Miss C Waaler v London Borough of Hounslow [2015] UKUT 0017 (LC)

There are many, many numbers in this case.

I have an aversion to numbers in narrative, so here they are in list form, with a short chronology of the events leading to the application to the FTT.

The Estate where Ms Waaler lived, which dated from the 1960s, comprised:

• 4 tower blocks,
• 23 four and five storey blocks of flats,
• 13 houses and

• One block of sheltered accommodation.

Miss Waaler’s flat was in one of the four storey blocks. She had bought it under the right to buy scheme:

• 850 of the occupants of the Estate were secure tenants;
• 140 were long lessees who had exercised their right to buy under the Housing Act 1985.

The chronology of events leading to the FTT was the following:

Mid-late 1990s: It is clear that works are needed to the Estate

2004: Section 20 consultation begins

10 January 2005: The works to Block U begin

21 May 2006: Practical completion of the works

17 December 2007: The final account is signed off with the contractor

23 March 2012: Invoice issued to Miss Waaler for her portion of the cost of the works

November 2012: Miss Waaler applies to the FTT for a section 27A determination

Here are the figures relating to the works:

• £8,326,139.48: the total estimated rechargeable cost of the whole project
• £61,134.01: estimated charge to Miss Waaler
• £55,195.95: actual amount demanded from Miss Waaler.

The flat roof on each block was replaced by a pitched one.

The windows also required attention. They had a fundamental design problem: their hinges were not strong enough to bear the strain placed on them, and failed regularly.

Hounslow had in the past recycled hinges from other windows, but that supply was now exhausted. Replacements were no longer available and, even if they were, would always fail because of the excessive strain they bore.

Hounslow therefore decided to replace the old wood framed window units with aluminium ones. This was not straightforward.

The new units could only be installed if the exterior cladding to the building was replaced. That could not be done without removing the asbestos underneath the cladding. Attending to the windows was therefore rather like pulling a stray piece of wool which causes the whole garment to unravel.

Finance for the works was partially provided from loans made available by central government as part of its Decent Homes initiative.

One of the issues before the FTT was whether the works were repairs or improvements.

The lease defined the flat as:

“All that flat known as 347 Summerwood Road…Together with the internal walls and ceilings and floors of the said flat… Together with all cisterns tanks sewers drains… Excepting and reserving from the demise the main structural parts of the building including the roof foundations and external parts (but not the glass of the windows of the said flat nor the door and door frames…)”

Hounslow’s repairing obligations

The lease expressly obliged the Hounslow to:

• “Keep in repair and redecorate when necessary the structure and exterior of the Flat and the Building including the drains gutters and external pipes thereof and will make good any defect affecting the structure…..
• “Keep in good repair and condition all other property over or in respect of which the Lessee has been granted rights…”

The same covenant is implied into Right to Buy leases by virtue of paragraph 14 of schedule 6 to the Housing Act 1985.

That paragraph requires the landlord to “keep in repair the structure and exterior of the dwelling-house and of the building in which it is situated (including drains gutters and external pipes) and to make good any defect affecting that structure”.

The lessees’ repairing obligations

The lessees had a corresponding repairing obligation to:

• “Keep the flat and every part thereof … and all walls party walls sewers drainpipes cables wires and appurtenances thereto belonging in good and tenantable repair and condition including the renewal and replacement of all worn or damage parts and in particular (but without prejudice to the generality of the foregoing) so as to support shelter and protect the parts of the building other than the flat”.

Each lessee was obliged to make payments towards the cost of repairs.

A separate provision expressly dealt with the costs of improvements, requiring the lessee to pay a fair proportion of those costs when served with a demand for payment. The fair proportion was to be based on the rateable value of the Flat.

The Tribunal’s decision was that, subject to some relatively minor adjustments, the sum claimed by Hounslow was payable.

It dealt with the installation of a pitched roof to replace the existing flat roof one in relatively short order – the experts on both Miss Waaler’s and Hounslow’s side were broadly in agreement that the replacement and its costs were reasonable.

The costs of replacing the windows caused considerably more difficulty. The FTT asked itself:

• Whether Hounslow’s course of action was reasonable;
• Whether the standard of works was reasonable, and
• Whether the costs were acceptable.

It criticised Hounslow for the paucity of information that it had made available, but came, reluctantly, to the conclusion that Hounslow’s actions were reasonable.

Factors it considered included:

• The positive aesthetic impact of the new windows and cladding on the appearance of the block;
• That Hounslow would be paying the costs of 860 sets of windows, since of the 1000 flats on the Estate, only 140 were leasehold. Although some of the costs borne by Hounslow were met by a grant, that grant was repayable;
• The new windows would remove the hinge problem once and for all, and
• Future costs should accordingly be considerably reduced.

