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Appeal ruling highlights landlord and leasehold liability

The question of liability in “Right to Buy” schemes has been brought sharply into focus following a failed appeal by the Corporation of London which sought to recover £8m from leaseholders to remedy problems at Great Arthur House.

Defects in design, installation or construction can lead to significant problems requiring considerable costs to landlord and leaseholders when liability for the works is examined.

In March 2021, the Court of Appeal dismissed an appeal by the Corporation of London against a decision of the Upper Tribunal (Lands Chamber), which ruled in favour of the leaseholders of Great Arthur House ([2019] UKUT 341 (LC)).

The Corporation sought to pass on the repair costs to Leaseholders in bills of over £172,000 per flat. The Leaseholders hold 125-year leases granted pursuant to the 'Right to Buy' scheme, which permit a landlord to recover the costs of repairs to the structure and exterior of the building “not amounting to the making good of structural defects”. The extent of the repairs and the meaning of "making good of structural defects" became the focus of the appeal,

The Upper Tribunal Lands Chamber (Fancourt J, President) rejected the Corporation’s argument deciding that works of repair of the structure and exterior of the building do not constitute 'repairs' if the effect of the works is to make good a structural defect.

The Court of Appeal agreed with Fancourt J, dismissing the Corporation’s appeal explaining that works will be chargeable to Leaseholders under the relevant part of the leases only if:

  • they are repairs.
  • they are carried out in order to keep in repair the structure and exterior of the building.
  • they do not amount to the making good of a structural defect.

 

However, the Court of Appeal noted in its conclusion that lessees do not have "complete immunity" as under a separate provision in the Right to Buy lease, lessees can be required to contribute to the cost of repairing structural defects which they were made aware before taking up the lease; and/or of which a landlord only became aware ten years or more after the grant of the lease.

As result of this case, the Upper Tribunal’s decision needs to be considered in the context of the very specific wording of the leases in question and in the context of the Right to Buy statutory code.

W Denis is a leading broker in the area of structural defects insurance with a significant involvement in UK and overseas markets. To discuss this further with an expert at W Denis, please make arrangements with daniel.moss@wdenis.co.uk and on 0044 (0)113 2439812

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