Court of Appeal decides the cost of work needed to remedy LPS buildings are not recoverable from leaseholders

On 9 December, the Court of Appeal handed down its decision in The London Borough of Tower Hamlets v Various Leaseholders of Brewster House and Malting House.

Summary

The appeal concerns whether the long leaseholders of two blocks in East London are liable to contribute to the cost of works to remedy structural defects in the blocks, which were required to make them safe for habitation.

The blocks were constructed in the early 1960s using the Large Panel System (“LPS”). In 1968, following the Ronan Point Disaster, it was discovered that the LPS was flawed and the blocks underwent reinforcement works. Further strengthening work was carried out in the 1990’s. However, in around 2018, it was discovered that the blocks were unsafe under normal loading conditions.

LBTH decided to carry out further major works to remedy the structural defects in the building and sought to recover part of the cost of those works from leaseholders through the service charge. LBTH relied on the leaseholders’ obligation in the leases to pay for ‘all such works … as in the absolute discretion of the Lessors may be considered necessary or advisable for the … safety … of the Building’ and for ‘any other costs and expenses reasonably and properly incurred in connection with the Building’.

The leaseholders applied to the First-tier Tribunal for a determination under section 27A of the Landlord and Tenant Act 1985 as to whether the service charges were payable. The FTT and the Upper Tribunal held that the service charges were not payable.

LBTH was granted permission to appeal to the Court of Appeal at which stage it was recognised that the decision was of importance to local authorities in view of the widespread use of the LPS.

CoA’s decision

The Court of Appeal concluded that the FTT and UT were correct and LBTH’s appeal was dismissed.

Although the court accepted that the works were carried out for “safety reasons”, it was held that the clauses relied on by the council considered in their full context, which included the right to buy legislation, did not impose an obligation to contribution to the costs of making good structural defects. The UT had been wrong to treat the legislative background as irrelevant to the interpretation of the leases.

Justin Bates KC and Mattie Green appeared for the Appellant. Ellodie Gibbons and Ashley Thompson appeared for the Respondents.