What did Sunlife v Tiger Aspect decide?

Sunlife Europe Properties Ltd v Tiger Aspect Holdings Ltd [2013] EWHC 463 (TCC) set out the principles for assessing damages on a terminal dilapidations claim, including the standard of repair, supersession, and the relationship between cost of works and the Section 18 cap. The Court of Appeal upheld the decision on 17 December 2013.

What standard of repair applies?

The standard is judged by reference to the condition of the building, plant and fittings at the date of the demise, not against what an equivalent building would look like at lease expiry. Plant beyond economic repair is replaced on a like for like or nearest equivalent basis.

How does supersession apply after Sunlife v Tiger Aspect?

Where the landlord carries out upgrade or refurbishment works that render the tenant’s repairs abortive, the cost of those repairs is not recoverable. The landlord recovers the cost of work that would have been needed to remedy the breach in any event.

How does the Section 18 cap interact with the case?

The court assessed the common law cost of works first, then considered the diminution in the value of the reversion under Section 18(1) of the Landlord and Tenant Act 1927. The recoverable damages cannot exceed the diminution.

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

Sunlife v Tiger Aspect concerned two full repairing leases of office and retail premises in Soho that ran from the early 1970s and ended in 2008 after holding over under the 1954 Act. It was accepted that the tenant had not complied with its repairing obligations. The dispute was about the measure of damages.

The key point

The landlord claimed £2.172m on a costed schedule of dilapidations including thirty weeks loss of rent. The tenant put the cost of works at around £700,000 and argued the cap under Section 18 of the Landlord and Tenant Act 1927 limited recovery to the £240,000 diminution in the reversion. Damages were assessed at £1.4m.

The principles for surveyors

The judgment of Edwards-Stuart J in the Technology and Construction Court set out a structured approach to the measure of damages on a terminal schedule of dilapidations. The points most relevant to the surveyor are:

The tenant is entitled to perform the covenant in the manner least onerous to itself. That is the starting point for damages.
The standard of repair is judged against the condition of the building, plant and fittings at the date of the demise, not against what an equivalent building would look like at lease expiry.
Where plant or equipment is 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 landlord can carry out more extensive works than the tenant’s breach required without losing the right to recover the cost of work that was actually needed to remedy the breach.
The landlord cannot recover the cost of repair work rendered abortive by the landlord’s own upgrade or refurbishment. That is supersession.
The landlord cannot recover the cost of remedial work that is disproportionate to the benefit obtained. This is the principle from Ruxley Electronics v Forsyth.
Where market conditions at lease expiry require upgrading or refurbishment to relet, the tenant is not liable for repairs that the upgrade or refurbishment would supersede.

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.

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Related knowledge

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