10 July 1998

LEGAL MATTERS

Whose repairs?

THE relationship of landlord and tenant, whether or not it exists under the Agricultural Holdings Act 1986, frequently gives rise to disputes as to who is responsible for repairs to the tenanted holding. It can also lead to claims by the landlord that the tenants failure to discharge repairing obligations to the land or buildings, has resulted in a reduction in the capital value of the landlords reversion – his interest subject to the tenancy.

In these circumstances, landlords have to consider carefully what action to take to put the problem right. If the tenancy is under the Agricultural Holdings Act 1986, the complex notice procedure will almost always involve expense, delay and uncertainty. Equally, applications to the Agricultural Land Tribunal for Certificate of Bad Husbandry are notoriously difficult to have upheld and again involve expense and risk.

Finally, only determined landlords will attempt to forfeit a lease, since the tenant may be given relief from forfeiture by the court and thereby the opportunity of preventing the tenancy from terminating.

In view of all these difficulties it is not surprising that, increasingly, landlords who can identify breaches of repairing decide the best course of action is to sue the tenant for damages – the claim being based on the reduction in the capital value of the reversion.

The Court of Appeal, in a recent case involving a tenanted holding under the Agricultural Holdings Act 1986, has provided guidance to the basis on which damages should be assessed and the approach that should be adopted to claims of this kind.

The court held it was wrong to treat the undiscounted cost of repairs as the reduction in value of the reversion when assessing damages for breach of covenant, under a continuing agricultural tenancy protected under the 1986 Act, since the length of the tenancy was unpredictable. Instead, the court held that the damages the landlord should recover must be determined objectively and that all the circumstances should be looked at, including the prospect of the landlord actually utilising the money that he recovered from the litigation for the purpose of carrying out the repairs in question as well as the likely future length of the tenancy.

However, the court did indicate that for damages to be awarded at the beginning, or in the middle, of the term of a long tenancy, the landlord must show by evidence that a reduction in the value of the reversion had occurred, otherwise his claim might fail. Equally, at or towards the end of the term of the tenancy, a tenant failing to show that the reduction in the value of the landlords reversion was much less than the cost of the repairs, may find that the court will award damages at or about the level of cost of repairs.

The courts ruling means that tenants are likely to be more frequently faced with claims of this kind by landlords who have despaired of utilising the other available procedures against their tenant, on grounds of expense, delay and lack of certainty:

The landlord may also be encouraged to bring the claim, having in mind the possibility that doing so may result in the tenant being dispossessed of the tenancy because of the financial implications for him of the claim being brought.

However, tenants faced with such a claim should be alert to the landlords obligation to prove that a reduction in the value of his reversion has actually occurred. It may be possible for credible evidence to be adduced on behalf of the tenant, particularly in a thriving property market, to the effect that there has been no such reduction since the particular lack of repair has had no adverse financial impact on the value of the landlords reversion – in which case the landlords claim will fail.

James Buxton is a Partner in Burges Salmon, Bristol.