Having determined that it was reasonable to replace the windows, the FTT concluded that the costs of doing so were also reasonable.

Martin Rodger QC gave permission to appeal on four issues:

(a) Whether the roof and window works fell within Hounslow’s covenant to repair the structure and exterior of the Flat and the Building at clause 5(b) of the lease;

(b) Whether Ms Waaler was bound by her own expert’s view as to the reasonableness of the decision to repair a flat roof by constructing a pitched one, and the costs thereof;

(c) Whether the decision to replace the windows was reasonable in all the circumstances of Miss Waaler’s case, particularly whether the cost of doing so should have played a greater role in Hounslow’s decision making process;

(d) Whether the section 20C order should be reconsidered.

Siobhan McGrath, who heard the appeal in the Upper Tribunal, began her consideration of the appeal by reminding herself of the wording of the relevant sections of the 1985 Act.

Section 18(1)

In the following provisions of this Act “service charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent –

(a) Which is payable directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord’s costs of management, and

(b) The whole or part of which varies or may vary according to the relevant costs.

Section 19(1)

Relevant costs shall be taken into account in determining the amount of a service charge payable for a period –

(a) Only to the extent that they are reasonably incurred, and

(b) Where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard;

And the amount payable shall be limited accordingly.”

“It is worth reflecting,” she added, “that the definition of service charge contained in section 18 did not originally include the cost of improvements and that this was added by an amendment introduced in September 2003 by the Commonhold and Leasehold Reform Act 2002”.

Must v may

Siobhan McGrath began by differentiating between the two sets of works for which the lessees covenanted to pay. Hounslow

• Was obliged to carry out repairs, but
• Had a discretion to carry out improvements. 

Glazing

Hounslow’s repairing obligations extended to the structure and exterior of the block.

Did that include repairing the glazing in the windows, which was demised to the lessees?

In Sheffield City Council v Hazel St Clare Oliver [2008] LRX/146/2007, Ms St Claire Oliver bought her flat under the right to buy legislation.

The lease therefore had the benefit of the same implied repairing obligation under paragraph 14 of schedule to the Housing Act 1985 as Ms Waaler’s.

The windows formed part of the demise to Ms St Clare Oliver. The recoverability of the cost of works to the windows turned on the meaning of “structure and exterior” in the landlord’s repairing covenant.

Having reviewed the authorities, George Bartlett QC, the then President of the Lands Tribunal, determined that the windows of the flat were part of both the structure and the exterior.

The cost of the works was therefore recoverable.

Siobhan McGrath held that the same principle applied to Ms Waaler.

Improvements

The lease was rather wanting in the drafting department so far as improvements were concerned.

Siobhan McGrath noted that whilst Ms Waaler was required to pay for improvements, Hounslow had no “separately articulated power” to carry out those improvements.

She nonetheless concluded that on a proper construction of the lease, Hounslow did have the power to carry out improvements.

Were the costs of improvements reasonably incurred?

Section 19 of the Landlord and Tenant Act does not distinguish between repairs and improvements, but “in my view”, said Siobhan McGrath, “the approach must be different:

• “In carrying out repairs a landlord is usually fulfilling an obligation under the lease;
• “Failure to carry out the obligation would mean that he was in breach of the lease and vulnerable to an order for specific performance and possibly an award of damages against him;
• “Improvements are a different matter and may simply be a matter of choice”.

There are, she observed, situations where the distinction between repairs and improvements is blurred, but that was not her concern here.

The landlord’s choice

Siobhan McGrath went back to basics:

• It is for the landlord to decide how to discharge its obligations;
• Provided that the landlord acts reasonably, a lessee cannot complain simply because the landlord could have adopted another and cheaper method of discharging those obligations.

“However”, she continued, “if a landlord decides to carry out a scheme of works which goes beyond what is required to effect a repair and seeks contributions to the cost from a leaseholder then in my view 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”.

This is a particular challenge to local authority-owned blocks, which often contain flats held on different tenures – for example, flats occupied under secure tenancies often rub shoulders with flats let on long leases.

The interests of these occupiers can diverge significantly where the long lessees are obliged to pay for structural repairs and improvements, but the secure tenants are not, and the local authority’s own funds are derived from a time-limited government grant.

To Siobhan McGrath’s mind, the existence in the lease of an obligation to pay for improvements was not enough on its own to justify a programme of highly costly improvement works.

Garside and Anson v RFYC Limited and BR Maunder Taylor [2011] UKUT 367 (LC)

This is the most recent case to consider the affordability of works.

Mr Maunder Taylor was appointed as manager of the Frognal estate pursuant to section 24 of the Landlord and Tenant Act 1987. The estate had been neglected for a long time, and he therefore planned an extensive scheme of renovation work.

