Dispute Resolution

Just imagine that you are a tenant with an old 25 year lease of some clapped out industrial property which is coming up to a potential break date in year 20. Across town, there is a shiny new shed and a new landlord ready to offer you an incentive to move.

You also know that your current landlord may have plans to redevelop their estate for housing and, as you survey the neighbouring sheds on the estate, all of which are empty and in poor repair, you decide to issue the break notice. A week later, the landlord sends in his building surveyor to carry out a survey. Two weeks later, the landlord’s lawyers serve a terminal schedule of dilaps (which narrates a long list of repairs with costings which they say should have been carried out by the tenant to comply with their repairing obligations in the lease) along with a notice demanding payment of a sum equal to the costs of carrying out the work. But, you say, why should a tenant have to pay the landlord for repairs where it appears that there is no intention of the work ever being done. A good question, you might think, but not one which will result in a well advised landlord walking away from the claim.

The answer could lie in the drafting of the lease – the devil is always in the detail after all. A well drafted lease can, so the courts suggest to date, include a payment obligation which could, if the contract is followed to the letter, mean that the tenant will not be facing a damages claim arising out of breach of contract but, instead, could be on the wrong end of claim for payment of a sum of money equal to the repairs bill due under the contract. The nuances of that might be lost on some but the consequence of facing a payment claim as opposed to a damages claim could be to denude the tenant of certain defences that will be usually be available, such as offering to prove that the landlord has suffered no loss. In the right case, this could mean that proving that the landlord has no intention of ever doing the repairs, is irrelevant.

While no Scottish case has made it to the Supreme Court yet on this issue, there are a few reported cases which, for now, mean that tenants may have to pay something rather than waltz off into the sunset but, then again, if a tenant chooses not to comply with their repairing obligations in the first place, do they really have any right to complain about that?

Stephen Goldie

Head of Litigation & Partner at Brodies LLP
Stephen is a partner at Brodies and heads up the Business Disputes and Asset Recovery team. Stephen acts for oil & gas companies, private equity funds, commercial lenders‚ institutional investors, estate owners, retailers and corporate occupiers throughout the country.
Stephen Goldie