Most commercial leases require tenants to leave premises in a decent state of repair on their departure and failing to comply with such an obligation can have serious financial consequences. That was certainly so in the case of a light industrial site on which asbestos was discovered following termination of a lease.

Covenants in the lease required the tenant on departure to remove any buildings it had erected on the docklands site and to leave it in good and substantial repair and condition. After the lease was terminated, the landlord asserted that the tenant had failed to comply with those obligations in that it left on the site remains of buildings which included asbestos-containing materials (ACMs).

The tenant’s parent company was granted two successive licences which enabled it to enter the site to conduct clean-up operations. The landlord claimed that, far from achieving that objective, ACMs remained on the site and ended up being spread more widely, necessitating costly remediation works. The landlord accepted that it should pay relatively modest compensation to the tenant in respect of the termination of the lease but lodged a much more substantial counterclaim.

In upholding the landlord’s case, the High Court found that the tenant had breached the covenants. Buildings it had erected had not been removed in their entirety after the lease came to an end and the presence of ACMs on the site meant that it had not been left in a good and substantial state of repair.

The parent company had breached its obligations in failing to remove ACMs from the site. It also failed to inform either the landlord or contractors engaged to clean up the site of the presence of partially buried asbestos cladding. It thereby failed to use its best endeavours to prevent distribution of asbestos around the site.

The parent company was ruled liable to the landlord in respect of the full costs of the remediation works. Damages payable by the tenant in respect of its breaches of covenant would be assessed at a further hearing, if not agreed.