Firm held to account over lease advice

Keydon Estates v Eversheds (Chancery Division - 20 May 2005) Keydon Estates was a small commercial ...

Keydon Estates v Eversheds (Chancery Division - 20 May 2005)

Keydon Estates was a small commercial investment company that instructed the defendant firm of solicitors, Eversheds, to act for it in the purchase of a commercial property that was subject to a lease. Eversheds knew Keydon intended the property to be an investment to generate a secure income stream.

A sub-lease had been granted out of the lease so that the lease and sub-lease expired simultaneously. It followed that the grant of the sub-lease operated as an assignment of the lease.

However, Eversheds incorrectly advised Keydon that the granting of the sub-lease in this way did not operate as an assignment and that the original lessee was liable on the covenants of that lease.

Keydon exchanged contracts and completed shortly thereafter. Later that year, the assignee went into administration, leaving a rental void. Keydon could not recover its losses from the original lessee.

Eversheds argued that diminution in value of the property was the appropriate measure of damages. However, the court agreed with Keydon that damages in this case should be the loss of rent, which was significantly more than any diminution in value of the leasehold interest and reflected Keydon's evidence that it would have made an alternative but similar purchase if Eversheds had advised properly.

Comment: While the usual rate in such solicitor conveyancing claims is to assess damages on a diminution in value basis, this is an example of the court departing from the norm to prevent the claimant from suffering an injustice. Alex Traill, BLM London.

These law reports are contributed by insurance law firm Berrymans Lace Mawer (http://www.blm-law.com).

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