Landlord and tenant — Lease — Implied term — Whether implied term that landlord repair structure of building
In 1969 the
development of a number of three-storey blocks of flats and maisonettes was
completed in Teddington together with some garages and communal grounds. In May
1971 the developer granted a 99-year lease of one of the maisonettes to the
plaintiff’s predecessor in title; the defendant was then a management company
and was a party to the lease. The lease contained covenants by the lessee to
keep the demised premises in repair and to maintain an insurance policy against
certain specified loss or damage and such other loss as the lessor might
specify. In fact, the lessor insured the buildings under a block policy and
included, as an insured risk, subsidence damage. In January 1990 the defendant,
which by then had acquired the reversion to the 1971 lease, granted the
plaintiff a further term of some 260 years. This lease contained covenants by
the lessee to observe the terms of the 1971 lease as if they were set out in
the 1990 lease. Following subsidence damage to the building and to the
plaintiff’s maisonette, the defendant sought indemnities from all the lessees
to carry out remedial work because the insurers had financial difficulties. All
the lessees other than the plaintiff gave such indemnities and work was done to
all parts of the building save for the plaintiff’s maisonette. The plaintiff
himself carried out work to the maisonette; his claim for the expenditure
incurred and for loss of rental income against the defendant lessor was
dismissed in the county court. He appealed contending that the 1990 lease
contained an implied covenant by the lessor to repair the structure of the
building.
results from an insured risk, there was no ground for importing any implied
obligation to do more than lay out any insurance moneys coming into the hands
of the lessor in making good that damage. There was no ground for importing any
obligation on the part of the lessor to carry out works of repair from causes
which were not covered by an insurance policy effected pursuant to the terms of
the lease, in particular damage which might result from the gradual
deterioration of the structure during the term of the lease. Barrett v Lounova
(1982) Ltd [1988] 2 EGLR 54 was decided on its special facts and contained
no principle requiring the implication of an obligation on the defendant lessor
to keep the structure of the block in good repair.
The following
cases are referred to in this report.
Barrett v Lounova (1982) Ltd [1990] 1 QB 348; [1989] 2 WLR 137;
[1989] 1 All ER 351; [1988] 2 EGLR 54; [1988] 36 EG 184, CA
Hafton
Properties Ltd v Camp; Camp v Silchester
Court (Croydon) Management Co [1994] 1 EGLR 67; [1994] 03 EG 129
Sleafer v Lambeth Borough Council [1960] 1 QB 43; [1959] 3 WLR 485;
[1959] 3 All ER 378; (1959) 57 LGR 212, CA
Westminster
(Duke of) v Guild [1985] QB 688; [1984] 3
WLR 630; [1984] 3 All ER 144; (1983) 48 P&CR 42; [1983] 2 EGLR 37; [1983]
EGD 541; 267 EG 762, CA
This was an
appeal by the plaintiff, David Adami, from a decision of Judge Martineau in
Central London County Court, who had dismissed the plaintiff’s claim for
damages against the defendant, Lincoln Grange Management Ltd.
Paul Marshall
(instructed by Clintons) appeared for the appellant; Nicholas Vineall
(instructed by Read & Co, of Twickenham) represented the respondent.
Giving
judgment, SIR JOHN VINELOTT
said: This is an appeal from a decision of Judge Martineau, sitting at Central
London County Court. He was asked to determine as a preliminary issue whether
it was an implied term of a lease of a maisonette known as 159 Harrowdene
Gardens, Teddington, that the lessor should maintain the structure of the block
of which the maisonette was part in a proper state of repair. The appellant,
David Adami (the plaintiff in the court below), is the lessee; the respondent,
Lincoln Grange Management Ltd (the defendant in the court below), is the
lessor. It became apparent in the course of the argument in this court that
there was some confusion as to the lease under which the implied obligation is
said to have arisen, and I should, I think, start by summarising the terms of
the original lease and of a subsequent reversionary lease and the events which
have given rise to the dispute between the parties.
