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London Borough of Southwark v Michelle Baharier [2019] UKUT 0073 (LC)

27th June 2019

Summary

Whether works are an improvement or a repair is irrelevant where they are in furtherance of a landlord’s obligation to provide a service.

Facts

The tenant was the long leaseholder in a block constructed in 1968, the freeholder of which was the local authority. The tenant exercised the right to buy in 2008. The local authority landlord proposed to replace the worn-out central heating system at an anticipated cost of £800,000. The tenant was required to pay a contribution of £24,486.88.

Issues

  1. Was the landlord entitled to argue a new case on appeal
  2. Was the cost of the new system recoverable as the cost of providing a service

Fist Instance

The parties were not professionally represented before the FTT, the landlord was represented by an officer from its service charge enforcement department, the tenant represented herself. The landlord’s statement of case correctly identified the provision of heating as a service under the terms of the lease. The FTT identified the issue to be whether the works were one of repair or of improvement, the latter being irrecoverable. The landlord’s representative agreed with the FTT that this was the issue.

The FTT held that the proposed works were an improvement and accordingly irrecoverable. The local authority landlord appealed to the Upper Tribunal.

Decision on appeal

Procedural  

The Upper Tribunal held that the landlord was not prevented from arguing on appeal that the provision of heating was a service and accordingly whether the works were one of repair or improvement simply because its lay representative before the FTT had, wrongly, agreed with the FTT as to what the issues were.

The Tribunal does not encourage a technical approach to the identification of the issues properly raised by an appeal. Parties are often permitted to raise new points, provided it can be done without unfairness or inconvenience to the other parties or the Tribunal. The matter in issue was a question of law which did not depend on the facts of the case and, in any event, the matter had been put in the landlord’s statement of case.

Substantive

The lease required the landlord to provide certain services among which were space heating and hot water and to ensure that insofar as practicable the services were maintained to a reasonable level. The lease required the tenant to pay all costs and expenses of or incidental to providing the services.

The obligation to provide a service is potentially more onerous than one to keep a system in repair, the covenantor may be required to carry out whatever work is necessary to provide the service even though that work goes beyond what would ordinarily be called repair.

As a matter of contract it is a matter for the Landlord to decide how to supply the service, Yorkbrook v Batten (1986) 52 P&CR 51 (CA) applied. The obligation was to take whatever steps were required to achieve the outcome, it accordingly wasn’t relevant to consider in any detail what those steps were, the question of whether a particular program or item of work went beyond repair was therefore irrelevant.

While the lease also required repair of the existing system it also obliged the landlord to go beyond the primary repairing obligation to provide the service. It was the service that was to be maintained, not the installations.

The FTT had accordingly directed itself and the parties to the wrong question – the issue was not whether the costs of the replacement system were costs of repair or improvement but rather whether they were costs and expenses of or incidental to providing the services of heating and hot water.

The Upper Tribunal declined to remit the matter to the FTT to enable the tenant to argue that the decision to install a new communal system was irrational. The evidence before the FTT has been substantial and included a report providing the estimated costs and benefits of different approaches, it had been open to the tenant to argue that the decision to install a new system had been irrational and she had not done so. In any event the tenant would have required substantial evidence of her own to counter the landlords evidence that her preferred alternative approach had not been viable.

Comment

The decision turns on the requirement in the lease to provide a particular service rather than just to maintain an existing system. Whether the lease imposes on the landlord an obligation to provide a service, and the tenant a corresponding obligation to pay the associated costs, as a matter of contract law the issue is not one of repair or improvement but whether the works are for the provision of the service.

 

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