Impacting of a Civil Procedure Code the Claims on Dilapidation - Literature review Example

? The effects of Civil Procedure Rules on Terminal Dilapidation Claims Introduction The notion of dilapi d premises often raises a picture of a bad-looking industrial unit or an office block that is being received by the landlord from erstwhile tenant at the expiry of a tenancy as the tenant who has not kept the landlord’s premise in good condition. In such scenario, the landlord will be trying to get at maximum terminal dilapidation under the threat of court proceedings, whereas a tenant will be trying to raise as many excuses or objections with an aim to minimise his outlay to the landlord. The landlord will take the help of a surveyor to maximise his claim, whereas a business tenant will be taking the help from his lawyer to keep such a claim at a bare minimum under the law of dilapidations. This research essay will be endeavouring to highlight the intricacies involved terminal dilapidated claims. This research essay will look into how changes in the CPR (Civil Procedure Code) have impacted the claims on dilapidation and will also analyse the maximum cap on the claims under section 18 (1) of the Landlord and Tenant Act 1927 by the landlord . Finally, this will research essay will come to a conclusion after having discussed that how changes of CPR have imposed changes in relation to terminal dilapidation claims. (Olins 2010:4). Claims of Terminal Dilapidation To safeguard the landlords , the Landlord & Tenants Act 1927 ( “ the Act”) was enacted as there was some feeling at the time of enactment of the above act that there existed some disparity in the affiliation between a tenant and a landlord with the latter too often misusing his dominant position. (Olins 2010:8). There will be complexity in arriving at the exact amount of claim under terminal dilapidations. This can be ascertained in two ways. One is that to quantify the cost of carrying out the repairs or renovations that the tenant ought to have carried out at the commercial premises before vacation of the same but failed to do so. The next one is whether the cost of carrying out these repair or renovation works symbolises the landlord’s recoverable loss or not. A claim for terminal dilapidation will fall under the claim for the infringement of contract. In Drummond v S& U Stores Ltd1, it was decided that there is an onus on the landowner to lessen the loss and this may extend to commencing preparations for carrying out the repairs before the expiry of the lease. Failure to do so may even result in reduction or extinguishment of claim for losses (for example, loss of rent). (Cooke &Woodhead 2007:337). In “Carmel Southend Ltd v Strachan & Henshaw Ltd”2, there was a covenant to handover the premises in substantial and in good conditions. In this case, whether quantum of damages included cost of patch repairs or whether it has to include whether more wide-ranging over-cladding as demanded by the new tenant. In this case, second limp of “s18 (1) of the Landlord and Tennant Act 1927” was applied. It was decided that patch repairs were enough to adhere with covenants and stance claimed by the incoming tenant may be relevant but not determinative. It was held by the court that erstwhile tenant was responsible for the full cost of patch repairs. (Watt 2007:14). In some cases, landlord may be asked to bear the terminal repairs as in the case of multiple occupations. In some cases, a tenant may serve a notice on landlord with a Schedule of Dilapidation if he fails to repair. In Wallace v. Manchester City Council, the tenant was awarded with damages for inconvenience or discomfiture by a County Court Judge and in appeal, the decision was upheld. In Hallise v. petmoor Developments Ltd, the landlord was held accountable for repairs. (The Times 2000). Civil Procedure Code The Civil Justice Review of 1988 recognised intricacy, expenses and delay as the three grave defects that were apparent in the Civil Procedure Code that existed since 1851. To remove these intricacies, Lord Woolf recommended some major changes in the Civil Procedure Code of UK, and his recommendation came into effect as a new Civil Procedure Code in April 1999. Woolf’s revamp of CPR was considered to be major shake-up in UK’s civil procedure since the 1870s. Lord Woolf was more concerned with the adversarial nature of litigations in UK. As there were no applicable rules or in the absence of judicial control, the adversarial process was under heavy criticism. The new proposal by Woolf strongly recommended the usage of alternate dispute resolution (ADR) instead of finding solution through court litigation. Woolf also recommended that legal aid should be extended to ADR and also for pre-litigation solutions. In case of claim of damages under dilapidated claims, use of ADR would help the litigants not only to obtain more information but also with resolution of disputes at a greater speed. The Arbitration Act 1996 has made the arbitration process easier and flexible and the litigants will have the control to select an arbitrator with the appropriate expertise and there are only very restricted grounds for appeal from an arbitrator’s award. (Cooke and Woodhead 2007:346). Further, under the new CPC, both parties are entitled to find a settlement for the issues either wholly or in part. Further, new CPC recommends that there should