When Can Repair In A Lease Include Demolition And Redevelopment?

Background

The case of Malin and Others v Crown Aerosols UK Limited concerned a lease of an industrial building constructed in 1972. The building still exists but has deteriorated significantly and has been lying empty since 2011.

The tenant contended that the building was beyond economic repair. They proposed demolition and re-development of the site rather than repair and maintenance.

The landlords raised proceedings in the Court of Session seeking interdict against the tenant to prevent it from demolishing the building. The landlord claimed that the deterioration had been caused by the tenant's failure to comply with its repair and maintenance obligations under the lease.

Decision

The landlord argued that the tenant's repair and maintenance obligation was 'wholly inconsistent' with an entitlement to demolish. The tenant submitted that the lease should be interpreted in accordance with commercial common sense. The repair and maintenance obligation in the lease referred to 're-erection' so it was clearly in the contemplation of the parties when the lease was entered into that demolition and re-development may be required.

The Court considered that the primary position of both parties was 'misconceived.' There was no justification for restricting references in the lease to "re-erection" to circumstances in which the building is destroyed by an external event, as suggested by the landlord. However, the tenant's contention that an absolute right to demolish could be read into the lease was also ill-founded.

Lord Tyre was more favourable towards the tenant's alternative argument that the lease should be construed as permitting development when circumstances rendered re-erection necessary. As the building was obsolete, re-erection was required and, as a matter of practicality, demolition of the building was required to facilitate re-erection.

The reference in the lease to re-erection "when necessary" should extend to where the building has fallen obsolete, even where disrepair...