not to carry out the work and also refuses to allow the landlord to carry out the works the landlord may seek a court injunction or consider forfeiture (see Where access is refused under Landlord entering and carrying out the works for more information).