Landlord and tenant – Service charges – Structural defects – Remedial works – Appellant landlord decision of First-tier Tribunal that it was not entitled to recover as service charges from respondent leaseholders cost of work to remedy inherent structural defects – Whether cost recoverable as cost of work to “maintain” blocks in good condition or under “sweeper” clause in leases – Appeal dismissed
The appellant local authority owned the Barleymow Estate in east London, a former industrial area redeveloped in the early 1960s as social housing. Three blocks were originally built, one of which had since been demolished; the respondents were long leaseholders in the two remaining buildings.
The blocks were built using the large panel system, a construction technique widely used in the 1960s whereby mass-produced concrete slabs were bolted together to form the walls and floors of the building. The appellant needed to carry out work to remedy inherent structural defects caused by the use of the large panel system. The total cost for the two blocks was estimated at £8,066,944.38 (half to each block). The appellant wished to recover part of the cost through the service charge. The appellant carried out extensive consultation with the leaseholders, beyond the statutory requirements. Contractual arrangements were put in place to carry out the work.
The respondents applied to the First-tier Tribunal to determine, pursuant to section 27A of the Landlord and Tenant Act 1985, whether those service charges were payable under the terms of the lease. The respondents said not only that the cost was excessive but also that the work proposed would not adequately address the inherent structural defects in the buildings. The FTT decided that the charges were not payable. The appellant appealed.
Held: The appeal was dismissed.
(1) The leases contained a clause requiring the landlord to maintain and keep in good and substantial repair and condition the main structure of the buildings. There was also a deliberately non-specific clause requiring the landlord “… to do or cause to be done all such works installations acts matters and things as in the absolute discretion of the lessors may be considered necessary or advisable for the proper management maintenance safety amenity or administration of the building” (the sweeper clause). The question was whether any part of the cost of the works were recoverable as the cost of work to “maintain” the blocks in good condition or alternatively via the “sweeper” clause in the leases.
The consistent approach of the authorities was that while “maintain” meant something different from “repair”, it was not otiose and could denote something preventive rather than remedial. Neither a covenant to repair nor a covenant to maintain was a covenant to remedy structural defects, nor to make safe a building that was not safe when it was built. The sweeper clause was a form of future-proofing such as was commonly and sensibly provided for in a lease that was supposed to last for many decades. The idea was to pick up items that could not be specifically foreseen on the date of the lease: Welsh v London Borough of Greenwich [2000] 3 EGLR 41, Fluor Daniel Properties Ltd v Shortlands Investments Ltd [2001] 2 EGLR 103, Mason v Totalfinaelf UK Ltd [2003] 3 EGLR 91, Westbury Estates Ltd v Royal Bank of Scotland Plc [2006] CSOH 177; [2006] PLSCS 243 and Alker v Collingwood Housing Association Ltd [2007] 2 EGLR 43 considered.
(2) If a particular type of work was clearly within an obligation, the fact a particular instance of that work was dreadfully expensive would not be relevant to the construction of the lease. But the sweeper clause here was, necessarily, unclear; and so it was relevant to its construction that the remedying of structural defects generally tended to be very expensive, and that a commitment to bear the cost of such work was a commitment to something potentially ruinous. For the respondent leaseholders, a liability of £60,000, £70,000 or £80,000 might well be impossibly expensive. That was part of the facts and circumstances known to the parties which had to be considered and also as a matter of commercial common sense: Arnold v Britton [2015] EGLR 53 and Dell v 89 Holland Park Management Co Ltd [2022] UKUT 169 (LC); [2022] PLSCS 113 considered.
(3) A sweeper clause might include the incurring of costs in a dispute over the repair of the building, but could not be extended to the extraordinary litigation costs the appellant had incurred, going far beyond the scope of its obligation to repair and maintain the building and so on in the preceding clauses. Only an express provision could go that far.
In requiring the landlord to do everything it considered necessary or advisable “for the proper management maintenance safety amenity or administration of the building” the sweeper clause did not require it to remedy structural defects because that went too far beyond the scope of anything that preceded it. The words “Without prejudice to the foregoing” at the start of the clause was to state that it did not narrow down or contradict anything previously provided, but that did not mean those previous items had to be ignored; they set the context for the sweeper clause and indicated its purpose and effect. Only express words would generate an obligation that was vastly different in kind and in likely scale from the obligations already specified.
A tenant who signed up to pay for the landlord’s compliance with a covenant to “repair” and to “maintain” had to be taken to know the courts had specifically held that neither of those terms included an obligation to remedy a structural defect. Such a tenant would not intend that the obligation to do just that could be tucked in to the general words of a future-proofing sweeper clause which did not encompass the work in issue here: Holland Park Management Co Ltd v Dell [2023] EGLR 10 considered.
(4) The definition of total expenditure in the lease did not enable the appellant to charge for the work. Looked at in context, it was a definitional section and was not intended to provide for liabilities found nowhere else in the lease. In signing up to covenants to repair and maintain, the original tenants knew that those terms excluded the remedying of structural defects. They would not have intended that potentially enormous liability to be included in the general wording of the sweeper clause.
Justin Bates KC and Mattie Green (instructed by Tower Hamlets London Borough Council) appeared for the appellant; Ellodie Gibbons (instructed by Bishop & Sewell LLP) appeared for the respondents.
Eileen O’Grady, barrister
