AWG BUSINESS CENTRES LIMITED V REGUS CALEDONIA LIMITED & OTHERS

There seems to be a lot of litigation relating to car parks at the moment. Here, the dispute was about the repairing obligations that applied to the car park.

BACKGROUND

A lease was taken by AWG over three levels of an office building in Aberdeen and it then sub-let the three levels to Regus for serviced offices. The building included a car park. Defects emerged in relation to the decking of the car park (It seems to be very hard to get the deck of a carp park right) and remedial works had to be carried out.

AWG paid its share of the remedial works as service charge. The lease excluded the tenant from liability for any expenditure incurred in relation to the construction of the building. Regus refused to pay AWG the service charge. It claimed the defects were due to inadequacies in the design and construction of the concrete slab of the car park. That meant that the cost of repairing them was expenditure incurred in relation to the construction of the building and shouldn’t have paid by AWG to the landlord.

COURT ACTION

As you would expect, AWG sued Regus for payment. It also sued the (now former) landlord at the same time, asking either that Regus be forced to pay the service charge for the repairs to the car park; or if Regus was correct, that the former landlord be ordered to repay the service charge to it.

The issue came down to whether the cost of repairing the defects fell within the exclusion from service charge because they were defects in the construction of the building.

DECISION

The Judge first of all decided that the building included the car park, so if the defects were caused by the design and the construction of the car park then the exclusion took effect.

He then looked at the exclusion and decided that it extended only to works carried out during the construction phase of the building and any related snagging. He came to that conclusion for two main reasons: (1) because the lease was a full repairing and insuring lease and to impose liability on the landlord for latent defects was inconsistent with that; and (2) because the obligation to repair the common parts applied irrespective of the cause of damage. The first reason seems to conflate the premises with the common parts.

The common parts have their own repairing obligations and they determine liability. The second reason highlights the importance of examining the repairing obligations for the common parts. Often the repairing obligation in the lease is closely negotiated these days, but the repairing obligations in respect of the common parts are often overlooked and that can mean that there is more often than not no provision relating to extraordinary repairs.