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Damages for disrepair

This page explains the principles to be applied when calculating damages in a housing disrepair case.

Introduction

How much should the tenant received in damages? How long is a piece of string? It is often very difficult to form a precise view. Every case will turn upon its own facts and the feelings of the individual judge about the case. Solicitors and barristers who regularly practise in this area will have feel for the right sum and regard will be had to previous cases. Legal Action regularly provides details on awards. A very useful book to have, which has collected together many cases, is the Housing Law Casebook by Nic Madge (LAG Books). However, it is always necessary to be cautious about the short reports of other cases. Further, as will be seen below (Earle v Charalambous) there is no tarrif to be applied.


Basic principles

The leading case which sets out the basic principles is Wallace v Manchester City Council [1998] EWCA Civ 1166. Morritt LJ:
    ".. the agreed starting point is the basic principle that the purpose of an award of damages is, so far as possible by an award of money, to place the innocent party in the position he would have been in if he had not suffered the wrong, whether breach of contract or tort, of which he complains. .. Thus in the context of the breach of an obligation to repair property let to another the purpose of the award of damages is, so far as an award of money can do so, to place the tenant in the position he or she would have been in if the obligation to repair had been properly performed."
Morritt LJ then carried out a lengthy review of the previous cases before coming up with the following propositions.
    "First, the question in all cases of damages for breach of an obligation to repair is what sum will, so far as money can, place the tenant in the position he would have been in if the obligation to repair had been duly performed by the landlord.

    Second, the answer to that question inevitably involves a comparison of the property as it was for the period when the landlord was in breach of his obligation with what it would have been if the obligation had been performed.

    Third, for periods when the tenant remained in occupation of the property notwithstanding the breach of the obligation to repair the loss to him requiring compensation is the loss of comfort and convenience which results from living in a property which was not in the state of repair it ought to have been if the landlord had performed his obligation. (McCoy v Clark; Calabar Properties Ltd v Stitcher and Chiodi v De Marney).

    Fourth, if the tenant does not remain in occupation but, being entitled to do so, is forced by the landlord's failure to repair to sell or sublet the property he may recover for the diminution of the price or recoverable rent occasioned by the landlord's failure to perform his covenant to repair. (Calabar Properties Ltd v Stitcher).

    Obviously the tenant cannot claim damages in accordance with the third proposition for periods occurring after the sale or sub-lease referred to in the fourth. To that extent, as shown in Calabar Properties Ltd v Stitcher, those two heads are mutually exclusive.

    This case is concerned with the proper application of the third proposition, not the fourth. Thus the question to be answered is what sum is required to compensate the tenant for the distress and inconvenience experienced because of the landlord's failure to perform his obligation to repair. Such sum may be ascertained in a number of different ways, including but not limited to a notional reduction in the rent. Some judges may prefer to use that method alone (McCoy v Clark), some may prefer a global award for discomfort and inconvenience (Calabar Properties Ltd v Stitcher and Chiodi v De Marney) and others may prefer a mixture of the two (Sturolson v Mauroux and Brent LBC v Carmel Murphy). But, in my judgment, they are not bound to assess damages separately under heads of both diminution in value and discomfort because in cases within the third proposition those heads are alternative ways of expressing the same concept.

    It follows that in my judgment Judge Hardy was right when he said that diminution in the value of the property in relation to the amount of rent paid is not a separate head of damage. In the light of the submissions made to us I would make some general observations on the problems of assessing damages in this field. First, I would agree with the observations of Stephenson and Griffiths LJJ in Calabar Properties Ltd v Stitcher that expert valuation evidence is not of assistance when assessing the damages in accordance with my third proposition. The question is the monetary value of the discomfort and inconvenience suffered by the tenant. That is a matter for the judge. As Kennedy LJ observed in the course of argument there is no market in out of repair council houses on which expert evidence could be either admissible or helpful. Second, a judge who seeks to assess the monetary compensation to be awarded for discomfort and inconvenience on a global basis would be well advised to cross-check his prospective award by reference to the rent payable for the period equivalent to the duration of the landlord's breach of covenant. By this means the judge may avoid over- or under-assessments through failure to give proper consideration to the period of the landlord's breach of obligation or the nature of the property."

Application of the principles

Shine v English Churches Housing Group
[2004] EWCA Civ 434.

