Summary

When assessing the current value of a property for the purposes of a calculation under the Landlord and Tenant Act 1927 s.18(1), a judge was wrong to have taken into account the likelihood that a former tenant would take a new lease.

Facts

The appellant landlord (L) appealed against the amount of damages awarded for breach by the respondent tenant (T) of its repairing obligations under a lease. Following the expiration of T's lease it remained in occupation under a tenancy at will and the repairing obligations continued. It made two separate offers to continue renting the premises, which were rejected by L. It then vacated the building and left it in a state of disrepair. L sued T for breach of its repairing obligations. The judge assessed the cost of repairs at £135,606 and went on to consider whether that sum was capped by the provisions of the Landlord and Tenant Act 1927 s.18(1). The judge found that the difference in value between the premises when fully repaired and the premises in their current condition was over £118,000. However, he went on to conclude that T would have offered to take a new lease from the purchaser, which would have increased the current value of the premises by approximately 7.4 per cent. He therefore capped the damages for breach of the repairing covenant at approximately £48,500, which was the difference between the value of the fully repaired premises and the current value of the premises.

Held

The judge had been wrong to increase his original valuation figure. Under s.18(1) the judge had to assess the amount by which the value of the reversion was diminished owing to the breach. The reversion meant the property as it reverted to the landlord. Any reversionary leases, whether made before or after the term date, were left out of account. What was to be valued was the freehold reversion at the moment it vested in the landlord unencumbered by the old lease or any new lease, Smiley v Townshend (1950) 2 KB 311 CA, Jaquin v Holland (1960) 1 WLR 258 CA and Hanson v Newman (1934) Ch 298 CA applied. On the valuation date, L did not have the benefit of an agreement for a lease with T, or even an offer capable of acceptance. The judge had embarked on an assessment using a hypothetical fact that was not permitted within s.18. There was no special purchaser and the judge was not justified in inventing one, Inland Revenue Commissioners v Clay (1914) 3 KB 466 CA considered. The judge had valued the wrong thing and the 7.4 per cent increase could not stand.

Appeal allowed