In 1969 Second
Land Holdings Ltd completed the development of an estate comprising a number of
three-storey blocks of flats and maisonettes. The development included a number
of garage blocks and extensive communal grounds. On May 8 1971 a lease (the
1971 lease) was entered into between Second Land Holdings Ltd (the lessor), the
respondent, Lincoln Grange Management Ltd (the manager), and Cynthia Joan Bates
(the lessee). The lease recites the intention of the lessor to set apart
community land and to lay it out with lawns, flower beds and the like, and to
enter into a 99-year lease of the community land in favour of the manager
(described as a company incorporated with the object of carrying out works on
the community land). Clauses 1 and 2 contain, respectively, an acknowledgement
of the receipt by the lessor of a premium and a demise of a term of 99 years
from September 29 1969 of a specified maisonette and a specified garage. Clause
3 contains a description of the demised premises by reference to the second
schedule and a statement that the lessee is to be entitled to no easements
except those expressly mentioned in the second schedule. By clause 4 the
manager covenants to observe the covenants in the third schedule; those
covenants relate to the maintenance of the community land and those parts laid
out as roads, garages, access ways and footpaths. The covenant in clause 4 is
subject to payment by the lessee of a service charge payable under clause 5; by
clause 5 the lessee covenants to pay to the manager a service charge equal to a
fraction (of which the numerator is ‘one’ and the denominator a figure equal to
the aggregate number of flats and maisonettes erected on the estate by the date
when the demand for payment of the service charge is made) of the expenses
incurred by the manager in (among other things) maintaining the community land
and ‘such other expenditure as the managers may properly incur in respect of
the community land or for the benefit of all lessees on the Estate’. By clause
6 the lessee covenants, with the lessor and the manager, to observe certain
restrictions as to the use of the property and the community land. Clause 7
contains an express reservation to the lessor of the right to vary the letting
of other parts of the estate. Clause 8 sets out the annual rents payable
varying from £30 pa in the first 25 years to £75 after the year 2004.
Clause 9
contains the lessee’s covenants. The principle covenants are set out in para
(b).
They are as
follows:
Subpara (i)
contains a covenant to keep the demised premises and to deliver them up at the
end of the term ‘in good and substantial repair and condition’;
Subsection
(iv) contains a covenant to permit the lessor and the manager to enter and view
the demised premises and ‘to effect any works necessary for repairing,
maintaining and upholding the building of which the maisonette forms part or
the block of garages of which the garage forms part’;
Subpara (v)
contains a covenant to maintain an insurance policy which is of central
importance and which I will set out in full:
(v)(a)
Forthwith to insure the property against loss or damage by fire and aircraft
and such other risks as the Lessor shall from time to time specify in writing;
(b) The
insurance shall be effected through such agency as the Lessor may require in
the Cornhill Insurance Company Limited or such other office as the Lessor shall
from time to time specify in writing and shall be in the joint names of the
Lessor and the Lessee;
(c) The
amount of the insurance shall be sufficient to defray the whole cost of rebuilding
the Maisonette and Garage and to provide all necessary incidental fees, costs
and expenses in relation thereto;
(d) Each and
every premium in respect of the insurance shall be paid by the Lessee
immediately it becomes due. If not paid as it becomes due the Lessor may pay it
and recover the amount paid from the Lessee by action or otherwise as if it
were part of the rent;
(e) All sums
paid by the office under the Policy shall together with the Lessee’s own moneys
in case of any deficiency be laid out in the repair reinstatement and
rebuilding of the Maisonette and Garage.
Subpara (ix)
contains a covenant ‘to co-operate at all times with the Lessor and the
Managers and with all persons interested in all measures necessary for
repairing, maintaining and upholding the building of which the Maisonette forms
part and the Garage block of which the Garage forms part’.
Subpara (xiv)
contains covenants by the lessee to accept a transfer of a share in the manager
at the request of the manager or the lessor and, while not a member of the
manager, to carry out the obligations of members under the manager’s articles
of association.
Clause 11
contains a covenant by the manager to observe and perform the covenants in the
third schedule, which I have already summarised.
Clause 12
contains the lessor’s covenants. They are to ensure that every lease of a flat
or maisonette on the estate contains a covenant in the terms of clause 9 and a
covenant that the lessor will, at the request of the lessee, enforce the
covenants in other leases of flats and maisonettes on the estate in the terms
of clause 9, save only that the lessor is not to be required to incur costs
unless given security by the lessee and may, at his discretion, decline to take
any action unless the lessee obtains favourable advice from leading counsel as
to the merits of any contemplated action. The only other lessor’s covenants are
a covenant to lay out the community land in accordance with a scheme of
landscaping to be prepared by the lessor and that the lessee would have quiet
enjoyment of the demised premises.
At some time
after the grant of the lease the policy of insurance which, under the lease,
was to be effected in the joint names of the lessor and the lessee, was
effected in the name of the lessor alone. The lessor entered into a single
block policy for the protection of all the flats and maisonettes on the estate.
