Landlord and tenant – Repairs – Liability – Leases of ground and basement floors of building – Leases containing tenant’s repairing covenants but no express covenant by respondent landlord to repair retained parts – Covenants requiring landlord to insure premises – Damage to demised premises caused by leaks from upper and external parts retained by respondent – Appellant tenants failing in claim for large sum of damages – Whether respondent liable for damage – Whether scheme of leases precluding existence of relevant duty – Appeal dismissed
The appellants were the tenants of the ground floor and basement of two adjoining sets of commercial premises under two leases from the respondent landlord. The demise did not include the upper floors of the premises, which the respondent let separately as residential flats, or the soil pipes on the rear wall of the building, which served the upper part of the premises. Each of the two leases contained tenant’s repairing covenants but no corresponding covenant by the landlord to repair those parts of the building that it retained; however, there was a covenant requiring the landlord to insure the premises.
The appellants fitted out the demised premises at some expense for use as gallery space. As part of their business, they fitted out part of the area for exhibits and other commercial events. However, on several occasions between April 2004 and June 2005 the interior of the premises was damaged by the ingress of water and, on two occasions, sewage from the parts of the building retained by the respondent. The necessary repairs were paid for by insurance payments from the respondent’s building insurance.
In October 2008, the respondent forfeited the leases for non-payment of rent and re-entered the premises. The appellants claimed a large sum by way of damages for financial loss flowing from lost business as a result of the earlier leaks. In the court below, the judge held that, in the absence of negligence, the respondent’s liability to remedy defects arose only once it became aware of those defects. He found that the respondent had acted reasonably once it was alerted to the damage, save for a three-week delay in April 2005 for which he awarded damages of £100. Since the damages were insufficient to extinguish the rent arrears, the judge declared that the leases had been forfeited by the respondent’s re-entry.
The appellants appealed. They contended that the court should imply into the leases a covenant by the respondent to keep the retained parts of the building in repair at all times.
Held: The appeal was dismissed.
Although, as an owner of adjoining premises, the respondent had a liability in nuisance for damage caused by an actionable interference with its neighbours’ enjoyment of their property, liability in nuisance was fault-based and depended on showing that the respondent had used its land in a way that it knew, or should have foreseen, would cause damage to its neighbour: Sedleigh-Denfield v O’Callaghan [1940] AC 880 considered. So far as liability was derived from the landlord’s retention of the external and upper parts of the building, that liability was based on a duty to take reasonable care to ensure that the retained premises were not in such a condition as to cause damage to the tenant: Cockburn v Smith [1924] 2 KB 119 and Duke of Westminster v Guild [1985] 1 QB 688; [1983] 2 EGLR 37; (1983) 267 EG 762 applied. The better view was that the obligation arose from an implied term in the relevant contract rather than in tort: Gordon v Selico Co Ltd (1986) 18 HLR 219; [1986] 1 EGLR 71; (1986) 278 EG 53 considered. Either way, the court had to consider whether the express scheme of repair or insurance imposed by the lease excluded any other form of liability that the law might otherwise impose.
The appellants’ case depended establishing that: (i) a liability on the landlord to keep the retained parts in repair should be implied or imposed over and above the express terms of the two leases; and (ii) the implied obligation to repair should be absolute in nature, in the sense that the landlord became liable for the consequences of the disrepair as soon as it occurred regardless of whether it had, or should have had, notice of the defect.
Any absolute obligation would have to be contractual and based on factors other than the landlord’s control of the external and upper parts of the building, since liability based on the landlord’s position as an adjoining occupier depended on negligence and notice. However, there were no grounds for attributing to the parties an intention to impose on the respondent a stricter implied obligation to repair defects in the demised premises than was imposed by the law by reason of the respondent’s control of the building. Although the leases imposed no express repairing covenant on the respondent as landlord, the repair of the structure of the building was catered for through the insurance covenant. The appellants were not left without a remedy in the case of any disrepair of the structure, since that constituted an insurable risk and the respondent was required to apply the insurance moneys in making good the damage and disrepair. In the face of those provision, there was no reason of necessity or business efficacy to alter the balance of the scheme by imposing an implied covenant to repair on the respondent, let alone one under which its liability to repair was made absolute: Liverpool City Council v Irwin [1977] AC 239; [1976] 1 EGLR 53; (1976) 238 EG 879, Gordon and Adami v Lincoln Grange Management Ltd [1998] 1 EGLR 58; [1998] 17 EG 148 applied.
Likewise, the existence of a comprehensive scheme for the repair of both the demised and the retained parts of the building was sufficient to exclude from the parties’ legal relationship any liability at common law in tort that the landlord might otherwise be under in relation to its retained premises. The judge had erred in holding that the respondent came under any duty to repair the retained parts and in awarding £100 for the breach that he found.
The first appellant appeared in person for the appellants; Zia Bhaloo QC (instructed by Bircham Dyson Bell LLP) appeared for the respondent.
Sally Dobson, barrister
