COLDUNELL LIMITED v HOTEL MANAGEMENT INTERNATIONAL LIMITED

A repairing covenant is judged by the age, character and locality of the premises, together with their permitted use and condition at the grant of the lease. It does not require perfect repair, pristine condition, or modernisation to current standards. Where a protected tenancy continues under the Landlord and Tenant Act 1954, repairing and decorating covenants ordinarily continue on the same terms. A provision requiring decoration in the last year of the term refers to the last year of the tenancy, including a statutory continuation, where the lease so provides. Damages are generally the reasonable cost of reinstatement, subject to the statutory cap for repairing covenants. For uncompleted works, recovery is limited to diminution in the value of the reversion.

The claimant, the former freeholder of a hotel, claimed damages for breaches of repairing, replacement and decorating covenants in a 1994 lease. The lease was protected by Part II of the Landlord and Tenant Act 1954. Although its contractual term expired in 2014, the tenancy continued under section 24 until the defendant yielded up the property on 27 September 2016 following compromised renewal proceedings.

The issues were the standard required by the covenants, whether the decorating obligations applied during the statutory continuation, whether particular works were required, and the appropriate measure and amount of damages, including the statutory cap under the Landlord and Tenant Act 1927.

1. Liability. The defendant breached its repairing, replacement and decorating covenants. The relevant standard was that appropriate to a fully refurbished, high-class hotel in a historic listed building, having regard to its age, character, locality and permitted use. The covenant did not require perfect repair, pristine condition, or upgrading to modern standards, but required defects materially affecting reasonable occupation to be addressed.
2. Statutory continuation and decoration. Section 24 of the Landlord and Tenant Act 1954 continued the tenancy on the existing terms pending renewal or termination. The phrase “in the last year of the said term” in the decorating covenants meant the last year of the tenancy, however determined. The defendant was therefore obliged to redecorate during the 12 months before 27 September 2016.
3. Damages. The ordinary measure for breach of a repairing covenant was the reasonable cost of the works needed to put the property into the condition in which it ought to have been delivered up, subject to section 18(1) of the Landlord and Tenant Act 1927. The judge considered the possible application of the Ruxley principle but found no relevant work disproportionate. For works not undertaken, damages were assessed by diminution in the value of the reversion.
4. The evidence established substantial disrepair, including defective boilers, windows, external and internal decoration, carpets and furniture. The statutory cap did not reduce the award because the agreed diminution in value exceeded the reasonable remedial costs.
5. Judgment was entered for the claimant in the sum of £597,117. Interest and costs were reserved for a further hearing.