Bishop & Sewell has registered a significant victory on behalf of a group of leaseholders at the Court of Appeal that could have major ramifications for the leasehold sector.
Acting on behalf of a number of leaseholders, B&S instructed Counsel of Ellodie Gibbons and Ashley Thompson from Landmark Chambers to respond to an appeal by the London Borough of Tower Hamlets in a case that had already been before the First Tier Tribunal and the Upper Tribunal. In each hearing, the judgment went in favour of the leaseholders.
The main issue in the case was whether the leaseholders, whose leases had originally been acquired under the right to buy scheme, were liable to contribute to the cost of works required to remedy major structural defects to the building in order to make it safe.
In the early 1960s the Barleymow Estate in East London was acquired by the London Council, which redeveloped the industrial area as social housing. Three tower blocks were constructed, of which two remain, Brewster House and Malting House. Between the two they consist of 112 flats, 80 of which are let to council tenants and 32 held on long leases.
The leaseholders in the case are the lessees of nine of the flats, under leases that were granted between August 1989 and January 2005 under the right to buy scheme. London Borough of Tower Hamlets became the freeholder when the Estate was transferred to the Council in 1986.
The structural issue in the blocks came to light in 1968, a year after construction. The blocks were built using the Large Panel System (LPS), whereby mass-produced concrete slabs were bolted together to form the walls and floors of the buildings. Using this method meant that the walls bore the whole weight of the building, and therefore the structural integrity of the block depended on them. This flaw came to light very quickly as a result of the Ronan Point tragedy in 1968, when a piped gas explosion destroyed some of the external walls in the Ronan Point building resulting in the collapse of one corner of the 22 storey block, killing four people.
The subsequent Ronan Point Inquiry recommended work to safeguard LPS buildings from the risk of collapse. The requisite work was done to Brewster House and Malting House before the buildings were occupied, and additional work was carried out to strengthen the buildings between 1990 and 1994 following concerns regarding the potential impact of the new Limehouse Link tunnel. This work was done to make the building safe in the case of abnormal loading, but at this stage it was considered that LPS buildings were safe under normal loading, i.e.; the weight of its occupants and contents.
In 2017, a fire in Shepherds Bush and the discovery of cracking in LPS buildings in Southwark raised further concerns about buildings constructed using LPS, and Tower Hamlets Council commissioned a report, and a subsequent structural reassessment was carried out. This reassessment concluded that the previous reinforcement of the buildings was insufficient to cope even with normal loading. As a result, in March 2020 the council concluded that major work was needed on the blocks.
The work included the installation of an external steel frame, external reinforcement to cross walls, the installation of internal steel frames to bedrooms, and the lobby. The final figure for the total costs of the work is £9.2 million. The council wanted to try and recover part of the cost from leaseholders through the service charge, with the cost to leaseholders of between £70,000 and £95,000.
The leaseholders applied to the First Tier Tribunal (FTT) for it to determine pursuant to section 27A of the Landlord and Tenant Act 1985 whether those service charges were payable under the terms of the lease. The FTT held that the leaseholders were not liable and the Upper Tribunal agreed.
At the recent Appeal, the London Borough of Tower Hamlets contended that the tribunals misconstrued the terms of the lease, specifically the obligations of the leaseholders 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’.
The Judge, Lord Justice Males, concluded that decisions by the Tribunals were correct and that the appeal be dismissed. In his judgment he stated that the clauses in the lease do not impose on the leaseholders an obligation to pay to make good pre-existing structural defect in the building.
In essence, the Court of Appeal refused to allow the council to recover the cost of the works as the use of the word ‘safety’ did not capture the remedying of a structural defect. This is a significant judgment that could have major ramifications across the leasehold sector and Bishop & Sewell is delighted to secure this outcome on behalf of the leaseholders involved.
