Landlords' repairing obligations: what is implied?

Common law

So far as landlords are concerned, the general principle is that there is no implied covenant that demised premises should be reasonably fit for habitation or for whatever purpose for which they are let. There are, of course, exceptions to this principle, such as where the letting is of a furnished house or where the landlord is also the builder/designer of a new property, but these only apply in quite limited circumstances. To prevent unscrupulous landlords from exploiting vulnerable tenants, statute has intervened to impose certain repair obligations on landlords. These obligations generally apply in respect of low rent residential tenancies of dwelling houses and are contained in the Landlord and Tenant Act 1985.

So far as tenants are concerned, almost all modern commercial leases impose express repairing obligations on tenants. However, common law also requires tenants to use demised premises in a 'tenant-like manner', or to keep demised premises 'wind and water-tight', and not to deliberately or negligently damage the demised premises.

Recent case

The case of Gavin and other v Community Housing Association Limited[1] concerned a scenario where the tenant had a lease, with repairing obligations, of ground floor and basement commercial premises. The landlord retained the structure of the building but did not covenant to keep the retained parts in repair. The landlord did, however, covenant with the tenant to insure both the demised premises and retained parts. The demised premises were damaged by water leaks caused by defects in the structure of the building and by leaks from soil pipes within the retained parts. When the tenant fell behind on rent and the landlord served notice of its intention to forfeit, the tenant alleged that it was entitled to set-off rent against compensation which it claimed was payable by the landlord by reason of damage caused by the leaks from the retained parts. 

In the absence of any express repairing obligation for the structure of the building, the tenant argued that the landlord was impliedly responsible for keeping the retained parts in repair. At first instance, the judge found that there was a general duty in tort on the landlord to take reasonable care to remedy defects once it knew or should know that defects had caused or were likely to cause damage to the demised premises. The judge decided, on the facts, that there had been one breach of this limited duty, to the value of £100. This was insufficient to discharge rent arrears, however, and so the lease was forfeit.

The tenant appealed on the basis that the judge was wrong to hold that the landlord's liability was limited to negligence and that, rather, there was an implied covenant on the landlord to keep the retained parts in repair. The landlord cross-appealed the first instance judge's finding of one breach, arguing that it had no liability beyond laying out insurance proceeds to repair damage, which it had done.

Court of Appeal decision

The Court of Appeal noted that, if a repairing obligation was to be implied and imposed on the landlord, then it would have to be contractual and based on evidence and factors other than merely the landlord's control of the retained parts. In addition, in the particular case, the repair of the structure of the building was covered by the insurance provisions, with which the landlord had complied. The court therefore held that there were no facts, nor any reasons of business efficacy, on which to base the imposition of an implied covenant to repair on the landlord, never mind one under which liability to repair would be absolute. The insurance provisions were sufficiently comprehensive to exclude any tortious liability that might otherwise arise for the landlord in respect of the retained parts, such that the first instance judge had been wrong even to find that there had been any breach at all. The landlord was therefore found to be free of any liability for repair.

WM comment

The Court of Appeal's refusal to imply repairing obligations in this scenario will be welcomed by landlords with similar leases. However the first instance and appeal court judgments indicate the likely approach of the courts where a lease is silent on the question of repair and where there are no other express contractual means of resolving the dilapidations liability gap. It seems that the court will consider the contractual position by reviewing factual evidence and business efficacy, and that repairing covenants will be implied where that is possible. Otherwise, a duty to take reasonable care (once knowledge of damage or possible damage has arisen) will be implied.

Landlords and tenants alike remain well-advised to ensure that repairing responsibility is expressly designated for all parts of a building. Where there are gaps, these may be resolved by adequate insurance provisions. Covenants or duties will therefore only be implied, and should only be relied upon, as a last resort.

______________________________
[1] Gavin and other v Community Housing Association Limited [2013] EWCA Civ 580