London borough fails in appeal over service charges and costs of remedying major structural defects in tower blocks

The London Borough of Tower Hamlets brought the appeal against ‘various leaseholders’ of tower blocks Brewster House and Malting House, both built in the mid-1960s.

This appeal followed a finding by the Upper Tribunal that leaseholders were not liable to pay some £9.2m after the First Tier Tribunal arrived at a similar conclusion.

Lord Justice Males said in his judgment: “I have concluded that [these] decisions were correct and that the appeal must be dismissed.

“In short, when the clauses…are considered in full and in their context, which includes the right to buy legislation, they do not impose on the leaseholders an obligation to pay to make good a pre-existing structural defect in the building.”

The two towers comprise 112 flats, of which 32 are held on long leases granted under Right to Buy. The council is the freeholder.

They were built using the large panel system, common at the time but since deemed a threat to structural integrity as the walls bear the whole weight of the building.

The technique was used at Ronan Point, in Newham, where a 1968 gas explosion caused the collapse of one corner of the 22 storey block.

Although various remedial works were done, by 2020 a further investigation led the the council to conclude major works were needed. It sought to charge leaseholders between £70,000 to £95,000 each for these.

Tower Hamlets argued the only question was whether the works were necessary or advisable for the safety of the buildings and that remedying structural defects would not be beyond the relevant lease clause.

Males LJ said the critical question was what a lease clause meant by 'safety'.

He said: “The question is not simply…whether the works in issue here were carried out for safety reasons, which I accept that they were, but whether the clause encompasses the making good of a pre-existing structural defect which renders the building unsafe for habitation.

“In my judgment, when the term is considered in its context in the clause, and against the background of the legislation, it is clear that it does not."

‘Safety’ appeared in the cause amid a list of other spending heads, which “suggests that the clause is concerned with relatively routine matters arising in the day to day management and administration of the building during the term of the lease, not with matters as fundamental as a pre-existing structural defect exposing the building to the risk of collapse”, Males LJ said.

He said there was a striking contrast between the landlord's obligation to keep the structure and exterior of the building in repair and the obligation to make good any defect affecting that structure.

“Both obligations are contained in para 14 of Schedule 6 to the 1985 Act," Males LJ said.

“However, while the maintenance obligation, with a corresponding right to recover the cost of such maintenance through the service charge, is expressly provided for in the lease (clause 5(5)(a) and the definition of 'Total Expenditure', there is no equivalent provision concerning the making good of structural defects.

“That omission appears to have been deliberate. It would have been surprising for leases giving effect to the right to buy legislation to impose a potentially ruinous burden on leaseholders who were likely to be of modest means.”

Noting a lease referred to “… any other costs and expenses reasonably and properly incurred in connection with the building” the judge said it was “inconceivable that these very general words were intended to enable the council to recover the cost of making good such a defect which it had a positive duty to make good…”

He dismissed the appeal and Snowden and Dove LJs both agreed.

Mark Smulian