A case in which a tenant won a recent case against its landlord using the unfair contract terms legislation, seems to have given tenants whose leases contain unfair exclusion clauses, improved weaponry in such disputes. In the case in point, the tenant was left with offices which were so hot as to be unusable because the landlord had failed to repair the air conditioning over a lengthy period. Because of the problems, the tenant withheld their payments and then vacated the premises. The landlord sued for the sums due and the tenant counter claimed for its losses and expenses connected with its relocation.
The landlord’s argument was that it had an exclusion clause in its agreement with the tenant which excluded losses arising to the tenant for ‘loss of business, loss of profits…and consequential loss’. The agreement also advised the tenant to insure itself against such eventualities and contained a limitation clause, which capped any claim at an absolute level of £50,000. The tenant argued that this clause was unfair under the Unfair Contract Terms Act 1977, because it was not reasonable. The tenant won in the first instance, because the judge concluded that the clause left the tenant with no remedy for its losses and was therefore unreasonable. The landlord appealed.
The Court of Appeal considered the issue and found that the landlord had been negligent in not repairing the air conditioning. However, it did not agree that the exclusion clause prevented the tenant from obtaining a remedy for its loss. The remedy was a claim for the difference between the value of services the landlord had contracted to provide and those actually provided. The exclusion clause was therefore reasonable. This decision will be taken as evidence that demonstrating that such a clause is reasonable may not be as difficult as had previously been thought.
The landlord’s argument was that it had an exclusion clause in its agreement with the tenant which excluded losses arising to the tenant for ‘loss of business, loss of profits…and consequential loss’. The agreement also advised the tenant to insure itself against such eventualities and contained a limitation clause, which capped any claim at an absolute level of £50,000. The tenant argued that this clause was unfair under the Unfair Contract Terms Act 1977, because it was not reasonable. The tenant won in the first instance, because the judge concluded that the clause left the tenant with no remedy for its losses and was therefore unreasonable. The landlord appealed.
The Court of Appeal considered the issue and found that the landlord had been negligent in not repairing the air conditioning. However, it did not agree that the exclusion clause prevented the tenant from obtaining a remedy for its loss. The remedy was a claim for the difference between the value of services the landlord had contracted to provide and those actually provided. The exclusion clause was therefore reasonable. This decision will be taken as evidence that demonstrating that such a clause is reasonable may not be as difficult as had previously been thought.
