In a recent case on the value of dilapidations, both
parties' expert valuation evidence was criticised by the judge
... in reaching their conclusions they lacked 'objective
reasoning' and were unable to provide clear analysis of their
evidence to support their subjective opinions.
Lesley Robinson provides an update on this
Recently, the Technology and Construction Court reminded parties
how damages for dilapidations should be valued.
In Consortium Commercial Developments Limited v ABB Limited
 EWHC 2128 (TCC) the judge had to examine the valuation
evidence put forward by both parties' experts in relation to
the value of dilapidations. The landlord's expert contended
damages was the cost of repairs (£315,000) while the
tenant's expert argued it was limited to the loss or diminution
in the value of the landlord's interest under section 18(1)
Landlord & Tenant Act 1927 (£75,000).
The outgoing tenant did not carry out any repairs, arguing that
there was no demand for the property, in or out of repair given its
age, character and location. The landlord did not do the works at
expiry of the lease arguing that it wanted to recover the costs
from the tenant beforehand and that it was better to wait for the
rental market to improve so it would then re-let the property in
repair at a higher rent. There was also an argument about how the
costs of reinstatement works should be assessed.
'The judge was further critical that, on cross examination,
the failure to make reasonable concessions when errors were
apparent further undermined an expert's credibility'
Both parties' expert valuation evidence was criticised by
the judge. He complained that in reaching their conclusions they
lacked 'objective reasoning' and were unable to provide
clear analysis of their evidence to support their subjective
opinions. He was further critical that, on cross examination, the
failure to make reasonable concessions when errors were apparent
further undermined an expert's credibility.
The judge carried out his own objective analysis of the
comparable evidence. He decided that a hypothetical purchaser would
not have deducted the full cost of the repair works from the
in-repair value of the property, but would instead factor in an
amount for the repairs it would want to carry out. In his opinion
the out-of-repair value was £675,000 but, given the state of
the market at the time the lease ended, damages were limited to the
diminution in value of the landlord's reversion, which the
judge concluded was £225,000.
As for the reinstatement works, it was decided the section 18(1)
cap may apply if the landlord has not done these works and has no
intention of doing so. However, provided the landlord has a clear
intention to re-let the property in good repair in better market
conditions and that it would be reasonable to carry out the
reinstatement works to achieve this, the measure of damages was the
full cost of the reinstatement works.
The judge then concluded there was no loss of rent claim as the
market conditions were such when the lease ended that the property
would have been difficult to re-let even in good repair. The loss
of rent was not attributable to the state of the property but to
the market and therefore this part of the claim failed.
Although not new law, this case is a reminder of how
dilapidations will be valued and that an expert's duty is to
the court. Expert evidence will be scrutinised. Intention is a key
factor and all statements made must be supported by clear objective
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