The terms of the policy were also extended to cover damage from subsidence as
well as damage from fire and aircraft. Mr Adami, who took an assignment of the
1971 lease after the single block policy had been entered into, at first
objected to the substitution of the block policy, but he did not persist in his
objections. He duly paid the appropriate proportion of the premium under the
policy. That was the position when a further lease was entered into on January
26 1990. By that time the reversion expectant on the lease had become vested in
Lincoln Grange Management Ltd. On January 26 1990 a further lease (the 1990
lease) was entered into between Lincoln Grange Management Ltd (defined as the
lessor) and Mr Adami (the lessee). By clause 1, in consideration of a further
premium, the lessor demised the premises comprised in the 1971 lease (referred
to as ‘the existing lease’) for a term commencing on January 29 1990 for the
remainder of the term of 279 years from September 29 1969 at a rent of £1 pa
for the period from March 25 1990 until the expiration of the term thereby
granted. By clause 4 the lessee covenants with the lessor to observe ‘all the
same covenants, obligations, conditions and provisions as are in the Existing
Lease contained as if the same were herein repeated in extenso and as if
all expressions contained within the Existing Lease should apply (where the
context so admits) to this Lease and in particular without prejudice to the
generality of the foregoing that the obligations of the Lessee to make payment
of the service charge to the Lessor throughout the term granted shall continue
in full force and existence notwithstanding the occurrence of’ a defined
perpetuity date. There are further covenants not to assign the 1990 lease
except to a person ‘simultaneously taking on assignment of the Existing Lease
save where such assignment of the Existing Lease is effected by a Mortgagee in
exercise of his power of sale’, and a declaration against the merger of the
existing lease and the 1990 lease. The 1990 lease does not discriminate between
the covenants entered into between the lessor and the lessee and those entered
into between the manager and the lessee in the 1971 lease. However, it is clear
that obligations of the lessee to Lincoln Grange Management Ltd, both in its
capacity as lessor and in its capacity as manager, and the obligations of
Lincoln Grange Management Ltd to the lessee in either capacity, remain in full
force as if the lessor and the manager had remained separate entities.
Shortly after
the grant of the 1990 lease, cracks appeared in the outer walls of the
building, which includes Mr Adami’s maisonette. Investigations revealed that
the concrete raft on which the building had been erected had subsided.
Extensive works of underpinning were required. In addition, the subsidence had
caused cracks to appear in the building above the foundations (the
superstructure). Tenders were put out for the work that needed to be done to
the foundations. The insurers, Municipal Mutual Insurers Ltd, accepted a claim
in respect of the subsidence and the consequential damage to the
superstructure. Work on the foundations was put in hand before September 30
1992, on which date the insurers announced that they were suspending payment on
all claims. Work on the superstructure had not then commenced and in view of
the insurer’s financial difficulties the contractors engaged to do that work
were not willing to start work unless they had some assurance that the cost
would be met. To meet this difficulty and to ensure that the work was done as
quickly as possible, Lincoln Grange Management Ltd sought indemnities from the
lessees of flats and maisonettes in the block in which Mr Adami’s maisonette is
situated that they would meet the costs so far as not met by the insurers; the
lessees were, of course, liable to make good any deficiency in the proceeds of
any insurance effected under clause 9(b)(v)(e). There were six lessees of
maisonettes and flats in the block. All agreed to give the required indemnity
except Mr Adami. Work was therefore put in hand to complete the necessary
repairs to the superstructure, save for those parts where Mr Adami’s maisonette
is situated. Mr Adami himself carried out work in addition to the work done by
the contractors at a net cost, after giving credit for sums paid to him by
Lincoln Grange Management Ltd (I assume representing a proportion of the
insurance moneys received), of some £1,325. Mr Adami’s claim is for this sum
plus the loss of rental income which he would have received if his maisonette
had been available for letting from the date when he declined to give an
indemnity to the date when, following the completion of the work to the
superstructure, he was able to redecorate his flat, namely March 30 1994.
It is clear
and is not, I think, in dispute, that Lincoln Grange Management Ltd was bound
to make a claim under the block policy for any damage covered by the policy and
to apply those moneys in carrying out the work necessary to rectify that damage
and to take those steps with reasonable diligence. Mr Adami does not rely on
any breach by Lincoln Grange Management Ltd of these obligations. In so far as
there was delay in the carrying out of the underpinning, the delay was due to
the financial difficulties encountered by the insurers, and in so far as there
was delay in carrying out work to the superstructure, that delay was a
consequence of Mr Adami’s own refusal to provide a letter of joint and several
indemnity. As I understand it, that was not disputed by Mr Paul Marshall, who
appeared for Mr Adami. Mr Adami’s case is that Lincoln Grange Management Ltd,
as lessor, was under an implied obligation to maintain the structure in good
and substantial repair and cannot rely upon the difficulties and delay
experienced in obtaining payment of the insurance moneys and in carrying out
the work of underpinning and the necessary repairs to the superstructure as
mitigating its primary liability, under its implied
repair.
