Philip Holliday

"A warzone with grease" – but was there a case for dilapidations?

22nd April 2024

The case concerned the former Chinese restaurant Pearl City in Manchester. The defendants had been tenants of the property for many years. When they vacated, the property was in a poor state of repair — described by the judge as a warzone with grease.

The landlord brought a claim for terminal dilapidations. The defendants raised three arguments in response, each aimed at reducing or extinguishing their liability.

The Defendants' Three Arguments

The defendants argued as follows:

  1. The property was in such a poor state of repair at the start of the lease that they could not be liable for its condition at the end.
  2. The landlord had not suffered any loss because it intended to redevelop the property.
  3. The s.18(1) cap under the Landlord and Tenant Act 1927 applied to limit the damages to the diminution in the value of the reversion.

The judge rejected all three arguments.

The Judge's Six-Point Summary of the Law

In a careful judgment, the judge set out six key principles governing dilapidations claims:

  1. The tenant's obligation is to put and keep the property in repair throughout the term.
  2. The standard of repair is that which a reasonable tenant would carry out having regard to the age, character and locality of the property.
  3. The fact that the property was in disrepair at the commencement of the lease does not reduce the tenant's repairing obligation.
  4. The landlord's intention to redevelop does not automatically extinguish the claim; it is relevant only to the s.18(1) cap.
  5. The s.18(1) cap limits damages to the diminution in value of the reversion caused by the breach — it does not cap at nil merely because redevelopment is planned.
  6. Betterment — where repairs would put the property in a better condition than it was at the start of the lease — may reduce the damages recoverable.

The Outcome

The judge awarded the landlord damages of £542,671.17. This was the cost of the works required to put the property into the state of repair required by the lease, subject to appropriate deductions for betterment.

The case is a reminder that tenants cannot escape liability for dilapidations simply because the property was in poor repair at the start of the lease, or because the landlord intends to redevelop. The s.18(1) cap is not a free pass.