Its common to find claims by a landlord in a terminal schedule for the cost of carrying out electrical testing, an asbestos survey, water testing and various other reports. The legal justification for those claims is usually given as the statutory compliance clause in the lease. That's generally wrong, but it doesn’t always mean there isn't a valid claim.

Statutory compliance clause

The statutory clause requires the tenant to comply with all statutes, regulations etc. If statute requires the tenant to carry out works, including testing, and it hasn't, that is a breach of statute and thus a breach of the lease.

But most statutes and regulations don't oblige a tenant to carry out testing. They generally only require the tenant to maintain the standards in the statute. And even those statutes that arguable do eg for electrical wire testing, there is normally no provision that obliges the tenant to hand over reports to the landlord at the end of the lease.

Tenant's liability?

In a better (for landlords anyway) world, the lease would deal with this. For example, the tenant is obliged to hand over all evidence of compliance with statute at the expiry of the lease, or words to that effect.

Otherwise, the tenant hasn't breached statute and thus the lease by not handing over evidence of testing at the end of the lease. The landlord cannot therefore recover the cost of testing on this basis.

Landlords may take issue with this. If the tenant has complied with its statutory obligations, it should have the reports and should have no problem handing them over. That makes sense, but its not how the burden of proof works in court. Its for the landlord to prove that the tenant hasn't been complying with statute and the tenant's refusal to provide reports is probably not going to be enough to do that.

Landlord's options

What the landlord should do is ask for the reports. If the tenant refuses to provide them, the landlord should tell the tenant it plans to carry out the reports and recover the cost of them. If the tenant still does not provide the reports, the landlord should carry out the testing. Assuming the reports show defects, the landlord should include their cost in the schedule together with the cost of the defects uncovered. If the reports show no defects and thus prove the tenant has complied with statute, the landlord probably has to bear the cost of the reports.

This approach has the added benefit of giving the landlord certainty on the defects and avoids the temptation to put provisional figures in the schedule.

Loss in other circumstances

There are circumstances when its proper to include the cost of testing in a terminal schedule without having first carried it out. If, for example, the nature of the dilaps works requires an asbestos demolition survey to be first carried out before the contractor could begin, that is a loss the landlord will suffer as a result of the tenant's breach of the lease. In that case, the complaint is not that the tenant should have provided an asbestos survey to the landlord under the lease, but is instead that the landlord is going to suffer a loss in complying with statute, which it would not have suffered if the tenant had carried out the works. Similarly, if there are works to the electrics, then often a wire test has to be carried out before and after those works.

Compliance with statute is important for society as much as it is for a landlord's dilaps claims, but the burden of proving that a tenant has failed to comply is one a landlord will always have to overcome to recover any costs from a tenant.


Matt Farrell