Landlord and tenant — Repairs — Covenant — Electric under-floor storage heating — Whether tenants discharged covenant to repair by installing space heaters rather than restoring and maintaining under-floor heating
The appellant
landlords owned an office building constructed in the 1960s with an under-floor
heating system. The system consisted of electric power running in cables
embodied in the heat-retaining concrete floors. It produced heat during
off-peak hours, which was stored and gradually released. Probably as a result
of expansion and subsidence in the building, the system became defective. The
respondent tenants held a 10-year lease of the building from March 25 1993
subject to a covenant to repair the interior ‘and all electrical heating …
installations therein’. The tenants provided individual storage heaters in the
spaces where there was defective under-floor heating. In the court below the
recorder held that the tenants were entitled to discharge their repairing
obligation in relation to the under-floor heating by installing electric
night-storage wall heaters. The landlords appealed.
impossible or even impracticable to maintain the existing under-floor storage
heating system in good working condition. The defective under-floor system
needed repair and the repairs, although expensive, could be carried out. The
fact that repairs would incorporate some improvements in design did not mean that
they ceased to be works of repair that the tenants were liable to perform. The
alternative method of performing the repairing covenant, by providing space
heaters, was not open to the tenants.
The following
cases are referred to in this report.
Elmcroft
Developments Ltd v Tankersley-Sawyer [1984]
1 EGLR 47; [1984] EGD 348; (1984) 270 EG 140; 15 HLR 63, CA
Morcom v Campbell-Johnson [1956] 1 QB 106; [1955] 3 WLR 497; [1955]
3 All ER 264
Quick v Taff-Ely Borough Council [1986] QB 809; [1985] 3 WLR 981;
[1985] 3 All ER 321; (1985) 84 LGR 498; [1985] 2 EGLR 50; 276 EG 452, CA
Stent v Monmouth District Council (1987) 19 HLR 269; [1987] 1 EGLR
59; 282 EG 705, CA
This was an
appeal by the plaintiffs, Creska Ltd, from a decision of Mr Recorder Professor
Hayton, who made declarations in an application by the plaintiffs against the
respondents, Hammersmith and Fulham London Borough Council.
John Cherryman
QC and John Davies (instructed by Wiggin & Co, of Cheltenham) appeared for
the appellants; Kim Lewison QC (instructed by the solicitor to Hammersmith and
Fulham London Borough Council) represented the respondents.
Giving
judgment, EVANS LJ said:
This is the judgment of the court.
This appeal
raises a single issue. It is the scope of a tenant’s undertaking to repair and
maintain the electrical heating installation in office premises which it
occupies. The installation consists of under-floor storage heating where the
concrete floors themselves are warmed by electrical cables passing through them
using off-peak power. The installation is admittedly defective and the tenants
have provided individual storage heaters in the spaces where the lack of
under-floor heating occurs. They propose to provide more heaters as further
defects occur.
The issue is
whether the tenants are entitled to discharge their undertaking in this way or
whether, as the landlords contend, they are bound by the covenant to restore
and maintain the under-floor heating in working order.
Parties
The landlords
are the appellants and the plaintiffs in the action. The respondents/defendant
council are tenants of four floors of an office building at 271/285 King
Street, Hammersmith, under a lease dated July 14 1993 for a period of 10 years
from March 25 1993, with a rent review clause operative at March 25 1998. The
10-year lease took the place of five separate leases that were due to expire in
1996. The details do not matter, but, in so far as it may be relevant, the fact
is that the tenants, whom I shall call ‘the council’, occupied the premises for
some years before 1993 and the existence of defects in the under-floor heating
installation was already known to them when they took the 10-year lease.
Premises
The building
was constructed during the 1960s at a time when, it may be assumed, individual
storage heaters were generally available on the market. Instead, the designers
chose to install an under-floor system, which uses the same techniques.
Electrical power running through cables embodied in a heat-retaining substance
(concrete floors in this instance, bricks, sand or, possibly, even concrete
blocks in individual units) produces heat during off-peak hours, which is
stored and gradually released into the surrounding spaces during the remainder
of the 24 hours. In order to provide the necessary electrical circuits, the
cables have to pass between the concrete floors and adjacent parts of the
building.