The principles stated above were applied in Shine v English Churches Housing Group (2004). The landlord was a registered social landlord in breach of s11 of the Landlord and Tenant Act 1985 over a number of years. The judge awarded damages of £16,000 in respect of the four year period preceding the trial. The CA held that the award was excessive applying Wallace v Manchester City Council (above). The award exceeded the level of the rent payable, and the judge had failed to give clear reasons for coming to his conclusion. The award was reduced to £8,000. Wall LJ, paras 104 to 107, 109:
    "Whilst we accept that the guidelines helpfully set out by Morritt LJ in Wallace v Manchester City Council are not to be applied in a mechanistic or dogmatic way, and whilst we equally accept that there will be cases in which the level of distress or inconvenience experienced by a tenant may require an award in excess of the level of rental payable, we take the view that the plain inference of Morritt LJ's judgment, and the figures identified in the case itself, demonstrate that if an award of damages for stress and inconvenience arising from a landlord's breach of the implied covenant to repair is to exceed the level of the rental payable, clear reasons need to be given by the court for taking that course, and the facts of the case - notably the conduct of the landlord - must warrant such an award.

    It must, we think, always be remembered that an award of damages under LTA 1985 section 11 is an award for a breach of contract by the landlord, not for a tort committed by the landlord. It is, accordingly in our judgment logical that the calculation of the award of damages for stress and inconvenience should be related to the fact that the tenant is not getting proper value for the rent, which is being paid for defective premises. Moreover, the reason for the awards being modest is, it seems to us, related to the fact that the tenant in a secure weekly tenancy has the benefit of occupying premises at a rent, which is well below that which the same premises would be likely to command in the open market.

    In these circumstances, and viewed against the careful guidance given by this court in Wallace v Manchester City Council, we take the view that the judge's award cannot stand for the reasons which Mr. Bowker advances. Firstly, it is manifestly excessive on the facts. Secondly, the judge gives no explanation as to how he has arrived at it. He dismisses Mr. Bowker's careful calculations as "very much off the mark" without explaining why. Having decided (as he was entitled to do) to make a global award, he fails to check that award against the rent Mr. Shine was paying.

    As Mr Bowker points out, the average annual rent for the seven years between 1996 and 2003 was in the region of £2,600.00 per annum. The judge made an award of £16,000 for the period of about four years from May 1999 to June 2003. This exceeds the average level of rent by some £1,400 per annum. In these circumstances, Mr Bowker argues - we think with some force - that the maximum award (ignoring any features which otherwise go to reducing it) on the facts of this case would be a sum broadly equivalent to the rental value of the premises, and that any sum which substantially exceeds this amount is plainly wrong.

    Accordingly, we see nothing in the instant case to take it out of what might be described as the basic rule of thumb that - all other things being equal - the maximum award for damages in the case such as the present should be the rental value of the premises."

Diminution in value - long leases

Earle v Charalambous
[2006] EWCA Civ 1090

It is important to note that the above two cases were concerned with social housing where there is no real market value for the property. However, this is not necessarily the position in all cases.

This case considered the assessment of damages for distress, discomfort and inconvenience in the context of a long lease at a ground rent. The property was a top floor flat. The disrepair related to the roof which led to substantial ingress of water into the flat. The central issue in the case was
    ".. whether in assessing the normal measure of damages for breach of a repairing covenant in respect of residential premises, the distress, discomfort and inconvenience for which the tenant is being compensated under the head 'difference in value' should be assessed according to past awards for such non-pecuniary loss or is actually dependant on the market rent of the premises." (para 15).
The judge had awarded £20,000 for a period of 35 months during which T had remained in occupation; and £10,000 for a period of 21 months during which T had lived with his parents. L appealed in the basis that the awards were excessive and out of kilter with previous decided cases. Counsel for the landlord suggested that there was a tariff based on previous cases, with a top award of £3,300 in a 'worst case'.

