Case law update – Daejan Properties Ltd v Griffin & Anor – historic neglect – recovery of cost of repairs via service charge – tenants liable as unable to show neglect by landlord had increased cost of repairs
In 2014 the FTT looked at historic neglect with regards to repair works and the quantification of the amount – if any – by which a service charge demand should be reduced by reason of a landlord’s neglect.
The landlord was required to carry out necessary repair works to a mixed use property at a cost of £300,000. The landlord acquired its interest in the property in 1973. The need for the repair works was only identified in 2008.
The residential leases contained a landlord’s covenant to keep the structure of the building in repair, and a tenant’s covenant to pay for such repairs through a service charge. The landlord claimed the full amount of the repair costs through the service charge. The tenants argued that the works should have been done a long time before and the delay had increased the cost of the works.
The FTT held that although the landlord had been in breach of its repairing covenant since it acquired the property, the tenants were liable for the full cost of the works because they were unable to show that the eventual cost of the repair would have been avoided or reduced had the landlord remedied the defect at the time, and as they were unaware of the defects they were not entitled to any damages for distress and inconvenience.
The FTT sought to clarify when historic neglect will afford a defence to a service charge claim. If it can be shown that, but for a failure by the landlord to make good a defect at the time required by its covenant, part of the cost eventually incurred in remedying that defect, or the whole of the cost of remedying consequential defects, would have been avoided then in those circumstances the tenant to whom the repairing obligation was owed has a claim in damages for breach of covenant, and that claim may be set off against the same tenant’s liability to contribute through the service charge to the cost of the remedial work.
The potential damages comprise two elements; the amount by which the cost of remedial work has increased as a result of the landlord’s failure to carry out the work at the earliest time it was obliged to do so; and any sum which the tenant is entitled to receive in general damages for inconvenience or discomfort if the demised premises themselves were affected by the landlord’s breach of covenant.