Defects
These are
described in a report produced by Mr Michael Brown, an experienced electrical
engineer called as expert witness by the council. He tested the large number of
individual circuits and found that some of them were ‘open’, that is to say,
the cables were broken or their insulation was damaged. He was not able to
discover the precise location of these faults, but he ascribed them generally
to one or possibly two causes. The first was movement between the concrete
floor slabs and adjacent parts of the building. This could be caused by
differential rates of expansion and would break the cables unless they were fitted
with flexible connectors, which they were not. The second cause was subsidence
of the building, which led to cracks in the concrete floors themselves and thus
to breaks in the cables inside. Some cracks were found, but the breaks in the
cables are impossible to discover without breaking open the concrete and
thereby destroying the floors. The number of open circuits was on average about
one-quarter of the total.
Proceedings
The appellants
claimed by summons dated June 4 1996 (issued in the High Court but transferred
to Central London County Court): (1) a declaration that ‘the Defendant is
obliged by virtue of clause 3(6) of the said lease to carry out repairs to the
under-floor heating’; and (2) ‘further or other relief’. The hearing took place
before Mr Recorder Professor Hayton, and by his judgment on July 28 1997 he
held that the landlords were entitled to the declaration which they sought.
Certain points were raised by the council which he decided against them, and
they accept that the appellants are entitled to the declaration he made. But
this is merely to the effect that the council are obliged to repair the
defects. It leaves open the extent of their obligation and, in particular, the
issue whether it is or may be discharged by the provision of storage-heating
units. The recorder held in the council’s favour that it could be so
discharged, and this part of his judgment led to him making a further
declaration:
2. The
Defendant is entitled to discharge that obligation by installing modern
electric night-storage wall heaters as and when requisite or by relaying the
under-floor cables in separate zones with flexible terminators.
The appellants
submit that this declaration was based on an incorrect interpretation of the
covenant in clause 3(b).
Lease
Clause 3(b),
so far as material, provides:
3. The Tenant
hereby covenants with the
Landlord as follows: —
(b) During
the Term at its own expense well and substantially to repair and maintain and
in all respects keep in good and substantial repair and condition the interior
of the Premises and every part therefore including without prejudice to the
generality of the foregoing … the Pipes and all electrical heating mechanical
and ventilation installations therein which exclusively serve the Premises.
The definition
of ‘pipes’ includes ‘wires cables channels flues and all other conducting media
including … any other ancillary apparatus’ (clause 1), and the rent review
provisions of the Fourth Schedule require the future rent to be assessed:
disregarding …
(iii) any
effect on rent of any alteration or improvement to the Premises made (otherwise
than pursuant to any obligation of the Tenant to the landlord to carry out such
work) by the Tenant …
In our
judgment, none of these further provisions is relevant to the issue that arises
under clause 3(6). The material words are ‘repair etc …all electrical heating …
installations therein’. The definition of pipe as including cables, etc, adds
nothing to this, and the rent review provisions depend upon, rather than
influence, the true construction of clause 3(6), although the 1998 review,
which is pending, may be affected by the outcome of those proceedings.
Submissions
Mr John
Cherryman QC, for the appellants, who did not appear below, submits that the
judge’s conclusion was wrong, for the simple reason that clause 3(6) means what
it says: the tenant undertook to repair etc ‘all electrical heating …
installations therein’. It is not a case where the under-floor heating system,
which is installed, cannot be repaired. The recorder found this, albeit in the
context of a different question that arises from the authorities, as to whether
repairs would be futile and repetitive. The judgment reads:
It would be
possible to remedy the under-floor heating by replacing it, subject to the new
design to allow flexibility … So that would not be futile. It could well be
futile and repetitive according to the case law I have just mentioned, if the
replacement only lasted for two or three years and the replacement exercise had
to be repeated time after time, but here one could have a more modern design of
under-floor heating that would operate satisfactorily for a lengthy period.
