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Derek Ching
Derek Ching,
Damage caused by a tenant leaving at the end of the lease – can the costs of repair be covered by insurance?
08 December 2014

A recent decision of the High Court in November 2014 in the case of Mandalia and Mandalia v Beaufort Dedicated No. 2 Limited involved a claim by a landlord under an insurance policy for recovery of costs of repair caused by the former tenant ripping out fixtures and fittings and damaging the property prior to leaving the property after defaulting under its obligations. The claim also included loss of rent for three years being the time they argued the premises were unusable as a result of the damage caused by the former tenant.

There was debate about whether damage caused by an outgoing tenant removing fixtures and fittings could be described as “malicious damage” so as to bring it within the scope of a claim under the insurance policy. The court decided that it could in certain circumstances.

When the court examined the details of the damage that had been caused, it attributed most of the damage to careless execution of the works by the outgoing tenant which although they might have given rise to a dilapidations claim, they certainly did not represent “malicious damage” within the terms of the insurance policy.

There were however certain elements of damage involving smashed toilets and a kitchenette and certain pipe work and radiators which were more significant. In respect of those limited elements of repair, the landlord’s claim was successful.

The landlord also failed to recover under the insurance policy in respect of most of its loss of rent claim, since most of the damage was not caused by an insured risk. The court doubted whether the period of the claim was legitimate in any event as the landlord could have undertaken various repairs at a much earlier stage and so ensured the premises were ready for re-letting much earlier than the 3 years which had been the subject of the claim. The court awarded the landlord just three months loss of rent representing the estimated time it would have taken the landlord to repair those items which the court had agreed had been damaged maliciously.

It is clear from the case that the landlord needed to provide stronger evidence supporting the claim that the extensive areas of other damage had been caused maliciously before the court would hold the insurance company liable to reimburse those costs.

The case also emphasises the importance of having clarity in leases and licences for alteration as to what items of fixtures and fittings are intended to be landlord’s fixtures and therefore form part of the property or tenant’s fixtures which can be removed by the tenant at the end of the lease period.

For further contact please speak to Derek Ching on [email protected] .

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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