Dilapidations: what is the appropriate standard of repair for a hotel?

The High Court has considered the appropriate standard of repair of a hotel in Coldunell Ltd v Hotel Management International Ltd [2022] EWHC 1290 (TCC), a claim for dilapidations which reviews the key principles and highlights the perils of expert evidence. The claimant was the former freeholder of the Mitre Hotel in Surrey. The defendant, a well-known hotel operator, vacated in September 2016, having occupied the property for more than 20 years. The claimant served a terminal schedule of dilapidations in November 2017, claiming damages for breach of the defendant’s repairing obligations of £1.08m of which £465k had already been incurred. The defendant’s lease required it to keep the property “in good and substantial repair and condition” and to yield up the property “decorated, repaired, cleaned and kept” in accordance with the lease covenants. The parties agreed that the standard of repair for compliance with the defendant’s obligations was such repair as having regard to the age, character and locality of the premises would make them reasonably fit for the occupation of a reasonably-minded tenant of the class likely to take them Proudfoot v Hart [1890] 25 QBD 42. The standard set by the court was that of a 36-room “high class” hotel, restaurant and public house, fully refurbished to a high standard when let, properly maintained and situated in a historic 17th century Grade II listed building located on the banks of the river Thames, opposite Hampton Court Palace. The measure of damages for breach of a repairing covenant is the reasonable cost of the works required to put the property in the condition it ought to have been when delivered up – whether undertaken by the landlord or not – Joyner v Weeks [1891] 2 QB 31, subject to the statutory cap. Section 18 of the Landlord and Tenant Act 1927 provides that damages for breach of a covenant to repair shall not exceed the diminution in the value of the landlord’s reversion as a result of the breach. The court heard expert building surveying and valuation evidence in considering the various elements of the claim. The defendant’s building surveyor had not inspected the property and took a slapdash approach to the evidence of condition. He acted as advocate for his client – repeatedly referring to “our case” – rather than providing expert opinion. His opinions – that the boilers were in good repair – lacked credibility when contradicted by the evidence. Consequently, the court was unable to place any reliance on his evidence. The established approach to assessing diminution in value for the purposes of section 18 of the 1927 Act is to carry out two valuations – first, assuming the property is in a state compliant with the tenant’s obligations, and second, on the basis of its actual state and condition. The difference between the two is the damage to the reversion. The claimant’s valuer had produced valuations on this basis – establishing a diminution of £1.3m – but the defendant’s valuer had not, so the valuations could not be compared. The claimant’s valuer’s evidence was preferred. The statutory cap did not bite, and the claimant established the majority of its claim. Louise Clark is a property law consultant and mediator