In LB Tower Hamlets v Brewster House the Upper Tribunal has considered whether a repair covenant and a 'sweeper clause' permits landlords to recover costs for dealing with inherent defects in a building.
Long residential leases of flats in blocks often include an obligation on landlords for the repair and maintenance of the structure of the building, with a corresponding obligation on tenants to contribute to the cost of such works via the service charge. However, the exact wording of the covenant, and consequently the ability of the landlord to recharge for works, varies.
It is well established that engagement of an obligation to 'repair' first needs some level of 'disrepair' and that an inherent defect (that is, a defect that was present when the flat or building was first leased) is not 'disrepair'.
However, in LB Tower Hamlets v Brewster House and Maltings House, the Upper Tribunal (UT) considered whether any part of the cost of works to remedy structural defects were recoverable under the service charge where the landlord was obliged to 'maintain' the building or, alternatively, whether the costs were recoverable via the 'sweeper clause'.
Brewster House and Maltings House in East London were constructed using the Large Panel System, whereby mass-produced concrete panels were bolted together to form the walls and floors of the building. Despite strengthening works carried out in the 1960s and 1990s, this system was deemed unsafe in 2020 and works to add steel reinforcement were commissioned. The landlord sought to pass the costs onto the leaseholders through the service charge.
The landlord's repairing covenant was 'to maintain and keep in good and substantial repair and condition … the main structure of the building'. The Leases also contained a 'sweeper clause', which entitled the landlord to carry out works deemed necessary 'for the proper maintenance safety and administration of the Building…'
The First Tier Tribunal held that the rectification costs were not chargeable to leaseholders, the landlord sought to appeal the decision to the UT.
With regard to the repairing covenant, whilst the landlord accepted that this was not work of 'repair', as there was no disrepair, it argued that the works fell squarely within the meaning of 'maintain'. LB Tower Hamlets had argued that to 'maintain' included to carry out works needed to prevent damage or harm, and so to 'preserve the building in a functional condition'. As such it would cover the necessary works. The leaseholders argued that there was nothing in the authorities that suggested that the meaning of 'maintain' could be stretched further than that of 'repair' and nor does it encompass putting the building into an improved state.
The UT agreed with the leaseholders. It held that whilst 'maintain' does mean something different to 'repair', as it can include preventative measures, it does not extend to remedying structural defects . The UT held that 'such covenants are engaged only where there is some form of physical deterioration' and hence they did not cover the works required to deal the inherent defects.
The UT further held that the 'sweeper clause' would not be sufficient to cover such major works because it went far beyond the scope of the other provisions in the lease. As a 'deliberately non-specific clause coming at the end of a long list', it could not be ignored that earlier terms made provision for elements of repair to the structure, setting the context for the interpretation of the sweeper clause. Ultimately a potentially ruinously expensive rectification of structural defects could not have been intended to be tucked away in such a general clause.
It is curious that the UT did not consider the High Court decision in Credit Suisse v Beegas Nominees Limited [1994], which was recently relied upon in by the FTT in St John Street Property Services Ltd v Riverside Group Ltd [2023]. In Credit Suisse it was held that to keep the premises in 'good and tenantable repair' did not strictly mean to repair, but rather the condition acceptable to reasonably-minded tenants likely to take the premises at the date of the demise. In that case, the cladding was not watertight and its replacement fell within the covenant.
The case will be of interest in the context of building safety works, which frequently involve the rectification of inherent defects.
It reiterates the importance of carefully examining the covenants in a lease when seeking to recover costs for major works, and acts as a warning to landlords to think twice before relying on non-specific 'sweeper clauses' to recover the costs of inherent defects.
If you would like further advice either on lease terms and service charge recovery, or on general aspects of building safety, please do get in touch.