Counsel for the plaintiff said ‘Exactly. One should therefore order this more
modern design to go ahead. That is the way to carry out the repair in covenant.
One cannot say that it would be futile or repetitive to do that’.
Mr Cherryman
further submits that, earlier in his judgment, again in a different context,
the recorder did direct himself correctly:
In this
context it does seem to me that the function of this covenant is to ensure the
tenant is to put in repair, maintain and in all respects keep in good repair
the particular heating and electrical installations that existed at the time,
whether or not they are actually functioning properly at the time. Meaning, at
the time of the lease.
Mr Kim Lewison
QC, for the council, on the other hand, submits that the recorder was correct
to reach the conclusion he did. A repairing covenant may be performed by
installing the modern equivalent of what was installed before. Individual
storage heaters operate on the same technical principles as under-floor storage
heating and they can be regarded as just a different type of storage heating.
Both types use off-peak over-night electricity, and essentially there is no
difference between ‘one big under-floor storage heater, or ten to a dozen
[wall] storage heaters’. Although individual heaters may take up some of the
available floorspace, and, if they do, there is an issue as to whether this
could have repercussions on the floor areas by reference to which the rent is
assessed, nevertheless, individual heaters are much better from the landlord’s
as well as the tenant’s point of view. Mr Brown gave evidence in his report and
orally, which the recorder summarised as follows:
It seems that
nowadays, with office buildings, it is unheard of to have under-floor storage
heating because wall storage heating, or other forms of heating for that
matter, are much more effective.
Mr Brown’s
evidence shows, however, that he compared under-floor heating with individual
units because ‘they provide exactly the same function’, and that must mean the
function of keeping the spaces warm. He also made it clear that the
disadvantages of under-floor heating, as he saw them, were economic rather than
technical. It could be done, but when asked whether replacing and, if
necessary, redesigning the under-floor system was ‘a sensible and practical way
to deal with the heating problem?’ he answered:
A. Not
really. I have never come across any office building that had this form of
[heating]. Electric under-floor heating is normally installed in places where
you have very little wall or floor area and want to put down a cheap
installation to start with. If you ever come to want to replace it or modify
it, it becomes a very, very expensive option.
Mr Lewison
submits, therefore, that repairing the existing installation is no longer a
‘sensible and practicable’ way of maintaining the heating installation and that
on the authorities the party liable to keep the installation in good repair is
entitled to modify the installation, at least to the extent of providing
individual storage heaters. He accepted in the course of his oral submissions
that if this is the correct approach, then in principle the council can install
whatever alternative form of heating it chooses to provide, extending even to a
conventional hot-water circulating system with radiators. We are not sure, on
reflection, that the submission need go so far, and we will consider it on the
basis that it is limited to individual heaters that operate on the same storage
principle as under-floor heating does. Mr Lewison submitted that the judge’s
conclusion was correct:
In my
judgment, the tenant has a choice here either to repair the under-floor heating
by repairing the under-floor heating as such, or the opportunity to replace and
repair in a way which will be likely to be an improvement by way of installing
[wall] heaters from time to time. These installed [wall] heaters … are designed
to improve the building permanently. But instead of improving the building
permanently by virtue of them being under-floor heating, the
far as its natural life allows, but being replaced by wall-storage heating as
appropriate. There will come a stage in four or five years when the under-floor
heating will have been totally replaced by [wall-] storage heating.
We have
bracketed the reference to ‘wall’ because it was agreed before us that the
individual heaters stand on the floor and may even be fixed to it, so they are
not clear of the floor as the phrase ‘wall heaters’ might suggest.
Authorities
We were
referred to a number of authorities where similar questions have arisen,
although in different contexts.
