Property Case Shows Need for Reasonableness

In a recent case, a landlord claimed dilapidations in excess of £1.5 million from its tenant, when what had actually occurred was a major refurbishment of the entire building. Indeed, some of the dilapidations claimed for related to work which had not actually taken place. The tenant refused to meet the claim, so the dispute ended up in court.

Only much later did the landlord accept that the exterior of the building was not in disrepair and that the interior work was largely a conversion of the premises into furnished offices.

In considering the claim, the court concluded that the work done by the landlord did include dilapidations recoverable from the tenant, but only to the value of £1,073. The tenant had made no offer of settlement to the landlord.

The tenant claimed that in spite of it having to make a payment, it was the clear winner in the proceedings and therefore argued that the landlord should pay its costs. Furthermore, it claimed it should receive ‘indemnity costs’ – the term applied where costs are awarded which are greater than those which would normally be payable to the winner. Indemnity costs are awarded only if there has been unreasonable or inappropriate conduct of the proceedings.

In this case, the landlord’s claim was considered to be so exaggerated that it had prevented meaningful negotiations from taking place. In addition, the failure to provide the tenant with accurate figures relating to the cost of the works done made it impossible for the tenant to evaluate the true position. The court ruled that the tenant was entitled to indemnity costs as yet to be determined.

Aston Bond says, "Keeping a sense of perspective when negotiating with your landlord or tenant is always advisable, especially where claims for dilapidations are concerned."

Business Environment Bow Lane Ltd. v Deanwater Estates Ltd. [2008] EWHC 2003 (TCC). See http://www.bailii.org/ew/cases/EWHC/TCC/2008/2003.html.

Telephone: +44 (0) 1753 486 777 (Slough Office)
Telephone: +44 (0) 1189 596031 (Reading Office)