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3rd February 2017

Landlords who make energy efficiency improvements may not be able to recover the cost through service charge provisions

By Kate Andrews

The Upper Tribunal (Lands Chamber) has held, in a recent decision, that a landlord was not entitled to charge tenants for the cost of replacing wooden window frames with metal ones simply because a small number of the wooden window frames required minor repairs.

The facts in Tedworth North Management Limited v Miller (2017)

A dispute arose regarding the repair of windows in a block of flats; the block was originally built in 1981 with single-glazed windows installed. The landlord, Tedworth North Management Limited (“Tedworth”) agreed with some of the tenants to install double-glazed windows at the individual tenant’s own cost. As part of the works, Tedworth replaced the wooden frames in the entire building with new metal ones. The cost of replacing the wooden frames was charged to all tenants through the general service charge provisions contained in the long leases. The covenant to repair contained in the long leases stated that:

“In each year deemed necessary by the Company … at all times during the said term to keep the interior and exterior walls and ceilings and floors of the Building (other than those included in this or any other demise) and the roof structure and the foundations and main drains thereof in good and substantial repair and condition.”

Building surveys found that the windows and sub-frames were generally in satisfactory condition, but in need of redecoration with some isolated repairs required. Tedworth argued that once some repairs were required, this meant it could carry out repairs to all of the windows by replacing all of the wooden frames with new metal ones, as the works (whether in part or in whole) required scaffolding to be erected. Tedworth argued that, as the new metal frames would not need decorating as often, this would create further savings that could be passed on to the tenants. In addition Tedworth argued that, in any event, the full cost of the scaffolding should be payable by the tenants.

The First-tier Tribunal decision

The First-tier Tribunal disagreed and held that the works Tedworth carried out amounted to “improvement”, rather than “repair”, as the decision to replace the windows was not motivated by the existence of disrepair.

The First-tier Tribunal also held that where costs were incurred in relation to different phases of work, the cost should be apportioned between each phase. Accordingly, the proportion of the cost of the scaffolding in relation to the windows and window-frames could not be recovered through the service charge.

Tedworth appealed.

The Upper Tribunal decision

The Upper Tribunal dismissed the appeal on the ground that the repairing covenant was not engaged, as only a small number of windows were in need of repair, and not the majority. The Upper Tribunal compared the situation to that involving a roof repair, stating that “If the greater part of a roof is in a deteriorated condition, the fact that some areas are undamaged would not of itself prevent complete replacement from being repair; on the other hand, if the only deterioration was localised to a small area and can adequately be dealt with by a localised repair, the whole roof could not be said to be in disrepair such as to require or justify its complete replacement.”

It was held that disputes should be settled on a case-by-case basis, as this is a practical assessment of disrepair and not a legal question. The Upper Tribunal distinguished this case from other cases where windows have been found to be in a state of disrepair.

Commentary

This case highlights that landlords who make energy efficiency improvements to their buildings will not necessarily be able to recover the costs from their tenants, even if they did so to ultimately make future savings. Landlords cannot charge their tenants under the head of “repair” unless there is “disrepair” to the premises.

For further information, please contact the Real Estate Disputes Team at Hamlins.

 

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