Express lease clauses allowing landlord to recover money in lieu of dilapidations
Both cases involved a failure by the tenant at the end of the lease to leave the property in the condition required by the lease repairing obligations. In each case the lease wording appeared to entitle the landlord to demand that the tenant pay a sum of money to the landlord, in lieu of the dilapidations - with the sum being an estimate of the cost of doing the repair works.
The tenants argued that, despite the express lease wording, they should only have to compensate their landlord for its actual loss - and that loss might not be the costs of the works if e.g the landlord did not intend to carry out the works because an incoming tenant's works would render them unnecessary or the landlord intended to demolish and redevelop. The loss might be the diminution in the capital value of the property or (if the property is to be demolished or significantly redeveloped) there might be no loss at all to the landlord.
Courts favouring a "fair" outcome - not always giving effect to express lease wording
In both cases, the court favoured the tenants' arguments, as they accorded better with business common sense. The court did not want to allow the landlords the potential to recover a sum of money that might far exceed their actual loss.
These cases do align with many recent decisions on contract interpretation, where the courts have been prepared to do, as the judges have said, "some slight violence" to the express contract wording in order to arrive at an interpretation that accords with business common sense.
This approach often produces what many would consider to be a fair result. However, as it can effectively ignore some express contract wording, it does make it quite difficult at the moment to predict how a Scottish court will interpret any particular contract.
