Carpet burns Landlord in dilapidations dispute
The Court of Appeal's recent judgment in the case of South Essex Partnership University NHS Foundation Trust v Laindon Holdings Limited (2016) has highlighted that the failure to adequately restrict a Tenant's ability to make alterations to a property can result in a Tenant of a commercial property being able to remove and replace a Landlord's fixtures without the Landlord's consent and without the Landlord having any redress against the Tenant.
Laindon was the Landlord of offices in Basildon, London which were occupied by the Trust under a commercial lease. Following the Trust exercising a break clause, the lease terminated in January 2011. A dilapidations dispute subsequently arose with Laindon claiming damages against the Trust, citing various alleged breaches of the Trust's repair obligations.
Proceedings were issued by Laindon and Laindon was successful in recovering damages of just over £130,000, £41,000 of which related to carpets. The Trust appealed this element of the award - the Trust also appealed an element of the award regarding loss of rent but that issue is not considered further in this article, rather will be covered in a separate note.
The history of the carpets
Before the end of the lease, the Trust told Laindon that it intended to replace the existing tiled carpet system with a new striped carpet and, having received no response, changed the carpet at a cost of £38,000.
Under the lease, the Trust was obliged to
"repair or replace from time to time the Landlord's fixtures and fitting in the premises as may become necessary at any time during or at the expiration of the Term"
Laindon argued that the carpets were Landlord's fixtures or fittings and as a result, the Trust was required to repair or replace the tile carpet system with a like for like system. By changing the carpets to a striped carpet, Laindon argued that the Trust had not satisfied its repair obligations.
In contrast, the Trust argued that the carpet was a Tenant's fixture because the Trust had paid for the refitting of the carpet as part of substantial fit out works carried out in 2002 at the beginning of the lease,. As a Tenant's fixture, the Trust said that it was entitled to either remove the carpet or leave it behind in a state of repair that satisfied the Trust's repair obligations. As the replacement carpet was in good repair, the Trust denied that it was in breach of its repair obligations.
The Trust also argued that if the carpet was a Landlord's fixture, the Trust was entitled to replace the carpet as it was an internal non-structural alteration that, under the terms of the lease, did not need Laindon's consent.
The Court of Appeal
The Court of Appeal agreed with the High Court that the tiled carpets were Landlord's fixtures. The fact that the Trust had funded the replacement and reinstatement of the carpet as part of the refit works was irrelevant as the carpet belonged to Laindon before it had been replaced.
However, the Court of Appeal accepted that under the terms of the lease, the Trust was allowed to make any alterations it wished to the interior of the property, including alterations to the Landlord's fixtures. As a result, the Trust was permitted to replace the tiled carpets. As the new carpet in the property was not in disrepair when the lease came to an end in January 2011, the Trust was not in breach of its repair obligations with the result that Laindon was not entitled to damages in respect of the carpets.
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