The London Borough of Lambeth v Gniewosz (LANDLORD AND TENANT : SERVICE CHARGES) (2020) UKUT 274 (LC)

A rather odd Upper Tribunal appeal of an FTT decision as to whether the costs of a new roof to parts of a block of flats would be recoverable under the service charge.. which takes us into the nature of a repair or renewal and how far it needs to be ‘like for like’ or whether it simply needs to be such as to make the property ‘reasonably fit for occupation’.

The appeal was from an FTT decision which had dealt with various issues around service and major works charges, The only issue appealed was whether the cost of a proposed replacement of a roof overing a communal area and a part of Ms G’s flat was recoverable/reasonable. The old roof was made of zinc, but was seriously out of repair – a tarpaulin currently covered the roof – and the need for replacement was not in dispute. The issue was that Lambeth proposed that the replacement roof would be ‘glass-reinforced plastic’ (GRP), not zinc.

At the FTT, Ms G had argued variously that the replacement of the roof in GRP rather than zinc would be a breach of the landlord’s covenant in the lease. She also argued that a like-for-like metal roof would be better value for money than a GRP roof, though the FTT did not deal with that or various other points, just whether replacement by GRP would be a breach of covenant.

The relevant lease clause was:

“3.2 Subject to the payment by the Tenant of the rents and the Service Charge and provided that the Tenant has complied with all the covenants agreements and obligations on his part to be performed and observed to maintain repair redecorate renew amend clean repoint and paint as applicable and at the Council’s absolute discretion to improve
3.2.1 the structure of the Building and in particular but without prejudice to the generality hereof the roofs foundations external and internal walls  (but not the interior  faces of such part of the external or  internal walls as bound the Flat or the rooms therein) and the window frames and timbers (including the timbers joists and beams of the floors and ceilings thereof) chimney stacks gutters and rainwater and soil pipes thereof…”

The FTT had held that the replacement of the roof must fall under ‘renewal’. It then when on to find that ‘renewal’:

would import an obligation to replace with like-for-like materials”; that the substitution of GRP for zinc “is not such replacement, but a lower quality and less attractive alternative” and is therefore not within the repairing covenant so that the cost of it is not payable.

Lambeth’s argument that it was a repair and that ‘like for like’ was not required was not accepted by the FTT, which also went on, somewhat confusingly, as the UT put it:

Next, the FTT looked at the appearance of the proposed work and considered the evidence of the landlord; it rejected the argument that GRP would provide “an almost identical aesthetic outcome as that of zinc” (paragraph 97) and recorded its view, on the basis of a photograph of a GRP roof next to a zinc roof on another part of the estate, that a GRP roof has a “plastic finish” and “could not be said to enhance the appearance of the buildings” (paragraph 98). At paragraph 99 it recorded the evidence of Mr O’Flaherty who said that he had initially recommended a zinc roof but had amended that because of the regeneration plans. “If regeneration was not going ahead, he said, he would be using zinc”.

At paragraph 100 the FTT said

“We conclude at this stage that, if one ignores the regeneration plans, the use of GRP rather than zinc to replace the roof would amount to a breach of the covenant contained in clause 3.2/3.2.1. We accept the applicant’s arguments in terms of the quality of a zinc roof, both per se and in terms of it being more in keeping with the character and age of the building. … we consider that Mr O’Flaherty would have been right to have recommended a zinc roof … and that would have been justifiable as the only method that would have met the obligation on the respondent in the lease.”

On appeal, Lambeth argued that:

the FTT did not sufficiently explain its conclusion that the replacement of the roof in GRP would be a breach of covenant. It did not explain whether it thought the proposed work was a repair or a renewal; nor did it give a proper explanation of its view that the work could not be an improvement.

the FTT should have identified the legal basis on which it decided that the proposed repair would be a breach of covenant; and it should have used, and did not use, the test in Proudfoot v Hart (1890) 25 QBD 41.

The test in Proudfoot v Hart was of ‘tenantable repair’. The Court of Appeal in that case found:

“’Good tenantable repair’ is such repair as, having regard to the age, character and locality of the house, would make it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it”.

Lambeth said this was the test for whether a specific repair was or wasn’t a breach of covenant.

Ms G abandoned her argument below that only a like for like replacement would be sufficient to avoid a breach of covenant, but argued that the FTT did look at the ‘age and character’ of the building, so had considered Proudfoot by implication.

Turning to the evidence of the aesthetic quality of a GRP roof, Ms Gniewosz pointed out that although only one photograph showed the FTT the contrast between GRP and zinc side by side, it had been shown a number of photographs of zinc roofs. Moreover, this was an expert tribunal; the members who sat with the FTT were an architect and a chartered surveyor and they were well-qualified to make an assessment. A site visit would not have shown anything further.

Ms Gniewosz relied upon the fact that Mr O’Flaherty, the landlord’s key witness, would have recommended a zinc roof had it not been for the regeneration, which in itself indicated that GRP was not suitable.

The Upper Tribunal held:

The FTT did not give sufficient reasons for its conclusion:

It did determine that it did not matter whether this was regarded as a repair or a renewal (while dismissing the possibility of improvement); but it did not say what was the legal test it employed in order to decide whether the proposed replacement roof would be a breach of covenant. It appears that the FTT was unimpressed with the GRP replacement, and took the view that zinc would be better as well as longer lived, and that the reasonable leaseholder would be unhappy with GRP. But that goes nowhere near to a statement of the legal test and an explanation as to why that test was not met.

The FTT was not clearly not applying the test in Proudfoot:

the FTT appears to have decided that a replacement with GRP would be carried out in breach of covenant because it did not like what it saw in the one photograph to which it referred in its decision; because of the lifespan of the material; and because of what it thought a “reasonable leaseholder” would think. The FTT looked at the contrast between zinc and GRP rather than at GRP in itself; it may well be that zinc would be “more in keeping with the character and age of the building” (paragraph 100, quoted above), but that does not mean that GRP was not in keeping with that age and character. It made no mention of locality.

Ms G accepted that the test that should be applied was Proudfoot, so the UT did not go further into what test was appropriate, but the UT found that proposed works were of repair, not ‘renewal’ and that there was no real difference between the terms, while acknowledging the outlying case that renewal would mean something different to repair, as per Credit Suisse v Beegas Nominees Limited (1994) 1 EGLR 76.

So:

The question whether the quality of the work proposed, which everyone agrees is necessary work, is a breach of covenant is not the usual issue in an application under section 27A of the Landlord and Tenant Act 1985. In circumstances such as these the FTT would usually be asked to go straight to the analysis of reasonableness pursuant to section 19. Understandably, in response to Ms Gniewosz’s argument the FTT asked itself, not whether the proposed work would be reasonable as required by section 19, but whether the work would be a breach of covenant by virtue of the material used. That question should have been answered using the Proudfoot v Hart test. That test is a relatively low threshold and it is highly unlikely that it would be failed on the basis of the lifespan of the material or the level of aesthetic concerns that were expressed here (even without the additional assurances the landlord is prepared to give about matching the colour and ribbing of the zinc roof in the GRP).

As I said above, that was not the test the FTT used.

Further, the FTT made an aesthetic judgment on the basis of what was clearly inadequate evidence. I accept that the bundle contained a lot of evidence about the architectural quality of the building but it is not known what if anything the FTT had in mind in reaching its decision other than the one photograph to which it referred; its catch-all phrase proviso that it had looked at all the evidence does not mend matters. I accept that this was an expert panel, but an unexplained decision based on inadequate evidence cannot be justified on that basis.

Appeal allowed. Matter remitted to the FTT for a hearing of Ms G’s other arguments regarding the GRP.