London Borough of Tower Hamlets v Lessees of Brewster House and Malting House (2024) UKUT 193 (LC) (11 July 2024)

This was an appeal to the Upper Tribunal on whether a service charge for major works to remedy structural defects to two blocks of flats was payable. It may well have broader significance for charges for building safety works, depending on lease terms.

The blocks at issue were built in the 1960s using the Large Panel System, which has been known to have safety issues since the partial collapse of Ronan Point in 1968. The landlord, LB Tower Hamlets decided to carry out work to reinforce the buildings by installation of steel frames. The likely charge to leaseholders was to be between £60,000 and £80,000 each.

The leaseholders applied to the FTT, which found that the charges were not payable under the leases. Tower Hamlets appealed.

The relevant lease clauses permitted Tower Hamlets to charge for carrying out the following obligations:

(a) To maintain and keep in good and substantial repair and condition:

(i) The main structure of the Building including the principal internal timbers and the exterior walls and the foundations and the roof thereof with its main water tanks main drains gutters and rain water pipes (other than those included in this demise or in the demise of any other flat in the Building)

…

(j)

(ii) To employ direct or enter into contracts with all such surveyors builders architects engineers tradesmen accountants or other professional persons as may be necessary or desirable for the proper maintenance safety and administration of the Building…

…

(o) Without prejudice to the foregoing 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

It was common ground that these works were not works of repair, as there was no deterioration from a previous state involved. Instead LBTH argued that the works fell under the obligation to maintain, or alternatively fell under the sweeper clause at (o).

On ‘maintenance’, the Upper Tribunal considered Assethold Limited v Watts (2014) UKUT 537, Welsh v London Borough of Greenwich (2000) 3 EGLR 41, Fluor Daniel Properties Ltd and ors v Shortlands Investments Ltd (2001) 2 EGLR 103, and Mason v Totalfinaelf UK Limited (2003) EWHC 1604 (Ch), to arrive at the conclusion that a covenant to maintain was only engaged where

there is some form of physical deterioration; none of the cases supports the appellant. Assethold Limited v Watts is as unhelpful as the rest; what was argued there was that maintenance was “the preservation of the subject matter of the covenant in its original state” (Assethold paragraph 44, quoted at paragraph 34 above), and at paragraph 49 the Deputy President said that “To maintain involves preserving a functional condition by acts of maintenance performed on or to the thing to be maintained”; the emphases are mine. To preserve is not to make something new, or to make something safe that was not safe.

And cites with approval Laws LJ in Alker v Collingwood Housing Association Ltd (2007) EWCA Civ 343

“I do not think that a covenant to maintain comes any closer to a covenant to make safe than does a covenant to repair.”

That sums up the position precisely. The consistent approach of the authorities is that whilst “maintain” does mean something different from “repair” – it is not otiose and can denote something preventive rather than remedial – neither a covenant to repair nor a covenant to maintain is a covenant to remedy structural defects, nor to make safe a building that was not safe when it was built.

As such, the works were not of maintenance and did not fall under that clause.

On the ‘sweeper clause’ and safety, the question was whether the clause was intended to encompass something so far reaching as an obligation to remedy structural defects. The FTT had held that the clause was not intended for “works so extensive that the costs would vastly exceed those likely in any category expressly mentioned.”

While the cost of works would not be relevant if the work clearly fell within a lease obligation, it was relevant to consider the extent and cost of works in construing an unclear clause. That remedying structural defects would likely be very expensive would be a fact known to the parties to the lease, and a matter of commercial commonsense.

Adopting the approach of the Court of Appeal in Holland Park Management Company Limited v Dell (2023) EWCA Civ 1460, it was relevant that the clause was a ‘sweeper clause’. The specific provisions preceding it in the lease were the “best indication” of the scope of such a clause and what it might include.

Clause 5(5)(o) in requiring the landlord to do everything it considers necessary or advisable “for the proper management maintenance safety amenity or administration of the Building” does not require it to remedy structural defects because that goes too far beyond the scope of anything that precedes it.

Yes, it is intended to provide for items not yet thought of, but only express words will generate an obligation that is vastly different in kind and in likely scale from the obligations already specified.

Appeal dismissed.

Comment

This clearly has potential broader significance. If works to remedy structural defects, or arguably other safety works, do not fall under a covenant to repair and maintain, and there are no other clauses that could be taken to expressly include such works, then a) the cost of works will not be payable by leaseholders under the lease, but also b) the carrying out of such works would not be an obligation of the landlord’s such that leaseholders could enforce it (though there may well be other ways in which the landlord could be compelled to do such work).

Without an express clause, a ‘sweeper clause’ expressed in general terms cannot be relied upon by the landlord.

But it will all depend on the specific terms of the lease. For example, a covenant to ‘repair, maintain and improve’ may well be taken to cover remedying structural or other safety defects. Or, if the building has been subject to enforcement by the local authority or fire service, and there is a ‘comply with notices or orders by a public body’ clause in the lease, that might cover it.

But the principle that safety works are not maintenance per se is certain to see further application. I would also imagine that this case may be headed to the Court of Appeal.