In Morcom
v Campbell-Johnson [1956] 1 QB 106 the landlords of an elderly block of
flats claimed that they were entitled to increase the standard rent of the
tenants by reference to expenditure they had incurred on what they said was an
‘improvement of the dwelling-house’ within relevant statutory provisions. They
had spent a considerable sum of money on drainage, installing a modern one-pipe
system for drainage from water closets and from wash-hand basins and baths in
place of the original two-pipe system, and on providing one water supply tank
at the top of the building to supply all six flats, in place of individual
tanks for each flat. The original system had come to the end of its life. The
Court of Appeal held that the replacement of the old drainage and cold-water
systems by their modern equivalents, although resulting in making the
dwelling-house better than it was before, were not ‘improvements’ within the
statute, but repairs only. Denning LJ said at p114:
I find great
difficulty in framing a definition of what is an ‘improvement’ as distinct from
a ‘repair’ …
It seems to
me that the test, so far as one can give any test in these matters, is this: If
the work which is done is the provision of something new for the benefit for
the occupier, that is, properly speaking, an improvement; but if it is only the
replacement of something already there, which has become dilapidated or
worn-out, then, albeit that it is a replacement by its modern equivalent, it
comes within the category of repairs and not improvements.
He added at
p115:
It is
material to notice that, so far as the tenants are concerned, the position in
the flats from the practical point of view is no different from what it was
before. The water-closets, the baths and the cold-water system all operate just
as they did before …
In a sense …
the work benefits them in the same way as any repairs must benefit the people
who live in a house, because, when it gets old and dilapidated, they are better
off when it is repaired and made good. But that is the extent of the benefit to
them. There is no provision of anything new for their benefit, but only the
replacement of the old parts by a modern equivalent, and, in my judgment, that
does not amount to improvement so as to qualify the landlords for an increase
in rent.
Hodson LJ said
at p118:
I think it is
clear that what one has to look at is whether there has been the provision of
something new, rather than the replacement of what was there before.
In Elmcroft
Developments Ltd v Tankersley-Sawyer (1984) 270 EG 140* the
landlords’ covenant was to ‘maintain and keep the exterior of the building and
the roof, the main walls, timbers and drains thereof in good and tenantable
repair and condition’. There was a severe damp problem within the ground-floor
flats, because the slate damp-proof course that was installed was ineffectual,
being positioned below ground level. This was due either to a defect in design
or construction or to bad workmanship. The court upheld the judge’s decision
that the landlords were obliged to cure the damp ‘by using the only practical
method at this price, namely injecting silicone into the wall … The damp-proof
course, once inserted, would on the expert evidence cure the damp.’ The
alternative was to patch or renew the plaster as it became affected by rising
damp, but that work would have to be repeated as often as the damp reappeared.
‘I have no hesitation in rejecting the submission that the [landlord’s]
obligation was repetitively to carry out futile work instead of doing the job
properly once and for all’: per Ackner LJ at p142.
*Editor’s
note: Also reported at [1984] 1 EGLR 47
Finally, in Stent
v Monmouth District Council [1987] 1 EGLR 59 the local authority, as
landlords, were obliged to repair and maintain the structure and exterior of a
dwelling-house. The dispute concerned the front door of the house, which stood
on an exposed site facing the prevailing west wind. The tenant complained of
the constant ingress of water blown through or under the door which, over a
period of 30 years, had been source of trouble and inconvenience and had, inter
alia, caused damage to carpets. The report shows that originally a wooden
door was fitted. Water collected at the foot of the door causing it to become
rotten and distorted, thus allowing water ingress, which damaged the carpets.
Repairs were undertaken and the door was replaced, but the problem was not
solved until an aluminium self-sealing weather-proof door was fitted. A number
of questions arose. The first was whether the landlords could be in breach of
the repairing covenant when the door as originally fitted was not itself defective
and the problem could be attributed to an inherent design defect. The court
accepted this submission to the extent that on the authority of Quick v Taff-Ely
Borough Council [1986] QB 809*, ‘the fact that the door did not fulfil its
function of keeping out the rain was not ipso facto a defect for the
purpose of the repairing covenant’. However, when the door itself became
damaged, an obligation to repair or replace it arose, and the landlords were in
breach of the repairing covenant by reason of their failure to replace the
wooden door by a self-sealing aluminium door earlier than they did. In the
leading judgment, Stocker LJ said at pp64–65 that, in his judgment:
*Editor’s
note: Also reported at [1985] 2 EGLR 50
the
replacement of the wooden door by a self-sealing aluminium door was a mode of
repair which a sensible person would have adopted; and the same reasoning
applies if for the word ‘sensible’ there is substituted some such word as
‘practicable’ or ‘necessary’ … [The wooden door] became distorted. It needed
accordingly replacement in order to enable it to perform its function at all,
quite apart from the question of repairing obvious defects which it had
exhibited
… In my view
the obligation under the covenant in this case was one which called upon the
appellants to carry out repairs which not only effected the repair of the
manifestly damaged parts but also achieved the object of rendering it
unnecessary in the future of the continual repair of this door.