be more co-operation and openness between the litigants encouraged by pre-litigation procedures on about experts and disclosures. By employing pre-trial reviews and case management conferences, the court would support the usage of ADRs in solving terminal dilapidated damages. The recent changes in CPR have, however, basically transformed the style that terminal dilapidation claims that is being how conceived and accepted. For tenants, the financial implications might be very major and is apparently to be aggravated if tenants fail to address the scenarios. Dilapidation Claims and the Impact of the Civil Procedure Rules (CPR) The reforms by Woolf would further acknowledge the ever increasing usage of the Property Litigation Associates, the pre-action procedure for Housing Disrepair cases and specifically supports the resolutions of disputes out of court wherever possible. The landlord makes his dilapidation claim if he witnesses the following; Instances where disrepair becomes evident on examination of the premises. For instance, disrepair to the top floor of the premise if not repaired soon, could result in grave harm to the roof or fabric of the premises. In cases of assignment of reversion. If a lease has to run for many years and if the landlord may not be specifically concerned about the theoretical impact on the value of his reversion despite of important disrepair as it involves only notional loss. In case where the landlord wants to raise major finance from his premise or dispose off his reversion, then there could be a real loss. In such event, he may compel the tenant to adhere with his covenants. In cases , where a tenant recommends an assignment of a term and in cases of urgencies like where there is an unexpected fall of structure of the building which the landlord either under instruction from a statutory official or of his own efforts repaired the same due to urgency . Instances where there have been criticisms at the juncture of expiry of the lease term or at the time of review of rental terms. The action of the landlord will be depending upon the three factors namely available remedies, the aggregate evaluation of the advantages of making a claim assessed against the risks and the costs of doing so. (Vegoda 2001:121). As per new CPR rules, landlords in UK are needed to peruse a set of and a formal procedure for dilapidation claims. Both the schedule and the notice are needed to be forwarded in a regular format and should contain all details of the tenant, the landlord, the exact clause within the lease pertaining to maintenance, repairs, decoration, reinstatement, etc., the details of each infringement of the covenant that has happened, the proposed remedy to cure each defect and a projection of cost involved for such claims. Under CPR, the landlord has to provide to the tenant with an exhaustive “schedule of needed works” along with anticipated expenses or claim. In BHP Great Britain Petroleum Ltd v Chesterfield Properties Ltd and another3 , , both BHP and Chesterfield applied for summary judgment under CPR Part 24. (Vegoda 2001:121). “Cap under the section 18 (1) of the Landlord and Tenant Act 1927” In cases of claims of dilapidation,” section 18(1)” wants a statutory cap on the quantum of recoverable loss by the landlord. The impact of Section 18(1) is to forbid the loss suffered by the landlord crossing the quantum by which its reversion is reduced due to the violation by the tenant of his refurbishing commitment. There is no perfect system for evaluating how the statutory limit or cap bites in any specific case. The valuers of the litigants will attempt to evaluate the worth of the landlord’s reversion both in out of repair and in repair and contrast the variances with the cost of carrying out the works necessary to remedy the items of disrepair detailed in the schedule. The statutory limit or cap tends to bite where the needed remedial works, if carried out, would be made as redundant. This happens, where, for instance, the landlord plans to covert or demolishes the premises for an alternate use or to renovate or refurbish the premises to enhance its present specification. (Davies 2011:224). If the litigants are not able to accept a court proceedings or an alternate dispute mechanism, they should try to make use of every opportunity to minimise the provinces of dispute as much as possible. This will assist to lower the cost and the time involved. In cases where a large claim amount is involved where the schedule of dilapidations is confronted and a section 18 defence is being shielded upon , there may be a request for a spilit trial with liability or cost of work issues being attempted first ,and with the reduction in value aspect being dealt with at a later date. (Cooke & Woodhead 2007:346). In Mason v TotalFinaElf UK Ltd, the law applicable to terminal dilapidations claims has been adequately clarified. The landlord in this case , relied on the preventative work which was embarked on to shun away the happenings of damage from a future expected repair was considered to be as “ repair” and the reasonable cost of which was to be paid by the tenant. Thus, the judgment reaffirmed the significance of the cap on the amount of any recoverable damages as demanded by” section 18(1) of the Landlord and Tenant Act 1927.” The judge held that though the actual cast of required repairs was estimated under ?135,000 , the reduction in value of the reversionary interest resulting upon the want of refurbishing was only ?73,000 and hence , it was only this sum the landlord was warranted to recover.