Upper Tribunal (UT) Judgment summer 2024.
The following judgment handed down from the Upper Tribunal affects landlords, property managers and tenants. The case focuses on arrears recovery for service charges.
The London Borough of Tower Hamlets v Lessees of Maltings House and Brewster House judgment could have significant implications for building defects. The UT ruled that the costs for remedying structural defects would not be included in their service charges. The costs of the major works are significant, meaning the leaseholders will breathe a sigh of relief. For the local authority however, it’s going to leave a huge dent in its housing revenue account.
London Borough of Tower Hamlets v Lessees of Maltings House and Brewster House
The Judge residing on this judgment was Elizabeth Cooke. In total there were 13 separate cases referred to when making the decision.
This case was brought to the UT after an appeal following the First Tier-Tribunal (FTT) decision, when the London Borough of Tower Hamlets (the appellant) wasn’t entitled to recover monies for works carried out from the defendants, via their service charges.
The works are structural defects caused by the construction of the building’s Large Panel System. To read the history of the blocks based in East London, you can read the full BAILII judgment HERE. Pretty interesting read I found, legally and historically.
The case in hand focused on the meaning of the covenant “to maintain” and the significance of a “sweeper clause“.
Landlord & Tenant and the Construction of a Lease
The lease has a covenant in which to “maintain and keep in good and substantial repair and condition” the main structure of the building. The Judge held that whilst “maintain” means something different from “repair” and can indicate something preventive rather than remedial, neither a covenant to repair or maintain is a covenant to remedy structural defects, and if that building was not safe when it was built, nor did the covenant mean to make it safe in this regard.
When it comes to the sweeper clause, the Judge again referred to other precedents and cases, specifically Arnold v Britton [2015] and the context of a sweeper clause and what precedes it. The UT confirmed that in this case the “sweeper” clause does not require the remediation of structural defects as it “goes too far beyond the scope of anything that precedes it”. Essentially the UT said that the lessees should not expect a massive liability* in some general covenant wording that is not obvious in the lease.
*Liability in the major works: estimated circa £8m (half to each block) increasing to £9m. Tower Hamlets wanted to recover part of that cost through the service charges.
Judgement handed down > neither of the above provisions allowed the London Borough of Tower Hamlets to pass down a service charge in respect of the major works.
Of course a relief to the long lease tenants, but a huge blow to the appellant’s housing revenue funds. It’s a judgment that my team and I will keep our eyes on because the decision may well impact future landlords and tenants’ buildings’ defects and necessary works.
Conclusion
“The appeal fails and the decision of the FTT stands.”
“Mr Bates KC indicated that the appellant is content to submit to an order under section 20C of the Landlord and Tenant Act 1985 that its costs in this litigation shall not be recovered from the leaseholders by way of service charge; if the parties would like a formal order to that effect I shall make one.”
Upper Tribunal Judge Elizabeth Cooke: 11 July 2024
Any questions in relation to what this judgment might mean to you, please get in touch with me.
Laura Severn
