- Court of Appeal (Civil Division)
- 25 March 2021
- Lewison, Bean and Arnold LJJ
- [2021] EWCA Civ 431
- [2021] PLSCS 60
Landlord and tenant – Service charges – Right to buy – Preliminary issue arising on interpretation of “right to buy” long leases – Works of repair carried out to structure and exterior of building – Appellant landlord appealing against decision of Upper Tribunal that works to make good structural defects not within definition of “specified repairs” in leases – Whether respondent lessees required to contribute to cost of repairs having effect of making good structural defects as well as remedying damage caused by defects – Appeal dismissed
The respondent lessees held long leases of flats in Great Arthur House, London, EC1. The building comprised 120 flats but the leases, created pursuant to the right to buy provisions of the Housing Acts 1980 and 1985, were in substantially identical terms. The respondents covenanted to pay the appellant landlord a reasonable part of the costs of carrying out “specified repairs”, defined as “repairs carried out in order: (i) to keep in repair the structure and exterior of the premises … not amounting to the making good of structural defects; and (ii) to make good any structural defect of whose existence the [landlord] had notified the tenant…”.
A dispute arose in respect of the costs of carrying out substantial work to the structure and exterior of the building costing in excess of £8m. The appellant landlord argued that whether works were works of repair was a question of fact and degree. Works did not cease to be works of repair merely because they simultaneously eradicated a defect in the building that had been there from the time it was constructed, where that defect had caused damage to or deterioration in the building. But if works were repair, properly so called, they fell within para (i) of the definition, and were properly chargeable to the lessees.
The Upper Tribunal rejected that argument, holding that works of repair of the structure and exterior of the building did not fall within para (i) of the definition if the effect of the works was to make good a structural defect, even if that defect caused damage which was remedied by the works: [2019] UKUT 341 (LC); 2019] PLSCS 227. The appellant appealed.
Held: The appeal was dismissed.
(1) The immediate legal background to the definition of “specified repairs” in the leases was schedule 2 to the Housing Act 1980. In the Housing Act scheme, the landlord was 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. The definition of “specified repairs” in the lease to a large extent followed the statutory provisions. Although the legislative background was undoubtedly relevant to the interpretation of a contract, it was not necessarily determinative. Where a contract defined its own terms, the court would give effect to the agreed definitions. The appellant had relied on the decision in Payne v Barnet London Borough Council (1997) 30 HLR 295; [1997] PLSCS 158 as establishing a “bright-line” distinction between repairs on the one hand and making good structural defects on the other. However, the court in that case did not intend to cast any doubt on the proposition that works could be works of repair even though their effect was to eradicate an inherent (or structural) defect, provided that the defect had caused damage and the “fact and degree” test contained in Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1979] 1 EGLR 54 was met. Nor did the decision in Payne limit “structural defects” to “inherent defects”.
(2) There was no “bright-line” distinction in the leases between repairs on the one hand and making good structural defects on the other. Works of repair might or might not also eradicate structural defects. If they did, the cost of making good the structural defects was not recoverable, unless the tenant was notified of them before entry into the lease or the landlord was unaware of them until 10 years after the date of grant. However, the whole of the definition was prefaced by the words “repairs in order to”. It followed, therefore, that unless works qualified as repairs both under the “fact and degree” test, and under the test that the works were carried out in order to repair deterioration or damage, they were outside the scope of the service charge. It followed that, under the terms of the lease, the cost of eradicating a structural defect was not recoverable from the lessees under para (ii) of the definition unless that defect had caused damage or deterioration in the subject matter of the covenant, so as to qualify as “disrepair” within the established meaning of that word; and the resulting scheme of work was properly described as work of repair.
(3) If a scheme of works could fairly be called a scheme of repair, it did not cease to be a scheme of repair merely because the scheme incidentally involved the making good of a structural defect. However, the governing phrase was not “in order to” but the phrase “not amounting to the making good of a structural defect” which introduced the carve out from paragraph (i) of the definition. Works fell within para (i) of the definition if: they were repairs carried out in order to keep in repair the structure and exterior of the building and did not amount to the making good of a structural defect. Each element of the definition had to be satisfied. The statutory provisions on which the lease definition was based did not contain any reference to the purpose of carrying out work. Paragraph 16 of schedule 2 to the 1980 Act avoided a service charge in so far as it “requires the tenant to bear a reasonable part of the costs of carrying out repairs not amounting to the making good of structural defects”, irrespective of the purpose for which those works were carried out.
What was to be considered was the effect of the works. If their effect was to make good a structural defect, then their cost could not be passed on to the lessee under para (i) of the definition. Whether that was the effect of the whole or part of a scheme of works was a question of fact, to be determined on the evidence, including expert evidence where necessary.
Timothy Straker QC and Jonathan Manning (instructed by the City of London Corporation Comptroller and City Solicitor) appeared for the appellant; Christopher Baker (instructed by DAC Beachcroft) appeared for the respondents.
Eileen O’Grady, barrister
Click here to read a transcript of City of London Corporation v Various Leaseholders of Great Arthur House
