The London Borough of Hounslow v Waaler [2017] EWCA Civ 45

The Court of Appeal upheld the decision of the Upper Tribunal that a landlord, where it seeks to undertake discretionary improvements, must take into consideration the leaseholders’ interests, their views on proposals for major works and the potential financial impact on them.

Relevant facts

The IvyBridge Estate (“Estate”) is owed by the London Borough of Hounslow (“Council”). The Estate was built in the late 1960s and consists of 4 tower blocks, 23 four and five storey blocks of flats, 13 houses and a block of sheltered accommodation. There are approximately 850 secure tenants on the Estate together with 140 long leaseholders created under the right to buy scheme. Ms Waaler is a lessee of 347 Summerwood Road being a flat within one of the blocks of flats (Block U).

On 18.11.04, the Council served a notice of intention to carry out significant work to ten separate blocks. It was estimated that the total recharge cost would be £8,326.139.48 with Ms Waaler’s charge being £61,134.01. After completion of the works, a demand was issued to Ms Waaler on 23.03.12 for £55,195.95.

First-tier Tribunal decision

An application was submitted to the First-tier Tribunal pursuant to section 27A of the Landlord and Tenant Act 1985 (“1985 Act”) by Ms Waaler and two other leaseholders seeking a determination relating to the reasonableness of works including, inter alia, the replacement of the original wooden-framed windows with new metal framed units. This item was particularly contentious as it necessitated the replacement of the external cladding and removal of asbestos despite the windows not being in disrepair. The FTT was satisfied that the windows retained an inherent design flaw insofar as unreasonable strain was placed upon the hinges which created a potential safety issue.

The FTT found that equivalent hinges were available at a cost of £140 per pair but noted that the same problems would arise unless work was undertaken to lighten the weight. This would require replacing the windows at significant cost. The Council eventually decided to use aluminium window units with a life span twice that of uPVC ones (which might have been used at a lower cost).  The Tribunal held that the Council was entitled to recover the claimed service charge.

Appeal to the Upper Tribunal

On appeal, the Upper Tribunal concluded that the Council had an obligation to carry out the repairs but a discretion to carry out improvements. Although s19 of the 1985 Act makes no distinction between repairs and improvements, the approach taken by a landlord must be different given that an improvement is a matter of choice. In contrast, a landlord will be obliged to carry out a repair in order to fulfil any obligation pursuant to the lease. Should a landlord fail to undertake any necessary repairs, it would be vulnerable to an order for specific performance and the possibility of an award of damages.

The Upper Tribunal further reasoned that where a landlord decides to carry out a scheme of works which includes improvements, he “must take particular account of the extent of the interests of the lessees, their views on the proposals and the financial impact of proceeding.” Accordingly, the Upper Tribunal decided that only part of the amount claimed was reasonable and remitted the question back to the FTT to determine how much.

Court of Appeal decision

With permission granted by the Upper Tribunal, the Council appealed the decision relating to windows and cladding. In his judgment, Lord Justice Lewison took the opportunity to confirm that a local authority must action rationally before reiterating that the appropriate statutory test was whether the works were reasonably incurred; there was no dispute that the works carried out by the Council were of a reasonable standard.

The Court of Appeal then went on to reject the argument submitted on behalf of the Council that the views of the tenants were immaterial where the works in question contained elements of improvements.

Lewison LJ confirmed that reasonableness was an objective test, consequently, any assessment shouldn’t be limited to an evaluation of the landlord’s decision-making process. It was also necessary to consider the outcome of the works undertaken. It was further stressed that where compliance with consultation requirements is required, a landlord must “have regard” to the lessees’ observations and ‘conscientiously consider the observations and given the due weight’ depending on the perceived cogency of the matters raised. Accordingly, and in light of these statutory obligations, it was deemed impossible to consider the tenants’ views immaterial.

Furthermore, the Upper Tribunal had not erred in formulating criteria to which a landlord must have regard; namely, the interests of the lessees, responses to consultation and financial impact of the works. The Court of Appeal took the opportunity to confirm the following:-

  • The extent of a lessees’ interest can be measured by the remaining unexpired terms of their leases.
  •  Given that a landlord has a statutory duty to consult, the reference to taking ‘particular’ account of the views of lessees where the works constituted improvements was not problematic. It makes sense that the lessees’ views should be more influential where improvements are being undertaking given that a landlord is exercising a discretion.
  • Considering the financial impact of the works does not require the landlord to investigate the financial means of particular lessees. However, in broad terms “the landlord is likely to know what kinds of people are lessees in a particular block.”

The appeal brought by the Council was dismissed and Ms Waaler’s application to cross appeal was refused.

Arden Chambers is a leading set specialising in property, housing, local government and planning. Arden Chambers has a strong and experienced team who provide a full range of services for freeholders and leaseholders in relation to residential property including enfranchisement, lease extension, right to manage and service charge disputes. Chambers has extensive experience of FTT litigation and advisory work, with members appearing both in the FTT and Upper Tribunal on a regular basis.

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