Previously we noted the case of Janet Reger [2006] where L carried out extensive works, including enlarging the basement. The former T then moved back into occupation, taking a new lease of the ground floor and basement. That lease required T to keep the premises in good repair (with ‘premises’ being defined as including the plaster finishes on the walls, the floor finishes, the raised floor and the void beneath). On the other hand, it was L’s responsibility to keep the ‘structure’ in good repair. Unfortunately, the damp-proof layer installed during the basement works was put in incorrectly (the damp-proofing work of the floor had not been properly linked to the damp-proofing work in the walls, and so damp seeped into the gap between the two). There was so much damp that the basement became unusable as shop premises and so T vacated. L argued that it was not responsible for the problem; there had been no deterioration in the condition of any part of the ‘structure’. The damp-proof membranes were in the same condition as when they had been installed (it was just that they had been defectively installed). Accordingly, L sued T for the unpaid rent – and won. The court agreed with L that he was not responsible for carrying out the works. L’s obligation to repair only arose if one could point to a previous time when the subject matter of the covenant (ie the structure) had been in a better condition. Since T accepted that there had been no deterioration in the damp-proof membrane from its condition when installed, it meant that L could not be liable. The fact of the matter was that the defect had caused damp, but it had not led to a deterioration of the ‘structure’ (eg it had not caused the brickwork to crumble). The mere fact that T was suffering loss of amenity was not of itself evidence of disrepair and the fact of the matter was that there was none.

In desperation, T argued that there should be an implied covenant requiring L to remedy such defects. But, applying general principles the judge said that such a term could only be implied if (i) it was reasonable and equitable; (ii) it was necessary to give ‘business efficacy’ to the lease; (iii) it was so obvious that it went without saying; (iv) it was capable of clear expression; and (v) it did not contradict any express terms of the lease. Not surprisingly, given those criteria, the argument for an implied obligation did not succeed.

It is worth making the point that this case does not decide anything new. For instance, in Post Office [1987] the court commented that, while at first sight, it seemed a startling proposition, if a new office block let in ground water into the basement (so that it was ankle-deep for some years) that condition was consistent with there being no ‘disrepair’. The reality is that this is a legal concept that many Ts will find it hard to come to terms with. Conversely, of course, it can also work against Ls – since if there is no ‘disrepair’ as a result of an inherent defect then it cannot amount to ‘repair’ that has to be done by T. In practice, however, it is usually T who will suffer more than L since T has to put up with the inconvenience that comes with the defect.

What this case does do is highlight the importance of considering whether L (or T) should be responsible for repairing any inherent defect. Most leases, needless to say, are silent on this point. At the least, T should surely argue for a covenant by L to keep the structure in ‘good condition’. For instance, in Credit Suisse [1994] the exterior cladding of an office block required replacing; that was not ‘repair’, but it was held to come within the scope of a clause requiring the cladding to be kept ‘in good condition’. The main thing for advisers to be aware of is that clients (whether Ls or Ts) should be aware of the potential problems surrounding inherent defects. If the parties cannot reach agreement on terms, then do consider, firstly, insurance and, secondly, getting direct warranties from the builders who did the works. For a full discussion of Janet Reger v Tiree [2006] EWHC 1743 (Ch) see [2006] 178 Property Law Journal 13.  © Practical Lawyer