Did you miss? Craigard v Westbury Homes [2026] EWHC 2453

Terminal dilapidation – supersession – intention – recoverable loss 

The facts 

The premises were a 1998 two-storey office building at Crossways Business Park, Dartford. The 2003 lease contained a covenant to keep the premises, expressly including the heating and air-conditioning apparatus, “in good and substantial repair and condition”. It expired on 8 July 2023. 

The HVAC system was original. Its chillers ran on R22 refrigerant, which can no longer be used to recharge systems. The tenant’s managing agents had known since 2011 that the chillers needed replacing. Their emails showed a deliberate strategy of nursing the system along in the hope it would “appear functional” at lease end. The only pre-expiry work was a £400 change of belts and filters days before the term ended. 

The landlords bought the freehold in 2021 as a syndicate investment. From the outset they planned to replace the HVAC system as part of a wider refurbishment aimed at ESG credentials, a BREEAM rating and higher rents. They told investors and sub-tenants as much. After expiry they installed a new VRF and MVHR system for £566,089 within a £1.64m project. 

The claim was for £1.6m: remedial works (reduced at trial to £1.24m), £218,145 loss of rent and £55,000 fees. The tenant said a new chiller plus modest repairs would have sufficed and relied on supersession and the section 18(1) cap. 

The decision  

The judge started from the orthodox position. In a terminal claim the primary measure is the reasonable cost of putting the premises into the covenanted state. That measure is subject to mitigation and proportionality, and the whole award, including rent loss, is capped by the diminution in value of the reversion under section 18(1) of the Landlord and Tenant Act 1927. 

The central question was whether replacement of the whole HVAC system was needed to comply with the covenant. The judge applied Ultraworth: plant is in repair if it works substantially as well as it did when new. He also applied the Sunlife propositions, in particular that the tenant may perform in the manner least onerous to it. 

The system was plainly out of repair, and the tenant’s neglect was “calculated”. But the burden lay on the landlord to prove that replacement was necessary, and it failed. The key step is this: if a reasonable specialist could have recommended either repair or replacement, damages are assessed on the repair basis. The landlord adduced no costing of the repair route, so the court adopted the tenant’s expert’s figure of about £163,500. Knock-on items fell too. 

The tenant argued that the landlord was always going to rip out the system and refurbish, so any repairs would have been wasted. On that footing only £123,161 of works would have survived, relying on the RICS Dilapidations professional standard (2016), section 8.3. 

On the facts, the judge agreed: had the tenant repaired, the landlord would have stripped the work out and replaced the system anyway. In law, however, he rejected the argument for the cost of repairs. His reasoning turned on the structure of section 18(1). The second limb removes damages where the premises are to be demolished or so altered as to render repairs valueless. If the common law already reduced damages because of the landlord’s intentions, that limb would have been unnecessary. Marquess of Salisbury v Gilmore and Henderson v Thorn confirm that, before 1927, the landlord recovered the cost of repairs even if it would not lose a penny. Outside the second limb, the common law measure stands, subject only to the first-limb cap. 

The court took a sharply different view of rent lost while works were carried out. Rent that would have been lost anyway, because the landlord was doing its own improvement works. It followed that the loss had not been caused by the need to repair. Ordinary causation applies. 

For the section 18(1) cap, the relevant intentions are those of the hypothetical purchaser of the reversion, not the actual landlord. The landlord’s valuer used residual and comparative methods and put diminution at about £1.38m. But he valued only on the landlord’s case that full replacement was required, so he gave the court no figure on the basis it actually found. The tenant’s valuer used the “shortcut” survival method and assumed a purchaser would also replace the HVAC system, producing heavy supersession. The judge took a hybrid course. He adopted the shortcut method but preferred the landlord’s valuer on the purchaser’s intentions: in this location a functioning, repaired HVAC system was acceptable and new plant brought no rental premium.  

Lessons learnt 

The case neatly maps where a landlord’s own plans matter in a terminal dilapidations claim. For property litigators, the practical points are these: 

• A plan to replace does not kill a repair claim. Tenants running supersession arguments on the landlord’s subjective intentions should expect them to fail against the cost of repairs, and should channel that material into the section 18(1) valuation instead.
• But it caps recovery at the cheapest compliant remedy. Where a reasonable specialist could recommend repair, damages follow repair. Landlords intending to replace plant must still obtain and cost a genuine repair option, ideally with validation testing, or risk the court adopting the tenant’s figure.
• Rent-loss claims are exposed. Where the landlord would have done improvement works anyway, consequential loss of rent is likely to fail.
• Valuers must model alternatives. A valuation premised only on one side’s building case may leave the court without a usable figure.

One point of tension deserves notice. Sunlife at [41] and [46(7)] recognises supersession at common law where market conditions require upgrading works. The judge did not reconcile that with his conclusion. The likely distinction is that Sunlife supersession is objective and market-driven, whereas here the argument rested on this landlord’s subjective plans, and the market evidence showed a hypothetical purchaser would not have replaced the system. An argument to be explored.  

Article by Lina Mattsson