Dilapidations Case Law: Hammersmatch vs Saint-Gobain

In the sphere of UK commercial property law, the case of Hammersmatch Properties (Welwyn) Ltd v Saint-Gobain Ceramics & Plastics Ltd [2013] stands as a crucial authority on repairing covenants, dilapidations claims, and the quantification of damages under Section 18(1) of the Landlord and Tenant Act 1927.

This High Court judgment offers essential insights for landlords, tenants, and property litigators alike.

Overview of the Dispute

Hammersmatch, the claimant and landlord, brought a dilapidations claim against Saint-Gobain, the tenant, upon the termination of a lease on the Norton Building in Welwyn Garden City.

The lease contained a covenant requiring the tenant to "keep the premises in repair." A key dispute arose over whether this obligation required the tenant to improve the building's condition beyond its state at lease commencement.

Saint-Gobain argued that since the property was already in poor condition at the start of the lease, the repairing obligation should not demand improvements beyond that initial state. They contended that the covenant was limited to maintaining, not improving, the property.

The Court's Findings

Mr Justice Ramsey, presiding over the matter, rejected the tenant's arguments. The judgment clarified the nature of repairing obligations :

The duty to "keep in repair" necessitates putting the premises into repair if they were in disrepair at the start of the lease, not merely maintaining the initial poor condition.

The standard of repair required depends on the building's age, character, and locality.

Cosmetic defects and general wear-and-tear were not automatically actionable unless they constituted actionable disrepair.

Ultimately, Hammersmatch was awarded £900,000. This was a figure capped by Section 18(1) of the Landlord and Tenant Act 1927, which limits damages to the diminution in the value of the landlord's reversion.

Quantification of Damages: Section 18(1) Landlord and Tenant Act 1927

One of the pivotal aspects of the case was the method for calculating damages.

Section 18(1) restricts a landlord's claim for damages for breach of a repairing covenant to the amount by which the value of the landlord's interest is diminished.

Despite Hammersmatch initially advancing a claim exceeding £4 million, the court found the appropriate diminution in value to be £900,000.

This underlines a key principle: even if the cost of remedial works is high, recoverable damages are constrained by the actual impact on the property's value.

Procedural and Conduct Issues - Dilapidations Case Law : Hammersmatch vs Saint-Gobain

The judgment also dissected pre-action conduct and case management issues, including :

Pre-Action Protocol Compliance: Although a formal Dilapidations Protocol had not yet come into force, best practice at the time (under RICS and Property Litigation Association guidelines) required the tenant to engage substantively with the landlord's schedule of dilapidations. Saint-Gobain\u2019s delayed engagement was criticised.

Part 36 Offers and Costs : Saint-Gobain made a Part 36 settlement offer close to the awarded amount (£1,000,000 offered vs. £900,000 awarded plus interest). However, under CPR 36.14(1A), even a minor excess above the offer meant that normal costs consequences did not automatically apply. Hammersmatch's slight monetary advantage was enough to avoid costs sanctions.

Tenant's Exaggerated Claims : While the tenant argued that the landlord had exaggerated the claim, the court held that there was no unreasonable exaggeration. Much of the disparity resulted from the tenant's failure to clearly articulate their case on diminution in value until a very late stage.

Intention to Carry Out Works : A point of contention was whether Hammersmatch genuinely intended to carry out remedial works. The court found that the landlord did not have a firm intention, impacting the credibility of their claim to recover the full costs of repairs.

Key Takeaway: Practical Implications for Landlords and Tenants

Repairing Obligations Are Active, Not Passive : Tenants must not assume that a "keep in repair" obligation allows them to maintain a building in a substandard state simply because it was in poor repair at lease commencement.

The duty extends to improving the property to an appropriate standard considering its age, character, and locality.

Section 18(1) Capping Damages Is Critical : Landlords need to assess not just the cost of repairs but also the actual impact of disrepair on the property's value.

Tenants should be alive to the fact that inflated dilapidations claims may ultimately be capped at a much lower figure if the market impact is minimal.

Importance of Early and Full Engagement : Both parties should adhere to best practices for pre-action protocols, ensuring that claims and counterclaims are properly articulated early on. Failing to engage meaningfully can adversely impact costs awards.

Careful Use of Part 36 Offers : Settlement offers under Part 36 must be carefully calibrated. A 'near-miss' offer can lead to significant cost exposure even if the litigation outcome is very close to the settlement figure offered.

Be Realistic About Claims : Both landlords and tenants should ensure that any claims (for repair costs, loss of rent, etc.) are realistic, evidence-based, and proportionate.

Unfounded assertions (e.g., an intention to repair without genuine commitment) can undermine credibility and inflate litigation costs unnecessarily.

Conclusion

Dilapidations Case Law: Hammersmatch vs Saint-Gobain serves as a powerful reminder of the complexity inherent in commercial lease obligations.

It demonstrates that both landlords and tenants must be diligent in their contractual obligations and their approach to dispute resolution.

Repairing covenants are not simply about maintenance but about achieving an appropriate standard of repair. Equally, damages are tightly controlled to reflect real economic loss, not hypothetical or speculative repair costs.

Property professionals, surveyors, and solicitors advising on dilapidations must be aware of the lessons from this case to guide clients towards fair, pragmatic, and well-supported outcomes in future disputes.

If you need expert advice navigating dilapidations disputes, or tailored guidance on dilapidations case law, contact Anstey Horne’s specialist team. We offer experienced support in resolving complex lease-end matters efficiently and commercially.

For more expert insights into Dilapidations Case Law : Hammersmatch vs Saint-Gobain and other pivotal cases, follow our blog or contact our specialist team for advice tailored to your property needs.

Related Resources

Dilapidations Case Law: PGFII vs Royal & Sun Alliance

Dilapidations Glossary of Key Terms

Understanding Section 18(1) and Diminution Valuations

Supersession in Dilapidations: What It Means for Landlords and Tenants

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Also see our recent article on Understanding Break Clauses.

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