At the end of a tenancy, L will be entitled to compensation from T for any breach of repair (and for failing to put the premises into their original condition).

The starting point is to say that T is liable for the ‘reasonable cost’ of doing the repair works, plus loss of rent for the period, until the works have been completed. However, this is all subject to s18(1) LTA 1927 which says that damages for breach of repair payable on termination of the lease shall be limited to the reduction in value of L’s reversion. But, how do you calculate that amount?

In a recent case the judge decided the cost of carrying out the remedial works was £135,000. He then considered whether that amount would be capped by s18(1). To work out the diminution in the value of L’s reversion, the judge made his assessment in two stages. Firstly, he decided that if the property had been marketed for six months the difference in value between its actual condition, and the condition it should have been, was £118,000. Secondly, he went on to say that T would have agreed to take on a new lease from a new purchaser of the reversion and that would have meant that the reversion was worth more on the open market, because it would have had the benefit of a T with a strong covenant. That would reduce the diminution in the value of the reversion to £45,000. The end result, therefore, was a damages award of £45,000.

The CA reversed this on appeal. In its view, stage two of the judge’s calculation was fundamentally wrong; the judge should not have taken into account the fact that T would have entered into a new lease (and this would then have increased the value of the reversion). The court should have simply looked at the ‘bundle of rights’ that L actually had on the valuation date (ie he did not have an agreement for a lease with T at that date and so therefore it should be regarded as being an untenanted property). ?Van Dal Footwear v Ryman [2009] EWCA Civ 1478 (access free at www.practicalconveyancing.co.uk).