I don’t think it is unfair to say that disrepair is not always viewed with great enthuiasm by practioners of housing law. So, I am going to plead with you all to stick with this post of mine even though on reflection it is far longer than I would have liked. It concerns a very important recent case (Moorjani v Durban Estate Limited [2015] EWCA Civ 1252 – not yet on bailii) that clarifies the principles to be applied by the court when awarding damages to tenants and leaseholders who have succeeded in a claim for disrepair.

The big four

Before commenting on this case, it is perhaps helpful to recall how we got here in the first place. There are four big Court of Appeal cases which, for me at least, are not easy to reconcile. They are Hewitt v Rowlands (1924) 93 KB 1080, Calabar Properties v Stitcher [1984] 1 WLR 287 , Wallace v Manchester City Council (1998) 30 HLR 1111 and Earle v Charalambous [2007] HLR 8.

Hewitt established the not so controversial proposition that a court should, when assessing damages for disrepair, award the tenant the difference in value to the tenant of the property in the condition it was in and the condition it should have been in had the landlord complied with his repairing obligaitons. How do you do that?

Well, in Calabar Griffiths LJ said that the award of damages was

“so far as money can, to restore the tenant to the position he would have been in had there been no breach. This object will not be achieved by applying one set of rules to all cases regardless of the particular circumstances of the case. The facts of each case must be looked at carefully to see what damage the tenant has suffered and how he may be fairly compensated by a monetary award.”

In Calalabar, the long leaseholder, was, in principle, entitled to the cost of alternative accommodation if she moved out, the cost of carrying out any repairs herself and “some award for all the unpleasantness of living in the flat as it deteriorated until it became uninhabitable.” This last award, for general damages, was not limited to an award based on the diminution of the rent, as in cases where the rent was very low (e.g. long leaseholders with pepper corn rents) the award of damages would not reflect the actual loss suffered. In such cases, Hewitt (a statutory tenant) also being one, the court could make a global award to reflect the actual loss suffered.

Next in Wallace, the Court of Appeal told us that the award of general damages (i.e. the third head in Calabar) depended on whether the tenant remained living in the property or not. If he did, he was entitled to compensation for “the loss of comfort and convenience which results from living in a property which was not in the state of repair” and if he did not “he may recover for the diminution of the price or recoverable rent occasioned by the landlord’s failure to perform his covenant to repair.” In circumstances where the tenant remained, the sum payable was for “the discomfort and inconvenience suffered by the tenant” and could “be ascertained in a number of different ways”. Judges could make a “global award” for discomfort; a notional reduction of the rent or both. Wallace is also now cited for authority that there is a so-called “Wallace tariff” for awards of disrepair. This is not entirely accurate as the tariff was submitted by counsel and the Court of Appeal didn’t actually decide that one existed. I’ve always thought that the existence of a tarrif was wholly inconsistent with what they actually decided, but it is often applied by the county courts.

Before moving onto Earle, it is probably also worth mentioning at this stage that in another case, English Churches Group v Shine [2004] HLR 42, the Court of Appeal held that it would be rare that the award for a tenant’s discomfort while they remained in premises would ever be in excess of the rent.

We then get to Earle. Earle was another long leasehold case. In that case, the long leaseholder had lived in his flat until eventually the ceiling collapsed and he moved out. He was therefore entitled to damages for both when he was living there and for when he was not. The Court of Appeal decided that there was a distinction between periodic tenancies and leasehold premises on the basis that the latter was an asset. This meant that a leaseholder was not limited to recovering damages for discomfort and incovenience; his loss actually arose from the interference with the lessee’s enjoyment of that asset, of which discomfort and inconvenience were merely a symptom. This should guide the award of damages for both when the lessee was living in the flat and in alterantive accommodation. Moreover, the appropriate starting point to assessing damages for both periods (living in and away from the flat) was “a notional judgment of the resulting reduction in rental value is likely to be the most appropriate starting point for assessment of damages.” The Wallace tariff was not to apply in leasehold cases (and I would at this point query, again, whether it is appropriate otherwise).

After these cases we were left with the following propositions. The starting point is always to put the tenant back in the position he would have been had there not been disrepair. However, there is a distinction between long leasehold and periodic tenancies as long leaseholders are entitled to compensation for interference with the right to enjoy their asset; losses for discomfort and inconvenience are a symptom of this interefrence and are an addition to the principle loss. In these types of cases, the starting point is always what the diminution in the rental value would be, irrespective of whether the leaseholder was actually living in the accommodation. Damages are therefore still available for times when the property is not occupied and it is not fatal to the claim that no actual inconvenience had been suffered. Damages would, however, be greater for periods in which the leaseholder actually lived in the premises though, because he could also rely additionally on damages for discomfort and incovenience.

In periodic tenancies, however, judges still appeared to have free reign to make a global award simply for the loss suffered from discomfort and incovenience, which were often modest (although it should not be forgotten that tenants were still entitled to a notional reduction in the rent for periods in which they were forced out of the property as per Wallace). To confuse me further, this basis for assessing damages in Wallace was based in part on Calabar, which was doubted as being correctly decided in Earle, and was itself a long leasehold case.