( Goddard 2011). Case laws on Dilapidation Claims Apart from the express terms that can be found in a lease, repairing obligations may not arise under general rule of law as it is reluctant to imply repairing commitments between a tenant and the landlord. In “Janet Reger International Limited v Tiree Ltd”4 , it was held that the regulation is hesitant to entail refurbishing commitments into leases. (Johnson 2009: 1-19). In the absence of any landlord’s covenant to repair the houses, and then claim may be made for dilapidated damages under the liability for permissive waste. Permissive waste connotes permitting damage to happen to the building through failure to function and for instance, permitting premises to depreciate by not repairing it. In such scenarios , liability falls under one of the very old laws i.e. “section 2 of the Statute of Marlborough 1267” and the same was talked about in Dayani v. Bromley LBC 5( Johnson 2009: 1-19). A duty to repair is not necessarily a commitment to renew or rebuild. In Credit Suisse v. Beegas Nominees Ltd 6 , due to design flaw, the cladding in office premises leaked, and it had made the lamp to explode. It was held by Lindsay J that the concluding portion of the lease condition inflicted a split duty to maintain the premises in tenable and good state which inflicted an accountability going beyond revamp. The absolute taking away of the cladding system by replacing with a redesigned and a new method while not within the responsibility to repair was within the commitment to keep in tenantable and good state. (Johnson 2009: 1-19). The general attitude is that a condition to keep the premise in repair obligates the covenantor to keep the building in revamp at all times as held in “British Telecommunications Plc v Sun Life Assurance Society Plc”7. If the landlord has note of the pertinent want of repair, then there arises from the landlord’s obligation to repair. The phrase “repair “has no any special or fixed meaning but it is interpreted as per “the good sense of the agreement.” In Lister v Lane8, it was held that repair does not need renewal of the entire or considerably entirety of the building. In Lurcott v Wakely9, it was held that repair require the renewal of a subsidiary part. In Norwhich Union v British Railways Board10, it was held that repair include the phrases “and where need to reconstruct, replace or rebuild.” In case of presence of any inherent defect in design of the premises, then a tenant may not be under obligation to remedy the same as held in Elmcroft Development Ltd v Tankersley –Sawyer11.( Johnson 2009: 1-19). In “Business Environment Bow Land Ltd v Deanwater Estates Limited”, 12 a landlord made a dilapidated damage of ?416,000 and finally, the tenant was asked to pay only just ?1,070 in full and final settlement. It was held by the court that there was a significant exaggeration in the claim. Thus, the Business Environment case is the best illustration what would happen if a landlord exaggerates his claims. ( Johnson 2009: 1-19). Conclusion Dilapidation is being often regarded by tenants as insignificant, but it would have a serious implication if enough precaution is not taken by a tenant. A tenant should seek advice from a surveyor to limit, avoid or lessen dilapidation claims by a landlord before a schedule of dilapidation is served upon him. Dilapidation claims are more expensive if one resort to legal action and it makes more sense to solve this through arbitration as suggested by Woolf without resorting to litigation. Landlord should avoid in making exaggerated claims else he would land in trouble. No doubt, the Civil Procedure Code of 1999 has impacted the claims of dilapidation substantially as it genuinely tried to shun the requirement for litigation through alternate dispute resolution. Thus, a tenant can now either make a rebuttal or substantiation of a claim. There is now an opportunity to use Part 36 for settlement of claim before the judgment. Further, if a landlord succeeds his stance on the substantive issues, the court can still penalise the landlord on costs.( Anderson , Wilde & Harris 2010). List of References Anderson , Wilde and Harris .(2010). Dilapidations. [online] available from [accessed 28 April 2011] Cooke Howard & Woodhead Simon. (2007).Corporate Occupier’s Hand Book. London: Elsevier. Davies, Alex. (2011). Workplace Law Handbook 2011- Health and Safety, Premises and Environment. London: Workplace Law Group. Goddard Addleshaw. (2011). Dilapidations. [online] available from >http://www.addleshawgoddard.com/asset_store/document/real_estate_-_dilapidations_151614.pdf> [accessed 28 April 2011] Johnson, Edwin (2009). Problems and Solutions in Enforcing Duties to Repair in Leases of Commercial Premises. [online] available from >http://www.maitlandchambers.com/Files/Article/PDF/Dilapidations%20lecture%20EJ%207.10.09.pdf> [accessed 28 April 2011]. Olins, Andrew. (2010). Guide to Dilapidations. London: Workplace Law Group. The Times (2000). ‘Hallise v. Petmoor Developments Ltd,’ The Times 7 November: 6 Vegoda V.H. (2002). The Dilapidations Handbook. London: Elsevier. Watt, John Muir. (2007). Estates Gazette Law Reports. 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