Landlord and tenant – Service charge – Liability – Appellant holding headlease of block of flats – Respondent holding sublease of one flat – Appellant as landlord carrying out major works to exterior of block including demolition and reconstruction of conservatories on roof terrace of penthouse flat – Whether respondent liable to contribute through service charge to cost of works to conservatories – Whether such liability excluded on ground that conservatories built in breach of covenant against alterations – First -tier tribunal disallowing cost of conservatory works – Appeal allowed
The appellant was the headlessee of a 1970s tower block in Chelsea, London, SW3, which contained flats let on subleases. The appellant was also the sublessee of the penthouse flat under a sublease originally granted in the early 1970s. The appellant had acquired both the headlease and the penthouse sublease by assignment in 1975. The respondent was the sublessee of one of the other flats in the building under a sublease granted to her in 2006.
All the subleases were in similar terms and provided for the payment of a service charge to the appellant as landlord in respect of various matters including the costs incurred in discharging the landlord’s repair and maintenance obligations under the subleases; these included an obligation “to keep the Reserved Property and all fixtures fittings and furnishings therein and additions thereto in a good and tenantable state of repair”.
In June 2012, the appellant began a programme of major works to the exterior of the building, at a cost of almost £1.38m. The works included the installation of new windows and patio doors in each flat and the demolition and rebuilding of two conservatories that enclosed sections of the roof terrace of the penthouse flat. The works to the conservatories cost £91,334.
The sublessees disputed their liability to contribute through the service charge to the cost of the conservatory repairs. They contended that the conservatories had been erected in breach of covenant and that the landlord’s repairing obligations did not extend to unlawful alterations.
Determining an application brought by the respondent under section 27A of the Landlord and Tenant Act 1985, the first-tier tribunal (FTT) found that the conservatories had already been present when the appellant acquired the penthouse in 1975. It further found that they had been built in breach of both an absolute prohibition on alterations contained in the headlease and a similar prohibition in the penthouse sublease and that the sublessees were consequently under no obligation to contribute towards the conservatory repairs. It held that the sublessees should instead contribute a lesser sum of £45,000 which, as the FTT found, would have been the cost of necessary repairs to the original structure had the conservatories not been erected. The appellant appealed.
Held: The appeal was allowed.
(1) The appellant was not itself culpable for any breach of covenant committed by the construction of the conservatories and, accordingly, the principle that a party could not take advantage of its own wrong in order to obtain a benefit under a contract had no application to the case.
(2) Further, a repairing covenant would in principle apply to subsequent alterations and additions to a building unless that result was excluded by the language used: Rose v Spicer [1911] 2 KB 234 applied. Assuming that the conservatories had been built after the grant of the penthouse sublease, they were at the very least “additions” to the “Reserved Property” by the time the appellant came to reconstruct the conservatories, which brought them within the express language of the repairing covenant in the subleases. Accordingly, unless the supposition that they were erected in breach of covenant made a difference, the appellant was obliged keep the Reserved Property and all additions thereto, including the conservatories, in a good and tenantable state of repair. Alternatively, on the hypothesis that the conservatories had been built before the grant of the penthouse sublease, they formed part of the Reserved Property and for that reason fell within the appellant’s repairing obligation.
(3) The FTT had erred in finding that any breach of covenant involved in the construction of the conservatories affected the appellant’s obligation to keep them in repair. The repair of the conservatories fell squarely within the natural meaning of the language used in the appellant’s covenants. To exclude liability for structures built in breach of covenant was contrary to the natural and ordinary meaning of the words used by the parties, which made no distinction between lawful and unlawful additions to the building. It would also subvert the overall purpose of the repairing covenant, and of the general arrangements for allocating responsibility for repair, since, if the landlord’s repairing covenant did not extend to the conservatories, a part of the main structure of the building would fall outside the repairing obligation owed by the landlord to the sublessees and outside its entitlement to recoup the costs of work through the service charge. Liability for the repair of that part would fall on either the headlessee, without entitlement to add the costs to the service charge, or on the sublessee of the penthouse flat, and in either case the identity of the party responsible for carrying out the necessary work would not be apparent from the contract but would depend on the circumstances that had occurred at or shortly before the grant of the penthouse sublease, and which, by their nature, were unlikely to be known to those acquiring interests in the building in the future. Speculation as to the true facts, and whether they would have formed part of the surrounding circumstances known to both parties, was unhelpful and underlined the importance of giving the words of the sublease their natural and ordinary meaning.
(4) There was no reason for the historic lawfulness of the addition to the penthouse flat to make any difference to the analysis of the continuing rights and obligation of different parties. Ultimately, the power to consent to alterations lay with the freeholder, over whose actions the flat sublessees had no control, and who owed no duty to them. A lawful addition, erected with the consent of the freeholder and the lessor of the penthouse flat, would fall within the landlord’s repairing obligation and the liability of the flat sublessees to contribute. To interpret the appellant’s repairing obligation as headlessee as extending only to lawful additions would therefore provide only a very weak and ineffectual protection for the sublessees against an increase in the burden of the service charge. Accordingly, even if the FTT had been correct to assume that the penthouse sublease was granted before the conservatories were erected, and correct to assume that they were erected in breach of covenant, it was wrong to rewrite the clear and practical language of the subleases. It followed that the sum disallowed by the FTT could properly be added to the service charge.
Philip Sissons (instructed by Darwin Law Ltd) appeared for the appellant; Ben Maltz (instructed by direct access) appeared for the respondent.
Sally Dobson, barrister
Click here to read transcript: Christopher Moran Holdings Ltd v Carrara-Cagni