The lessees agreed that the work was needed: the question was whether they should be carried out all at once or phased, so that their cost was spread over a period of time.

In the Upper Tribunal, HHJ Robinson held that the LVT had failed to consider whether the programme of works should have been phased so that the really urgent work was dealt with first, with other, less pressing matters, such a decoration, being phased so that the lessees could manage the costs that were demanded of them.

“In my view”, said Siobhan McGrath of Garside, “…where works of repair are required and there is a reciprocal duty on a leaseholder to contribute to the cost of repair then the lessee’s means are usually irrelevant to the issue of whether costs are reasonably incurred. This is subject to the limited circumstance where an unexpected increase in service charges and the financial impact of such an increase may well be relevant considerations in a decision on how and when to effect repairs”.

Financial impact and improvements

Having expressed her views on considerations relating to expensive repairs, Siobhan McGrath turned to unaffordable improvements.

By improvement, she had in mind works which would result in a building or part of a building being completely different from the original. In her view, if a landlord planned to make improvements, s/he was obliged to give thought to:

• The availability of an alternative and less expensive remedy;
• The views and the financial means of the lessees who would be required to pay for those works.

She then turned to Miss Waaler’s case, and considered each area of work in turn.

Miss Waaler’s case

The roof

Siobhan McGrath dealt with this point in the same short order as the FTT.

She did not consider that the FTT had treated Ms Waaler as being bound by her expert’s view. The FTT had reached its decision having considered all of the evidence and submissions through the prism of its expert knowledge.

The windows and cladding

Siobhan McGrath considered that the Tribunal had however erred on its determination of the recoverability of the costs of replacing the windows on two broad, connected grounds:

• There had been insufficient research into alternative, cheaper methods of solving the problem, and
• These being works of improvement, FTT had not considered the financial impact of the service charge on the lessees.

Insufficient research

The factors which caused Siobhan McGrath to conclude that insufficient thought had been given to the decision to replace the windows included:

• The high cost of the window replacements;
• The only disrepair to the windows disclosed by the evidence was caused by the design of the windows which were too heavy for the hinges;
• Hounslow had presumably managed the problem for more than thirty years;
• While, plainly, something needed to be done, Hounslow ought to have made more of an effort to investigate alternative solutions before committing to a programme of complete replacement;
• There was some, rather thin, evidence before the Tribunal as to the cost of new hinges. The problem was that those hinges had become obsolete, and no other viable solution had been found;
• There did not appear to have been any consideration as to whether the tilt window section could have been replaced with a lighter double-glazed unit.

Financial impact

Financial impact was a factor which “may” (Siobhan McGrath’s word) be relevant to whether work is reasonably incurred if those works exceed what is needed to repair the building.

“In this case and on these specific facts, the cost of the works to the windows is a significant factor”, she said.

There was little to no evidence before the Tribunal that Hounslow had taken any steps:

• To investigate the financial impact of the works on the lessees, or
• To demonstrate how or why the decision was taken at all.

To a certain extent that was unsurprising because a number of years had passed since the works had been carried out: the decision to replace the windows rather than just the hinges had been reached in 1997.

The passage of time and all other issues aside, Siobhan McGrath held that it was incumbent on Hounslow to show that it had considered alternative methods of repairing the windows in circumstances where the cost to the lessees of replacing the windows and cladding was so high.

Its failure to do so – and the FTT’s failure to take those issues into account – meant that the cost of the replacement windows and cladding had not been reasonably incurred, nor was that cost reasonable in amount.

Quantifying the reduction that should be applied to the lessees’ service charge bills was not likely to be straightforward.

Some works needed to be carried out because the windows needed repairing. The question was what the cost of those repairs would have been.

Siobhan McGrath remitted the case to the FTT for that tricky assessment to be carried out.

The FTT had made no section 20C order.

It had not been altogether very friendly to Miss Waaler’s legal representative, suggesting that there had been a “kitchen sink” approach to the case in that Hounslow’s works had been challenged under as many sections of the 1985 Act as possible.

Conversely, it held that the legal representative’s instructions to the expert had been poor, which had rather disadvantaged Ms Waaler.

It noted that Hounslow had also on the whole been successful.

Reviewing the exercise of the FTT’s discretion, Siobhan McGrath declined to interfere with the FTT’s order.

In her judgment, the FTT had dealt with many issues, not all of which had been appealed, and even on the appeal, Miss Waaler not succeeded in overturning the FTT’s determination on the roof works.

Siobhan McGrath did however consider it appropriate to make a section 20C order on the appeal:

“Ms Waaler has,” she said, “succeeded in a not insignificant aspect of the case which was conducted in an efficient manner”.

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