Jervis v Harris

A landlord’s contractual right to enter leased premises, remedy disrepair and recover the expenditure from the tenant creates a claim in debt, not damages for breach of a repairing covenant. The restrictions in section 1 of the Leasehold Property (Repairs) Act 1938 therefore do not require the landlord to obtain the court’s leave before exercising or enforcing that right.

The penalties doctrine applies only where payment is triggered by breach of another contractual obligation. A tenant’s obligation to reimburse repair expenditure is triggered by the landlord’s expenditure, rather than the tenant’s earlier failure to repair, and is not a penalty.

The landlord sought to enforce repairing provisions in a 999-year underlease. Clause 2(7) required the tenant to maintain and repair the buildings, and, when necessary, to rebuild them so that they retained a stated letting value. Clause 2(10) permitted the landlord, after notice and the tenant’s default, to enter, undertake repairs and recover the expenditure.

Morritt J determined three preliminary issues in the landlord’s favour. The tenant appealed on whether the stated letting value limited the repairing obligation, whether section 1 of the Leasehold Property (Repairs) Act 1938 required leave before clause 2(10) could be enforced, and whether the reimbursement obligation was a penalty.

1. Appeal dismissed unanimously. Millett LJ delivered the leading judgment. Otton LJ and the President agreed with his reasons.

2. The concluding words of clause 2(7), which required rebuilding sufficient to produce a specified letting value, qualified the rebuilding obligation alone. They did not qualify the separate obligation to keep the premises in good tenantable repair. That standard depends upon the property’s age, character and locality, and does not vary merely with its letting value. Millett LJ added, obiter, that even if the concluding words applied to repair, they would impose an additional minimum requirement rather than limit the express repairing standard.

3. A landlord exercising a clause permitting entry, repair and recovery of expenditure does not claim damages for breach of the tenant’s repairing covenant. The landlord’s monetary claim is a debt arising only after the landlord has performed the repairs. It seeks reimbursement of actual expenditure, rather than compensation for diminution in the value of the reversion.

4. Section 1 of the Leasehold Property (Repairs) Act 1938 did not require leave before the landlord entered, served notice, performed the repairs or demanded reimbursement. The reimbursement claim was triggered by the landlord’s expenditure and the tenant’s subsequent failure to repay on demand. The existence of an alternative damages remedy for breach of the repairing covenant did not alter the character of the remedy actually pursued. Swallow Securities Ltd v Brand [1981] 45 Property and Compensation Reports 328 was overruled, while the reasoning in Hamilton v Martell Securities [1984] Ch 266 was followed.

5. Clause 2(10) was not a penalty. The penalties doctrine requires the stipulated payment to become due upon breach of another contractual obligation owed by the payer to the recipient. Here the relevant payment was triggered by the landlord’s expenditure on repairs, not by the tenant’s anterior failure to repair. The court declined to extend the established limits of the doctrine to invalidate a standard lease provision familiar to property lawyers for generations.

1. Court of Appeal: The tenant’s appeal was dismissed unanimously. The declarations made below on all three preliminary issues were upheld.

2. Chancery Division: Morritt J, sitting as Vice-Chancellor of the County Palatine of Lancaster, made declarations on 10 May 1994 determining the three preliminary issues in the landlord’s favour. He granted leave to appeal on the issues concerning the Leasehold Property (Repairs) Act 1938 and penalties. The Court of Appeal granted leave on the lease-construction issue.