An interesting judgment in a recent dilapidations case of Peachside Limited v Lee and Keung was handed down on 23rd April 2024. For a reminder on what dilapidations are, check our dilapidations seminar here. The judgment was particularly interesting as there was significant variance in the expert valuation evidence, meaning surveyors and valuers should pay close attention.
Facts of The Case
The Claimant company, Peachside Limited granted the Defendants, Mr Lee and Mr Keung a business tenancy for a Chinese restaurant called Pearl City in Manchester. The lease expired and the Defendants remained in possession until March 2021, failing to comply with their repair obligations.
The Claimant tried to enforce the repairing obligations in the lease in two phases. The first phase involved repairs to put the premises back into a lettable state, whilst phase two involved redeveloping the premises into an office space.
The Claimant sought damages for dilapidations at the end of the commercial lease describing the condition of the premises as “a warzone with grease”. However, the Defendants argued that the Claimant’s intention was to extract money through dilapidations as the premises were not realistically lettable as office spaces in lieu of solving access issues.
The judge needed to decide whether the Claimant’s dilapidations claim was justified and whether their intention to redevelop the property for office use was genuine.
Judgment
The Court found in favour of the Claimant, save for a goods lift/hoist issue. This was the only item where the landlord had not undertaken the works. The Court was unpersuaded that the works would in fact be done.
The Court applied the principle that a landlord cannot recover for losses that could have been avoided or which would be disproportionate for remedial work costs.
The Claimant was awarded damages of £542,671.17 for dilapidations.
Commentary
Both parties had expert valuers, but the Court generally preferred the Claimant’s valuer, accepting his conclusion “that the premises in repair would command a reasonable rental for office accommodation, such that it was reasonable for the Claimant to undertake them as and when it did”. There were property/market-specific valuation arguments, but the Court found that the 'cap' pursuant to section 18 (1) of the Landlord and Tenant Act 1927 did not reduce the damages recoverable.
The landlord submitted that the expert valuer for the Defendant/tenant had strayed into areas beyond his expertise, namely on issues relating to building surveying. The Court noted this and found that he had become a little too invested in advancing his clients' interests, due to his long involvement as their property representative.
If you have any questions about dilapidations, please get in touch with a member of our Dispute Resolution team on 01494 521301.