It was in this
context that Judge Martineau was asked to decide as a preliminary issue of law
whether:
It was an
implied term of the said Lease and for the avoidance of doubt implied as a
matter of the obvious or alternatively in order to give business efficacy to
the said Lease that the Landlord would be liable to effect repairs to the
structure of the building of which the property formed part. The said term is
implied by reason of the substantial obligation imposed on the plaintiff under
Clause 9(b)(i) of the Lease in the absence of any repairing obligation on the
defendant Lessor.
It is apparent
from the particulars of claim that the reference to ‘the said Lease’ is a
reference to the 1971 lease. Strictly, Mr Adami cannot rely on the covenants in
the 1971 lease; he is now the owner of the reversion immediately expectant on
that lease. He can, however, rely on clause 4 of the 1990 lease which incorporates
clause 9 by reference. The argument before us proceeded on the footing that the
reference to ‘the said lease’ should be taken as a reference to clause 4 of the
1990 lease.
In my
judgment, the contention that it was an implied term of the 1990 lease that the
lessor would be liable to make good any damage to the structure of the block
whatever might be the cause of the damage, is simply untenable. The lease
contains an elaborate scheme under which exceptional damage to the structure is
to be covered by insurance effected in the joint names of the lessor and the
lessee and maintained at the expense of the lessee; similar obligations are to
be imposed upon the lessee of every other maisonette or flat in the block. The
lessor is given power to enlarge the scope of the policy beyond fire and damage
by aircraft, so as to enable the insurance to be extended at the expense of the
lessee if it becomes apparent that damage to the structure may result from
other causes. After 1971 damage by subsidence following a succession of dry
summers became a common experience and it was, no doubt, for that reason that
the lessor (who by this time had effected insurance in its own name under a
block insurance policy with the consent or acquiescence of the lessees)
extended the insurance to cover subsidence. In so far as damage to the
structure results from an insured risk, there is simply no ground for importing
any implied obligation to do more than lay out any insurance moneys coming into
the hands of the lessor, in making good that damage (any deficiency in the
insurance moneys being made good by the lessees).
More
generally, I can see no ground for importing any obligation on the part of the
lessor to carry out works of repair to the block from causes which are not
covered by an insurance policy effected pursuant to the terms of the lease
(modified in practice by the substitution of a block policy and its extension
to cover damage by subsidence), in particular damage which might result from
the gradual deterioration of the structure during the term of the lease. In Duke
of Westminster v Guild [1985] QB 688*, Slade LJ, at p697, approved a
passage in Woodfall, Landlord and Tenant 28th ed (1978) vol I, para
1/1465 p618 in these terms:
*Editor’s
note: Also reported at [1983] 2 EGLR 37
In general,
there is no implied covenant by the lessor of an unfurnished house or
flat, or of land, that it is or shall be reasonably fit for habitation,
occupation or cultivation, or for any other purpose for which it is let. No
covenant is implied that the lessor will do any repairs whatever …
In the context
of a lease for a term of some 260 years at a nominal rent granted by a
corporate lessor originally incorporated as a management company, in which
shares are held by the lessees of all the maisonettes and flats comprised in
the development and which contains detailed provisions governing the repair of
the individual maisonettes and flats, the levying of a service charge to meet
the costs of the maintenance of the community land and for insurance to be
effected and maintained at the expense of the lessees to cover damage from any
catastrophe affecting a block as a whole so far as reasonably foreseeable, it
is, in my judgment, impossible to presume an intention that the cost of
maintaining the structure of each block should fall on the lessor. No such
implication can be founded on the obligations on the part of the lessee under
clause 9(b)(iv) to permit the lessor to view the property and to effect work
necessary for upholding the building (see Sleafer v Lambeth Borough
Council [1960] 1 QB 43) and the same principle must apply also to the
covenant by the lessee in clause 9(b)(ix) to co-operate with the lessor and
other lessees in carrying out repairs to the block.
