Landlords and investors should take note of the recent Court of Appeal decision in J N Hipwell & Son v Szurek [2018] EWCA 674.

Ms Szurek ran a café business (trading as ‘Mocha-Mamas’) in Mr Hipwell’s premises under a three year lease from January 2012.  In 2013, she experienced problems which she said were due to unsafe electrical wiring and alleged that this led her to close down and cease trading. Consequently, she alleged that Mr Hipwell was in ‘repudiatory breach’ and was entitled to terminate the lease as a result and claim from him losses incurred in closing the business.

Ms Szurek’s case was that there was an implied obligation to the effect that Mr Hipwell was responsible for maintenance/repair of electrical installations.  Also, when the lease was entered into, Mr Hipwell had indicated that rewiring at the property had been checked and certified.

In response, Mr Hipwell denied that he was in breach and counterclaimed for rent arrears.  He relied on the fact that the lease contained an entire agreement clause and a further clause which stated that Ms Szurek was not relying on statements or representation made by the landlord outside the lease.

The claim was heard in the county court and the judge found that a lease term should be implied making Mr Hipwell responsible for the electrical installations and that he was indeed in repudiatory breach. Damages were just under £23,000

Although the sums in dispute could be considered relatively low, Mr Hipwell pursued an appeal. The Court of Appeal considered (1) whether it was correct to imply a term placing responsibility for the installation and maintenance of electrical wiring onto Mr Hipwell and (2) whether the entire agreement and non-reliance clauses prevented the implication of such a term.

The court considered that the lease was an “oddly balanced document” and, on the first issue, found that a term should be implied to give effect to what the parties intended. There was a plain and obvious gap in the drafting – the lease made no express reference to responsibility for the repair/maintenance of the exterior of the premises itself, or plumbing and electrical installation and supply.  However, in evidence, Mr Hipwell accepted he would assume those obligations and some of the lease terms reflected this (for example, he was entitled to access the premises to maintain service media, including electricity wires and cables). The term implied was a landlord’s covenant “that the electrical installation which serves the Premises (including all wires, ducts, cables, conduits or other channels through which electricity is conveyed) is safe and the subject of a current Electrical Safety Certificate”.

On the second point, the court held that entire agreement and non-reliance clauses did not prevent the implication of a term on the basis of business efficacy.

In this case, the court had to make sense of a lease that was not particularly well drafted and the gaps and ambiguity resulted in uncertainty and, ultimately, expensive litigation between the parties.  The sums in dispute were relatively low in comparison with the fairly substantial costs of both a trial and the subsequent appeal.

It is clear that landlords will not necessarily be able to rely on either an entire agreement clause or the lack of express lease obligations to avoid liability for the repair and maintenance of certain parts of leased premises.

Consequently, landlords (and their advisers) should carefully consider how responsibility for key aspects of the premises will be allocated between the parties and ensure that the lease terms reflect this.

If you are a commercial landlord and need advice regarding a property dispute then call 01752 203500 or email me via jonathan.bouchta@GAsolicitors.com.

Jonathan Bouchta, solicitor

Jonathan Bouchta, partner and property litigation solicitor

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