Held: L's argument was rejected. There is no tariff based on previous cases to be applied regardless of the nature and value of the property (para 22). Comments by Stephenson LJ in Calabar Properties v Stitcher [1984] 1 WLR 287 that suggest that the diminution in value of the property should never be taken into account where the tenant used the property as a home were not necessary for the decision, and were contrary to well-established principle. When considering the amount of damages to award it is important to have regard to the type of tenancy before the court. For example, in the well-known case of Wallace v Manchester City Council [1998] 3 EGLR 38 the court was concerned with a secure tenancy, whereas in the present case the court was concerned with a long lease with a value of its own. Carnwarth LJ at paras 32 and 33:
    "I do not think that a direct analogy can be drawn with awards in relation to protected periodic tenancies, still less with the 'modest' awards thought appropriate in other areas of the law .. A long-lease of a residential property is not only a home, but is also a valuable property asset. Distress and inconvenience caused by disrepair are not free-standing heads of claim, but are symptomatic of interference with the lessee's enjoyment of that asset. If the lessor's breach of covenant has the effect of depriving the lessee of that enjoyment, wholly or partially, for a significant period, a notional judgment of the resulting reduction in rental value is likely to be the most appropriate starting point for assessment of damages. Generally, this reduction will not be capable of precise estimation; as Morritt LJ said in Wallace, it will be a matter for the judgment for the court, rather than for expert valuation evidence. Use of a notional rack rent as a means of assessing reduction in value is not confined to cases where the property is in fact held as an investment."
On the facts, the award of £20,000 for the first period, when T remained in the property, was held to be excessive and reduced to £13,500 (which was confirmed in a supplemental judgment of the CA). The award of £10,000 in respect of the second period represented just under half of the rental value of the property for that period was a fair estimate of T's loss and was not open to criticism.

Note: Two other points came out of the case:
  • There was no expert evidence on the rental value of the property. The judge relied upon evidence given by T. "The claimant was well able to carry out his own researches into rental values of equivalent properties, and the judge was entitled to accept his figures in the absence of evidence to the contrary." (para 34).
  • L is only under a duty to repair once notice of the disrepair has been given to him "and a reasonable time has elapsed in which the repair could have been carried out." (para 43). Damages should therefore only be assessed from the passing of that reasonable time. How much time is reasonable will depend on the facts of each case ".. but is likely to include time to find out what is wrong, to take the necessary advice, to prepare specifications, and to select and instruct a builder. Where the cost is to be recovered through service charges time may also need to be allowed for the statutory consultation procedure. Although we have had no arguments on the point, in principle this approach seems to me correct once it is accepted that the date of notice is the starting-point."
In a supplemental judgment in this case the CA commented on the principle that the landlord is only liable to repair once he has received notice that the property is in disrepair. In fact this notice requirement only applies where the disrepair is to part of the property demised to the tenant. It is an exception to a general rule. Where the disrepair is to common parts the "general rule" applies ie the duty to put the property in repair arises the moment that disrepair occurs. Carnwarth LJ at para 8:
    "In applying a standard lessor's repairing covenant, the law draws a distinction between disrepair in the demised premises themselves, and disrepair in other parts of the building within the lessor's control. In the latter case the 'general rule' applies: that is, the covenant requires the lessor to keep the premises in repair at all times, and he is in breach immediately a defect occurs (British Telecommunications plc v Sun Life plc [1996] Ch 69). In the former case, by contrast, there is no breach until the lessor has had notice of the defect and a reasonable time to carry out the necessary remedial works (ibid; O'Brien v Robinson [1973] AC 912). In BT (at p 79), Nourse LJ accepted that there might be other exceptions to the "general rule", for example if the defect is caused by an occurrence wholly outside the lessor's control."
In the present case the defects were principally in the roof, and therefore at first sight arguably within the general rule. However, it was accepted by the tenant that notice was the starting-point. Damages were therefore assessed on the basis that the landlord should be allowed a reasonable amount of time to respond to the notice by practical action. As the case had proceeded on the basis that notice was the starting point it was right to allow the landlord a reasonable period to respond to the notice. However, Carnwarth LJ did make the following comment:
    "The BT case, and the earlier cases relied on [in] it, were not concerned with the modern statutory and contractual framework governing residential leases. The lessor's repairing obligation, in a case such as the present, is not free-standing, but is in practice linked to the obligation of the lessees to contribute to the costs so incurred. (Indeed the lessor may be a company owned by the lessees, with no separate assets of its own.) The link is made expressly in the present lease, where the lessor's repairing obligation is "subject to contribution and payment by the lessee as hereinbefore provided" (cl 4(3)). (It is unnecessary to consider the precise effect of that qualification, which seems open to debate.) To protect lessees, there is an elaborate statutory framework to ensure that they are consulted in advance on major works. In a future case, it may have to be considered whether the "general rule" as laid down by BT requires some modification to take account of the practicalities of the modern relationship of residential lessors and lessees."


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