Repair obligations for commercial tenants regarding asbestos

Nearly all commercial leases will contain an obligation on the tenant to keep and return a property to the landlord at the end of the lease in good repair and condition, often to the (reasonable) satisfaction of the landlord. The legal meaning of “keep” is more onerous than its ordinary meaning and includes a requirement to put a property into a good state of repair, even if a tenant does not take a property on in such a state.  It is therefore advisable for commercial tenants to have a photographic schedule of condition prepared at the start of a lease and to limit the repair obligation by reference to it so that they only have to return the property in the condition that they took it on in, as evidenced by the schedule of condition.

However, the recent case of Pullman Foods Ltd v The Welsh Ministers and another [2020] concerned the tenant’s repair liability in connection with asbestos, which is not always something that can be seen or recorded by the untrained eye.    In this case the tenant had appointed consultants to remove buildings from the site. The consultants’ works in dismantling the buildings had disturbed asbestos-containing materials and left them buried across the site.

The High Court decided that the presence of the asbestos meant that the site was in a damaged or deteriorated condition and was not in a good condition or in proper repair, and so removal of the asbestos was reasonably required.  Importantly, this was the case even if the asbestos had been present before the grant of the lease, although this was not the case here.  The tenant was also liable for damages for breach of the covenant.

The Court added that use of the word “condition” shows that the obligation was capable of extending to doing works that went beyond strict repair.

The landlord also did not have unlimited discretion in deciding on the appropriate standard of “good condition” or the remediation work required. However, it could form its own judgment as to what was needed, provided that it was within a range of reasonable views.

This case highlights the importance of tenants and their solicitors carefully looking into the environmental status of a property and the existence of any contamination such as asbestos before taking on a lease, via searches and enquiries.  In particular, the Commercial Property Standard Enquiries (CPSEs) will raise questions such as whether and when an asbestos survey has been carried out, whether there is any asbestos management plan in place and whether any other potentially hazardous substance may be present at the property.

If the CPSEs do flag any potential environmental concerns that there is potential for liability to be apportioned between the landlord and tenant in the drafting of the lease so that the tenant is only responsible for any contamination of the site from after the date of the lease.

There is a national drive to improve our country’s environmental credentials at the moment and this is undoubtedly filtering into the world of commercial property.  It is therefore an issue that both landlords and tenants should be particularly live to and on which we would be glad to advise.

Fenella Eddell is a solicitor in the property department at Barker Gotelee, Ipswich solicitors.

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