City of London v Various Leaseholders of Great Arthur House

Under these right-to-buy leases, works are chargeable as ordinary repairs only if they are repairs, are undertaken to keep the structure and exterior in repair, and do not amount to making good a structural defect. The works’ effect, rather than the landlord’s purpose or their classification at common law, determines whether the structural-defect exclusion applies.

Repair works may also make good a structural defect. To that extent, their cost is recoverable only under the separate provision for notified defects or defects discovered by the landlord at least ten years after the lease was granted. Every chargeable scheme must also remedy damage or deterioration and satisfy the common-law test for repair.

The City of London Corporation carried out works costing approximately £8 million to Great Arthur House, including replacement curtain walling and structural-frame works. It sought contributions potentially exceeding £72,000 per flat under right-to-buy leases defining the works recoverable as “specified repairs”.

The Upper Tribunal (Lands Chamber), Fancourt J, held in [2019] UKUT 341 (LC), [2020] L & TR 6 that repair works fell outside paragraph (i) of the definition where their effect was to make good a structural defect. Such costs were recoverable only where paragraph (ii) applied.

The Corporation appealed. The central issue was whether works otherwise amounting to repair remained chargeable under paragraph (i) when they also remedied damage caused by, and eradicated, a structural defect.

1. Appeal dismissed. The Upper Tribunal correctly construed the leases. Works of repair to the structure or exterior fall outside paragraph (i) of the definition of “specified repairs” to the extent that their effect is to make good a structural defect. Lord Justices Bean and Arnold agreed with Lewison LJ.

2. The common law distinguishes the existence of disrepair from the scope of permissible repair works. Damage or deterioration must first occur. Once it has, whether the proposed scheme amounts to repair is a question of fact and degree. Works do not cease to be repairs merely because they also eradicate the original defect that caused the damage.

3. The statutory background nevertheless imposed an additional restriction. Paragraphs 13, 15, 16 and 17 of Schedule 2 to the Housing Act 1980 were intended to operate together. Paragraph 15 prohibited recovery of any part of the landlord’s relevant costs, subject to paragraph 16. Paragraph 16 excluded repairs amounting to the making good of structural defects from the ordinary-repair exception, whether or not the defect had caused damage. Recovery for structural defects depended on the notification or delayed-awareness conditions in paragraph 17.

4. Paragraph (i) of the lease definition therefore required three cumulative elements: the works must be repairs; they must be undertaken to keep the structure and exterior in repair; and they must not amount to making good a structural defect. The phrase “in order to” did not displace the third requirement. The effect of the works was decisive. Different parts of one scheme could receive different treatment.

5. Paragraph (ii) was also governed by the definition’s opening reference to repairs. Consequently, even a notified structural defect, or one discovered after ten years, was not chargeable unless it had caused disrepair and the resulting scheme qualified as repair. Some work within the landlord’s obligation could therefore fall outside the service charge.

6. “Structural defect” was not confined to an inherent design defect. Any suggestion in Payne v Barnet LBC that the statutory expression had that narrow meaning was obiter and was not followed. The contrary Housing Law Reports headnote was inaccurate.

1. Court of Appeal (Civil Division): The Corporation’s appeal was dismissed. The Upper Tribunal’s construction of the leases was upheld: [2021] EWCA Civ 431.

2. Upper Tribunal (Lands Chamber): Fancourt J held that repair works did not fall within paragraph (i) where their effect was to make good a structural defect. Such costs were recoverable only under paragraph (ii): [2019] UKUT 341 (LC), [2020] L & TR 6.