The president,
Sir John Arnold, held that ‘the repairing covenant on its true construction
does not require any design defect to be made good’, but that, at p65C:
on the true
construction of the covenant to repair there is required to be done, not only
the making good of the immediate occasion of disrepair, but also, if this is
what a sensible, practical man would do, the elimination of the cause of that
disrepair through the making good of an inherent design defect at least where
the making good of that defect does not involve a substantial rebuilding of the
whole.
He concluded:
it is plain
that if all was done to the door that stood in need of repair was to patch it
or even to renew it and to leave, when so doing, the cause of the damage, which
was the absence of any agent to defeat the collection of the rotting water
beneath the door, then one was not doing that which the sensible, practical man
would have advised as a sensible way of dealing with the problem.
The appellant
council had the obligation of making good the design defect that caused the
collection of water which occasioned the rotting, and, at p65:
the failure
so to do was in the circumstances a breach of the appellants’ covenant for
which they were properly required to pay damages by the learned judge.
From these
authorities, particularly Stent v Monmouth District Council, Mr
Lewison derived his submission that where, on the evidence, the sensible and
practicable course is to install the modern equivalent of an existing installation
that has proved defective, then the party liable under the covenant to repair
is at least entitled to perform his obligation under the covenant by
substituting a different system that performs the same function in place of the
old.
Conclusion
This is not a
case where it is impossible or even impracticable to maintain the existing
under-floor storage-heating system in good working condition nor where doing so
would be ‘futile’ in the sense that the repair would be short-lived and
commercially unsound. Nor, in our judgment, can it be said that individual
storage heaters are the same ‘electrical heating … installation’ in a different
guise. It seems to us that they are two different methods of achieving the same
result, notwithstanding that the same techniques are employed. We therefore
hold that the case is as straightforward as Mr Cherryman submits. The council
undertook to maintain the existing under-floor installation in good repair. It
is defective and needs repair and the repairs, although expensive, can be
carried out. The fact that repairs carried out now would incorporate some
improvements in design, particularly the use of flexible connectors where
appropriate, does not mean that they cease to be works of repair that the party
liable under the repairing covenant is bound to perform. Morcom v Campbell-Johnson
is direct authority for this. On the evidence, the existing installation (as
distinct from the failure to incorporate flexible connections) cannot properly
be regarded as a design defect in the original structure at the date of the
lease, but, even if it was, the case is not one where attempts to repair it
would be futile or where the only ‘sensible and practical’ course is to
substitute some other system. We therefore hold that the council are not
entitled to discharge their obligations under the repairing covenant by
substituting individual storage heaters for the under-floor system, and the
question whether they would be entitled or bound to do so, if repairs to the
existing installation were no longer practicable, does not arise.
We have
assumed in Mr Lewison’s favour that the judgments in Stent v Monmouth
District Council are authority for the proposition not merely that, in the
circumstances of that case, the landlords were entitled to provide a modern
substitute but that they were bound to do so: in other words, they were not
entitled to replace the wooden front door, if they had wished to do so. We
doubt whether the decision goes that far, but for obvious reasons there is no
suggestion in the present case that the council are not entitled to remedy the
under-floor heating if they choose to do so. The sole question is whether they
can discharge their obligation by alternative means, which, they say, are the
sensible and practical course for them to adopt. In our judgment, they are
bound to perform the covenant in accordance with its terms, as they still can,
and the alternative method of performance they suggest is not open to them.
We therefore
allow the appeal and make a negative declaration accordingly.
Appeal
allowed with costs.
