Van Dal Footwear Ltd v Ryman Ltd

When assessing damages under section 18(1) of the Landlord and Tenant Act 1927, the court values the landlord’s freehold reversion at the date when it returns to the landlord. The comparison is between the property in its actual condition and the property as it would have been if the repairing covenant had been performed.

The valuation must concern the rights actually comprised in the reversion. A future or hypothetical agreement for a new lease, including one with the former tenant, cannot be added merely because the property is assumed to have been exposed to the market. The statutory hypotheses do not permit reconstruction of a hypothetical marketing period or invention of a special purchaser.

Ryman Ltd occupied a listed building under a lease containing repairing covenants, continued under tenancies at will after statutory protection was lost. When Ryman vacated, the premises were in disrepair. The first-instance judge assessed repair costs at £135,606 and considered the statutory cap under section 18(1) of the Landlord and Tenant Act 1927.

The judge valued the property in repair at £1,068,838 and its actual condition at £950,000, but increased the latter valuation by 7.4% to reflect a hypothetical offer by Ryman to take a new lease, producing damages of £48,538. Van Dal Footwear Ltd appealed. The central issue was whether that hypothetical lease arrangement could properly be taken into account in valuing the reversion.

1. Appeal allowed. The 7.4% uplift applied to the out-of-repair valuation was set aside.

2. Under section 18(1) of the Landlord and Tenant Act 1927, the relevant subject of valuation is the landlord’s reversion: the freehold as it has returned to the landlord before it is let again. The valuation compares the actual value of the property at the relevant date with its value had the repairing covenant been performed.

3. The court must value the bundle of rights actually held by the landlord on the valuation date. Any reversionary lease, whether made before or after the term date and whether made with the same or a different tenant, is left out of account. On the valuation date there was no agreement for a new lease with Ryman, and earlier offers had been rejected.

4. The only permissible hypotheses under section 18(1) were simultaneous sales of the reversion, one assuming that the property was in the physical condition required by the repairing covenants. The judge therefore asked an irrelevant hypothetical question and valued the freehold with the benefit of an agreement for lease, rather than the reversion itself.

5. Assuming that property has been exposed to the market does not alter the subject matter of the valuation, require reconstruction of the hypothetical marketing period, or justify inventing a special purchaser. An actual special purchaser may be relevant, but no such purchaser existed here.

The appeal was allowed for the reasons given by Lewison J. Jacob LJ agreed, and Sir Anthony May P agreed with those reasons, relying in particular on Hanson v Newman and Jaquin v Holland.

• Court of Appeal (Civil Division): The appeal from the Technology and Construction Court was allowed. The court rejected the 7.4% uplift in the valuation of the property in disrepair.
• Technology and Construction Court, Queen’s Bench Division: HHJ Wilcox assessed repair costs at £135,606 and damages at £48,538 under section 18(1) of the Landlord and Tenant Act 1927.