Construction of lease — Tenants covenanting to contribute towards cost of repair — Landlord to keep building in repair, and renew and replace where necessary — Roof of building damaged in storm — Original design of roof inadequate — Landlord radically altering roof structure — Tenants resisting claim for contribution as not falling within “repairs” — Whether replacement of roof an “improvement” and not a repair — Whether tenants liable for cost — Judgment for the landlord
A lease was entered into by the original lessor and the predecessors in title to the present lessees on July 12 1972 for a term of 21 years of a commercial building known as Northgate, in Grayshott, Hampshire. The plaintiffs were now the present landlord. By clause 3 of the lease the tenant covenanted to pay a contribution towards the “cost and expense of constructing, repairing rebuilding … and maintaining all things the use of which is common to the demised premises”. The contribution was to be assessed by the landlord’s surveyors. By clause 4(3) the landlord covenanted with the tenant to maintain, repair, decorate, renew, where necessary, the roofs, foundations and boundary walls of the building. During the latter part of 1987, the landlord became aware of a bulge and the appearance of cracks in a gable wall which formed part of the building. During the great storm of October 1987, the tiles on the roof were lifted and there appeared to be a real danger of collapse in the gable wall. Three schemes were put before the tenants and it was common ground that the original roof was inadequate. As a result of the works, subsequently carried out, there was erected a different roof with a different pitch, proper restraints and more substantial timbering. The liability for the works of £202,000 was paid by the landlord.
Under clause 4(a) of Schedule 4 the landlord was to “keep and maintain … [the buildings] exterior and its structure and foundation … including all apparatus equipment plant and machinery serving the same in good and substantial repair and condition and decoration and to renew or replace same whenever such renewal or replacement was necessary”. The landlord sought to recover under that clause the cost of the works to the roof from the tenants under their covenant in clause 3.
The tenants submitted that the words “renewal or replacement” had to be controlled by a test such as was found in a repairing covenant, ie that no radical improvement to the building resulted; that the words were directed to repairing by renewal of the parts; and that the reference to replacement or renewal were directed at particularising the preceding obligation of keeping the building in good and substantial repair. Furthermore, the literal construction of the words to “renew or replace whenever necessary” could not have been intended where the leases were for 21 years to commercial tenants of small office suites.
Held Judgment for the landlord.
1. In Norwich, Union Life Insurance Society v British Railways Board [1987] 2 EGLR 137, Hoffmann LJ refused to construe the lease as the tenants had wished the court to do in the present case. There he held that in the context of a repairing covenant, the draftsmans had to separate obligation in mind, first, that of repair and, second, that of replacement.
2. The tenants sought a gloss on the word replacement. If there were to be such a gloss, it would be subject to the normal measure of reasonableness, viz that the landlord could only renew or replace when necessary.
3. Moreover, from the landlord’s point of view there was nothing inconceivable in the literal construction of the words “to renew or replace whenever necessary”. The tenants’ advisors could not have misread them and the tenants might have chosen to take the risk upon entering into their leases. The words were clear and the court was unable, by any acceptable path of construction, to get out of them the meaning for which the tenants had contended.
4. Further, the tests such as whether the works involved replacement or renewal were not the beginning and end of the court’s approach in construing such covenants. All factors were to be taken into account in order to decide whether works could fairly be regarded as “repair” in the normal usage of the word. That was a more general approach than a formal test such as whether the work was a subordinate part or substantial in relation to the building as a whole.
5. The roof in the present case was an integral part of the building; the option to strengthen the roof was plainly within the repairing covenant. However, it was decided not to strengthen it where such a procedure would carry the same risk of water penetration and wind lift with possibly recurring damage.
6. Whatever test or approach, it was a matter of degree. That was the continuing theme of the authorities. The fact that the option selected meant that an inadequate roof would be replaced by an adequate one by itself did not cease to make it a matter of repair. If that meant that the landlord got back a building radically altered so far as the roof was concerned, it might make it a borderline case: see Elite Investments Ltd v Bainbridge (TI) Silencers Ltd [1986] 2 EGLR 43 for a case in which the court construed the works as repair and Post Office v Aquarius Properties Ltd [1986] 2 EGLR 105, which fell on the other side of the line as a structural alteration. However, in the instant case, looking at the matter broadly and taking into account the original defects in design and the imminent danger of collapse, and by comparing the costs of patching up vis-a-vis replacing the roof, at the end of the day, it was not such a matter which would come under the category of “improvement”. Accordingly, the court found the works carried out a “repair”.
Vivian Chapman (instructed by Wheldon Houlsby & Scott, of South Shields) appeared for the landlord; Timothy Bowles (instructed by Thomas Eggar Verrall & Bowles) appeared for the tenants.