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Case Summary of Recent Jersey Case Regarding a Cap on Tenant's Liability to Reinstate in line with the Genuine Loss to the Landlord or Diminution of Value in the Reversion

There has been a recent Jersey judgment: Barclays Bank v JSSL (23 January 2012) which examined (inter alia) the position in Jersey in relation to caps on tenants' liability to reinstate referenced to the actual loss to the landlord or diminution in the reversionary value. The case was not conclusive but is still of note.

Neither Jersey nor Guernsey has an equivalent to the English s.18(1) of the LTA 1927, and accordingly it is a valid question whether the lease would be interpreted strictly in accordance with its terms, or whether tenants could benefit from a cap on their liability if they can show that e.g. the building was about to be demolished or completely refurbished by the incoming tenant or the landlord. Unfortunately this Jersey case was referred by the arbitrator and the Court refused to pass judgment (as it would not in the judge's opinion save substantial costs and because it was a question that could not be answered in isolation, but would turn on the facts).  It does however clarify the fact that Jersey law is thus far silent on this issue and that we would not necessarily follow English law.  In fact, the judge said the following:

 

"it is not clear to me why the Court should necessarily look to English common law let alone English statutory law on this issue and the extent to which research has been conducted into the sources from which Jersey customary law is derived, but it can be seen from the laws of England and Scotland alone that there are a number of approaches to the issue".

 

And he goes on to say:
"It is the sort of question that can only be answered by saying "Well, it all depends".  It is possible that the Court may consider that there could be situations in which it would impose some cap or restriction on damages for reinstatement depending on the circumstances (the terms of the lease, the nature of the breaches, the cost of reinstatement, the conduct of the parties, the intentions of the lessor and so on) but such generalised guidance would be of no value to the arbitrator".  

 

For further advice on this issue, or any aspect of commercial leases in Jersey or Guernsey, please do not hesitate to contact us.