Mr Marshall
relied on the decision of the Court of Appeal in Barrett v Lounova
(1982) Ltd [1990] 1 QB 348*. That case concerned a tenancy agreement for
one year and thereafter from month to month; the tenant covenanted to do all
the inside repairs and to leave the inside in good repair, order and condition
at the expiry of the tenancy. The Court of Appeal upheld the decision of a
recorder that the circumstances justified the implication of a covenant on the
part of the landlord to repair the structure. Kerr LJ, with whose judgment
Swinton-Thomas J agreed, gave three reasons for this conclusion.
*Editor’s
note: Also reported at [1988] 2 EGLR 54
First, he
referred to Sleafer v Lambeth Borough Council (supra).
That case also concerned a periodic tenancy of a flat — a weekly tenancy from a
local authority. The tenancy agreement contained a covenant by the tenant to
keep the flat in good and tenantable repair. The front door was defective and
tended to jam. The tenant, attempting to close it, pulled on the outside
handle. It came off and he fell and injured his back. The decision of the Court
of Appeal was that the local authority were not liable for the damage. As I
have already indicated, the Court of Appeal rejected the contention that an
obligation to repair could be implied from a covenant to allow the local
authority to inspect the state of repair and execute repairs. However, Wilmer
LJ observed, at p63:
I think there
is much to be said for the view that clause 2 of the agreement, which requires
the tenant to reside in the dwelling-house, does by implication require the
landlords to do such repairs as may make it possible for the tenant to carry
out that obligation. At least it seems to me that that is a possible view.
Kerr LJ
commenting on the terms of the tenancy considered in Sleafer v Lambeth
Borough Council said:
It is also to
be noted that the lease provided, by clause 2, that the tenant was to reside in
the dwelling — that is to say, in the same way as here, that it was not to be
used for any business purposes;
For my part, I
can see no analogy between a covenant to reside in demised premises, which
might be said to import an obligation to do whatever may be necessary to enable
the tenant to do what he had contracted to do and a purely negative covenant
restricting the tenant from using the premises otherwise than for residential
purposes. Be that as it may, this part of the decision of the Court of Appeal
can have no application in the instant case where the lease contains no
covenant to occupy the premises as a residence or not to use the premises for
any other purposes than as a residence.
Next, Kerr LJ
referred to cases in which an obligation to carry out certain work had been
implied from an obligation on the part of the tenant to pay the cost of so
doing and to a passage in the judgment of Slade LJ in Duke of Westminster
v Guild (supra) in which Slade LJ referred to such an implied
term as a ‘correlative obligation’. Kerr LJ took the view that a covenant to
keep the structure in repair could be said to be ‘correlative’ to the tenant’s
covenant to keep the inside in repair. Mr Nicholas Vineall, who appeared for
Lincoln Grange Management Ltd, pointed out that the cases described by Slade LJ
as cases giving rise to a ‘correlative obligation’ were cases in which an
obligation to carry out work could be said to be a necessary counterpart to an
obligation to pay a fixed sum towards the cost of doing the work. Judge
Fox-Andrews QC pointed out in Hafton Properties Ltd v Camp [1994]
03 EG 129* that such a reciprocal obligation may also be said to arise from the
principle that a landlord
cleaning of the demised premises, is under an obligation to accept the
corresponding burden. An obligation to repair the interior of demised premises
and to repair the structure of the building are not in that sense
‘correlative’.
*Editor’s note:
Also reported at [1994] 1 EGLR 67
Finally, Kerr
LJ took the view that:
on the basis
that an obligation to keep the outside in a proper state of repair must be
imposed on someone, three answers are possible.
namely that the
tenant was obliged to do so to such an extent as was necessary to enable him to
perform his covenant to keep the inside in repair, the second that there was a
joint obligation and the third, an obligation on the landlord. In the context
of a lease for over 260 years at a nominal rent containing the elaborate
provisions which I have summarised, there is another possibility, namely that
neither would be under an obligation to make good defects in the structure of
the block arising otherwise than from the insured risks and that such defects
would be dealt with, if the situation arose, by co-operation between the
lessees all of whom, as I have said, are shareholders in Lincoln Grange
Management Ltd, and Lincoln Grange Management Ltd in its capacity as lessor and
manager.
The decision
of the Court of Appeal in Barrett v Lounova is, of course,
binding on this court. However, in my judgment, it must be taken as decided
upon the special facts of that case and no principle can be discerned which
requires the implication of an obligation on the part of the lessor to keep the
structure of the block in good repair. I would dismiss the appeal.
HUTCHISON and BUTLER-SLOSS LJJ agreed and did not add anything.
Appeal
dismissed with costs.
