Sunlife Europe Properties Ltd v Tiger Aspect Holdings Ltd [2013]

The principles for surveyors

Edwards-Stuart J set out the conclusions on the law as eight numbered principles. The list below follows that order, in plain English, and applies on a terminal schedule of dilapidations.

1. The tenant is entitled to perform the covenant in the manner least onerous to itself. That is the starting point for any assessment of damages, applying Riverside Property Investments Ltd v Blackhawk Automotive (2004).
2. The tenant must return the premises in good and tenantable condition with the mechanical and electrical systems in satisfactory working order. The tenant is not required to deliver up new equipment, or equipment with any particular remaining life. The standard is judged against the condition of the fabric, equipment and fittings at the date of the demise, not against the condition expected of an equivalent building at lease expiry.
3. Where the lease contains a covenant against alterations, the tenant is not entitled, let alone obliged, to deliver up the premises in a condition that involves any material alteration to the building or fixtures as demised. The fact that the landlord could consent to an alteration does not change the basic obligation.
4. Where the put and keep obligation requires replacement of plant beyond economic repair, the tenant replaces on a like for like or nearest equivalent basis. The tenant is not required to upgrade to current standards unless law or regulation requires it. The obligation must still be read in line with commercial common sense.
5. A landlord’s claim for the cost of repairs is subject to two general limits. The landlord cannot recover for a loss that could reasonably have been avoided, and the landlord cannot recover the cost of remedial work that is disproportionate to the benefit obtained. The second limit applies the principle in Ruxley Electronics v Forsyth.
6. Where remedial work is needed because of the tenant’s breach, the fact that the landlord has carried out more extensive work does not, of itself, prevent the landlord from recovering the cost of work that would have been necessary to remedy the breach.
7. Where market conditions at lease expiry require upgrading or refurbishment to let the building to the appropriate type of tenant, the tenant in breach is not liable for the cost of any repair works that the upgrade or refurbishment would render abortive. That is supersession.
8. Where the tenant is in breach, the court is entitled to infer that remedial work is necessary unless the tenant demonstrates the contrary.

How it played out

The court agreed with the landlord that, had the tenant yielded up in a good state of repair, only relatively modest additional works would have been needed to relet to a tenant of the appropriate type. The tenant’s supersession argument therefore failed on the facts. The Court of Appeal upheld the decision on 17 December 2013.

Source

Citation: [2013] EWHC 463 (TCC); affirmed [2013] EWCA Civ 1656. A free case summary is available on the RICS isurv directory at isurv.com.