Most tenancies go ahead without incident, tenants move in, pay their rent and look after the property. However, that is not always the case and where a tenant leaves a property sometimes the security deposit taken is not enough to pay for damage caused meaning a landlord has to consider whether or not to pursue their former tenant for losses suffered. In recent Upper Tribunal decisions, the Upper Tribunal Judge looked at the nature of such claims and the issue of loss. The two related claims between the same parties, can be found here and here and whilst different applications they deal with the same issue.
What is the starting point for such claims?
A tenant has duties under any lease to look after a property they rent. There can be specific terms set out in writing in the lease itself called express terms, but even if that is not the case, certain duties are implied by law, such as to take reasonable care of the property and act in a proper tenant-like manner. If they do not, then a landlord is entitled to seek compensation from them for any loss suffered.
What were the cases about?
Both cases were applications for permission to appeal to the Upper Tribunal against the First-tier Tribunal’s decisions which, despite a finding that the tenant was in breach of contract, was to refuse the landlord’s claims against their former tenant for the cost of replacing shutters and replacement carpets. Both cases proceeded on the basis of estimates for the costs as the landlord had in fact sold the property without actually replacing either.
What did the Upper Tribunal decide and why?
The Upper Tribunal refused permission to appeal in both cases. As mentioned already, the cases were claims for damages which it was alleged arose from the former tenant’s breach of contract. As such, in order to succeed and recover damages even where there is a breach of contract, a landlord has to be able to prove they have actually suffered a loss. As the Upper Tribunal Judge said “In Scotland, damages are compensatory. That is, damages are awarded to restore the wronged party to the position they would have been had it not been for the breach of contract by the wrongdoer. Therefore, the principle is that breach of contract must cause a loss to the pursuer to entitle the pursuer to damages”. In these cases, the claims were based on estimates and not costs actually incurred and because, in one case the carpets had not been replaced and there was no evidence that the price received for the property had been reduced due to carpets not having been replaced by the tenant, it was decided that the landlord had not, in fact proved a loss.
How should claims of this kind be approached in terms of loss?
There is of course no single measure of loss in these types of cases. Losses could be quantified with reference to the actual costs incurred and as mentioned in the Upper Tribunal’s decisions, a reduction in the value of the property (albeit that is far more complicated). Whilst rejected in these cases, and whilst landlords are restricted to claiming for losses actually suffered, it is possible to seek to quantify such losses with reference to a reasonable estimate of costs likely to be incurred. However, if a landlord chooses to do that, it is open to a tenant to challenge the landlord on the basis that they have no intention of doing the works (as was done in this case) or that the estimates are excessive. Overall, the cost of actual repairs is in most cases the easiest and best route to go.
What can be claimed for?
As mentioned, it is the actual loss suffered that can be pursued. Whilst not an issue raised in either case despite the suggestion of lease clause to that effect, that means that a landlord cannot expect to have a property returned to them at the end of a lease in exactly the same condition as it was at the start of the lease and “fair wear and tear” is allowed for. All fittings and furnishings have a finite lifespan and what will be “fair wear and tear” will depend on the circumstances including the fittings or furnishings themselves, the length of tenancy and the composition of the tenants. That means, in practice that, even if a tenant causes damage to a carpet, for example by way of cigarette burns, and the landlord replaces the carpet, that the tenant will not necessarily be responsible for the full replacement cost of the carpet as fair wear and tear for its age has to be taken into account. There is no entitlement to receive “new for old” as that would be classed as “betterment” in that the landlord would be better off if they got a new carpet at the end of the lease rather than one that had been subject to fair wear and tear.
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