Commercial landlords will be familiar with the problems associated with pursuing tenants when it comes to breaches of repairing covenants during, or at the end, of the lease term. They are expensive, time-consuming and often uncertain claims to bring. A property investor who is concerned about the state or condition of its asset will, therefore, be comforted to know that it may have an alternative, potentially workable, and relatively quick self-help remedy at its disposal.
An enter and repair clause (otherwise known by lawyers as a "Jervis v Harris clause", named after a Court of Appeal case in the mid-1990s) is a common feature of modern commercial leases. If drafted correctly, and the notice procedure in the clause is followed correctly, the clause will allow a landlord to enter the premises during the term to undertake a survey, to serve a "Notice to Repair" on the tenant identifying any disrepair found, and to require it to remedy the disrepair within a specified timeframe. If the tenant fails to carry out the work, the clause will permit the landlord to re-enter the premises and carry out the work itself, and recover the cost from the tenant as a debt.
At a time where when property owners are being particularly impacted by tenants defaulting on rent, a tenant’s failure to maintain the state and condition of the property is an additional unwanted problem. This is especially the case where the lease still has a number of years left to run and a landlord is concerned that the ongoing disrepair is likely to cause serious damage to its investment if left unaddressed.
The following five points are, therefore, a timely reminder for landlords and tenants of the pros and cons of a "Notice to Repair".
1. A "Jervis v Harris clause" allows the landlord to reclaim the cost of the works from the tenant as a debt. This means the landlord can dodge legislation that would otherwise limit its claim for disrepair. In particular, a "Jervis v Harris clause" is not subject to the Leasehold Repairs Act 1938, which if applicable would require a landlord pursuing a damages claim to first seek permission of the court. Neither does section 18(1) of the Landlord and Tenant Act 1927 apply, which is often used by tenants to cap a landlord’s damages claim to the loss in value that the landlord’s reversionary interest has suffered by reason of the disrepair (the so-called diminution argument). As the claim becomes a simple debt claim, this saves the landlord time, money and the uncertainty of proving a damages claim.
2. If timed correctly, a landlord’s "Notice to Repair" could give the landlord the upper hand in exerting legal and/or commercial pressure on a tenant to undertake works before the lease ends and, in doing so, avoid having to rely on a terminal dilapidations claim, which could end up being limited by the diminution argument and result in recovering less than the cost of the works.
3. If the "Jervis v Harris clause" refers to the recovery of costs as “rent”, all usual remedies for recovering rent shall also apply to the cost of the works, which means that a landlord may in theory be able to forfeit for non-payment (bar any restrictions on forfeiture under current COVID-legislation).
4. However, if the landlord hopes to recover the full cost of the work from the tenant, it will have fund the work itself first, which means if the tenant is not good for the money, the landlord could be left seriously out of pocket. Also, a landlord needs to scope its proposed works carefully before serving the "Notice to Repair". A landlord is not entitled to recover the cost of any works, unless the tenant can be shown to be liable to do them under the terms of the lease. Also the "Notice to Repair" cannot extend to cover reinstatement work, or improvements. Further, a landlord will not be able to recover the cost of any additional works it chooses to do on site without first serving a fresh "Notice to Repair" relating to those additional items. Importantly, if the landlord is tempted to go beyond what it is entitled to do under the "Jervis v Harris clause", it may face a legal challenge over the cost and extent of the work. Worse still, it could be faced with either injunctive proceedings, or a damages claim for trespass and/or derogation from grant. A well-advised tenant would make the landlord aware of this risk and make life difficult for the landlord by challenging the scope of the works right at the outset.
5. Whilst a tenant may find it difficult to prevent a landlord from accessing the premises to carry out the works, if they are deemed too intrusive or disruptive to a tenant’s business, a court may decide to refuse access. A landlord faced with this problem may well then be forced to reduce the scope of its proposed works, or even withdraw its "notice to repair" entirely.
The pros and cons of a "Notice to Repair" are well known to legal practitioners, but it is important for landlords and tenants to be aware of how they can be used and what arguments might arise from them. If used correctly, a "Notice to Repair" is a handy tool for a landlord to leverage pressure on a tenant, whether to force it to carry out repair works, or as part of a wider investment strategy.
Markus Klempa