COMMENT Right-to-buy tenants are to an extent insulated from liability to contribute towards rectifying structural defects, writes Ellodie Gibbons.
The current cladding crisis has brought into focus the question of who is responsible for the cost of remedying inherent defects affecting leasehold properties: the landlord or the tenant?
A conventional long lease will provide that the landlord is obliged to carry out certain work and the tenant is obliged to pay for that work via the service charge. As such, the starting point in considering who pays is generally: what is the landlord obliged to do under the terms of the lease?
The case law
It is well established that there is no breach of a covenant to repair unless there is in existence relevant damage (or “disrepair”). In other words, a deterioration of the subject matter from some previous physical condition: see Quick v Taff-Ely Borough Council [1985] 2 EGLR 50 and Post Office v Aquarius Properties Ltd [1987] 1 EGLR 40. So, in Waaler v Hounslow London Borough Council [2017] EWCA Civ 45; [2017] EGLR 19, Lewison LJ (with whom the remaining members of the Court of Appeal agreed) said: “The concept of repair takes as its starting point the proposition that that which is to be repaired is in a physical condition worse than that in which it was at some earlier time.”
While a defect in design or construction does not of itself constitute “disrepair”, where the defect results in damage to the subject matter of the covenant, the obligation to repair may, depending on the facts, involve not only remedying the damage in question but also eliminating the design or construction defect.
Consequently, it has been held that a landlord who had covenanted to keep the main walls of a flat in repair was obliged not only to replace damp plaster but also to insert a damp-proof course so as to eliminate the cause of the damp: Elmcroft Developments Ltd v Tankersley-Sawyer [1984] 1 EGLR 47.
A covenant which imposes or includes a liability to keep in good condition is likely to be construed more widely than a covenant to repair or keep in repair. However, while it is not clear to what extent damage or deterioration is required before the covenant is engaged, the tenor of the authorities is that some damage or deterioration is required.
Where a lease is one granted under the statutory right-to-buy regime, repairing covenants will not only be implied into the lease, but the scheme under the Housing Acts 1980 and 1985 will form part of the matrix of background facts, against which the lease is interpreted.
In Payne v Barnet London Borough Council [1997] PLSCS 158, a case concerning a block of flats constructed using the “large panel system”, the Court of Appeal considered the scheme. Starting with the Housing Act 1980, Brook LJ said: “In the Housing Act scheme the landlord is fixed not only with the liability to keep the dwellinghouse’s structure and exterior in repair, but also with the liability to make good any defect affecting that structure. However, the requirements he must fulfil if he is to be able to pass on to the tenant any of the expense he may incur in meeting these liabilities are different in each case.”
Brooke LJ went on to identify that, at this stage of the scheme’s evolution, parliament was making provision for normal service charges, ordinary external repairs (including repairs to the structure) and the making good of structural defects in three different ways.
What’s new?
In the recent case of City of London Corporation v Various Leaseholders of Great Arthur House [2021] EWCA Civ 431; [2021] EGLR 21, the parties disputed the effect of “not amounting to the making good of structural defects” in the definition of “specified repairs”, drafting which reflected the provisions of the Housing Act 1980. The tenants argued that works of repair were not “specified repairs” if their effect was to make good a structural defect. The local authority considered that works of repair that made good structural defects were “specified repairs” if the purpose of the works was to remedy disrepair. The Upper Tribunal (Lands Chamber) found for the tenants and the Court of Appeal dismissed the local authority’s appeal.
The UT, with which the Court of Appeal agreed, confirmed that the words “to make good any defect affecting that structure” in the Housing Act are intended to broaden the scope of the implied covenant, and therefore, in that context, must be taken to contemplate works that do not fall within the scope of what is meant in law by “repair”, but that works that have the effect of making good a structural defect can nevertheless be repairs.
In considering the purpose of the legislation, the Court of Appeal said it was to encourage home ownership by council tenants – often persons of modest means. That was achieved not only by giving them the right to buy at all, but allowing them to buy at a substantial discount from market value.
It added that it is by no means surprising that parliament gave a measure of consumer protection to persons to whom the right to buy was given by partially insulating them from liability to contribute towards the cost of rectifying structural defects.
Further, the case was all the stronger in the case of a building like Great Arthur House, because it could not be supposed that the purchaser of a single flat in a large block would commission a structural survey of the whole building before committing himself to acquiring a long lease.
Ellodie Gibbons is a barrister at Tanfield Chambers