Moorjani

So we come to Moorjani. Mr Moorjani – the appellant leaseholder – was the owner of a long leasehold  flat in central London. The respondent was the freeholder – and his landlord – of the building in which his flat was located. After purchasing the flat the appellant decided to refurbish it before moving in. During this time he lived with his sister. The lease required the lessor to maintain and repair the common parts of the building. to keep the flats insured against loss and damage and to use any money received from any insurers to repair, rebuild and otherwise reinstate the building or flat with all convenient speed. In 2005, before the appellant had completed refurbishing the flat and while he was living with his sister, there was a leak from the flat above the appellant’s which caused serious damage to his flat. In April 2006, the lessor’s insurers instructed contractors to carry out the works of repair. The works were, however, of poor quality and failed to do all that was required. The deficiencies were, however, essentially decorative and did not cause the flat to become inhabitable. In February 2007, the appellant instructed his own contractors to make good the remaining defects in the flat. The respondent lessor agreed to pay for the cost of these works save for repairs to some doors, the master bedroom and electrical repairs. In 2008, the appellant moved into the flat. Between 2005 and 2011, the respondent also failed to maintain and keep in repair the common parts of the building so that they became dilapidated, shabby and dingy.

In 2011, the appellant issued a claim for damages from the respondent. He contended that he was entitled to special damages in respect of the costs of the repairs to the doors, master bedroom and electrics. He also sought general damages arising from the respondent’s failure to keep the common parts in repair between 2005 and 2011 and the failure to repair the damage to the flat caused by the leak for the period between April 2006 and February 2007 (i.e. from when the contractors were instructed to when he completed the works of repair to the flat).

HHJ May QC, sitting in the Central London county court, refused to award the appellant general damages for the period in which he did not live in the flat and dismissed his claim for special damages. She did, however, award him damages arising from the poor decorative state of the common parts for the period in which he was living in the flat. The sum equated to 1 to 2% notional reduction of the rental value of the flat, i.e. £1500 over three years. The appellant was granted permission to appeal to the Court of Appeal.

The Court of Appeal allowed the appeal in part. The Judge had been wrong to dismiss the appellant’s claim for special damages; he had proved that the doors and master bedroom had been damaged by the leak in 2005. It was not appropriate to interfere with the Judge’s decision to award a 1 to 2% notional reduction of the rental value in respect of the common parts. In awarding damages, she had applied the correct principles and as a county court judge had considerable experience of assessing damages in cases of this type, which the Court of Appeal did not.

The Judge had, however, been wrong to refuse to award general damages for the periods in which the appellant had not been living in the property. Damages for breach of a repairing covenant of a lease are for the impairment to the rights of amenity afforded to the lessee by the lease, i.e. the right to the enjoyment of occupation of a specific property for a specified period arising from the payment of a premium. The quality of enjoyment is underpinned by the lessor’s promise to perform its repairing obligations under the lease. Discomfort, inconvenience and distress are only symptoms of an interference of that right. It is therefore not a fatal obstacle to a claim for damages arising from that impairment if the lessee has decided not to make use of the property. That does not mean that the use of the property is irrelevant to the quantification of damages. A lessee who decides to live in alternative accommodation, whether in mitigation or not, should not in principle be entitled to 100% notional reduction in the rent. It ought not, however, wholly cancel out the loss occasioned by the impairment of the lessee’s right to enjoy his leasehold interest irrespective of where he lives. If the lessee does decide to live elsewhere he will, subject to an obligation to mitigate, be entitled to the cost of renting alternative premises. In certain cases, a lessee may be entitled to damages in excess of the current rental value, e.g. where a lessee or a member of their family has suffered from ill health. In other cases, however, the circumstances of the lessee may result in the award of damages being reduced.

It followed that the Judge had been wrong to dismiss the appellant’s claims for general damages for the periods in which he had not lived in the flat. The Court of Appeal decided that had the appellant occupied the flat between 2005 and 2008 it would have awarded a 5% notional reduction in the rent for the common parts. However, as he had been living elsewhere this was reduced to 2.5%. Likewise, in respect of the flat, the Court of Appeal decided that had the appellant been living in the property between 2006 and 2007 it would have awarded a 15% notional reduction in the rent, but reduced the figure to 7.5%.

What about for periodic tenants?

That is all consistent with Earle. The quesiton is whether it has any bearing on periodic tenancies. Have we moved on from Wallace? The answer is probably yes. In Moorjani, Briggs LJ says that for his part he would not confine the principle in Earle (i.e. that a lessee can recover damages for the interference with the lessee’s enjoyment of that asset) to long leaseholders so as to exclude periodic, secure or statutory tenancies. He went on,

“[31]… In each case, the lessee or tenant enjoys a recognisable species of property right, in return for payment, either in the form of a premium, a rack rent or a fair rent. If in any of those cases the amenity or value of that bundle of rights to the lessee or tenant is impaired by the lessor’s or landlord’s breach of covenant, then that is a loss of which discomfort, incovenience or distress (or the breakdown in health of a loved one) are all symptoms.”

Accordingly, the approach of the Court of Appeal in Earle and Moorjani are likely to apply to periodic tenancies (even if Briggs LJ’s remarks are only obiter). Thus, even if the tenant cannot show that he has suffered any discomfort or incovenience he is still entitled to an award, which according to the Court of Appeal can be as high as 15% of the rent, for the interference with his right to enjoy the use of the property in circumstances where the landlord has not performed his repairing obligations.

This must mean that landlords will no longer be able to hide behind the “oh its only a bit of (insert minor disrepair here)” and argue that the tenant hasn’t actually suffered any loss. In fact the tenant has suffered loss: the loss of the right to enjoy the premises free from disrepair and that may amount to as much of 15% of the rent. A new arrow for the bows of tenant lawyers.

Importantly, it should also put to bed the argument, which has not yet been had, that there is a maximum award for general damages in cases concerning breach of contract.