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Landlord and tenant

21 February 2017

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Waaler v Hounslow London Borough Council [2017] EWCA Civ 45Court of Appeal: Patten , Lewison , Burnett LJJ

Landlord and tenant — Covenant — Service charge — Reasonableness — Council undertaking improvements to properties — Cost of improvements passed on to lessees — Whether works “reasonably incurred” — Whether standard of reasonableness or rationality — Landlord and Tenant Act 1985 (c 70) (as amended by Commonhold and Leasehold Reform Act 2002 (c 15), s 150, Sch 9, para 7), ss 18(1)(a)(3)(c), 19

The tenant was a lessee of a flat on an estate owned by the council. The council served notice of its intention to carry out works to certain of the blocks of flats on the estate, including the replacement of windows, which in turn required the replacement of the external cladding and removal of asbestos, and estimated the tenant’s charges. The works were carried out and the tenant was issued a demand. She applied to the First-tier Tribunal under section 27A of the Landlord and Tenant Act 1985 for a determination of her liability to pay the requested service charge. The tribunal held that the council was entitled to recover the claimed service charge, concluding that while the windows were not in disrepair they did have an inherent design problem and the council was reasonable in seeking to replace them and the cost of replacing the cladding was an inevitable consequence. Allowing in part the tenant’s appeal, the Upper Tribunal determined that under the lease the council had an obligation to carry out repairs and a discretion to carry out improvements, that the replacement of the windows was an improvement and although under the lease the council had the right to make improvements, and the lessee was obliged to contribute to such cost, the council ought to have taken particular account of the extent of the interests of the lessees, their views on the proposals and their financial impact and therefore only part of the amount claimed was recoverable.

On the council’s appeal against the decision relating to the replacement windows and cladding—

Held, appeal dismissed. The council’s contractual ability to undertake improvements whose cost was to be passed on to the lessees was constrained by an implied term that the decision-making process be lawful and rational in the public law sense, that the decision was made rationally, and consistently with its contractual purpose and that the result was not so outrageous that no reasonable decision-maker could have reached it. The rationality test applied both to a choice as between different methods of repair and also to a decision whether to carry out optional improvements. Whether costs were reasonably incurred within the meaning of section 19 of the Landlord and Tenant Act 1985 was to be answered by reference to an objective standard of reasonableness, not the lower standard of rationality, and was not simply a question of process but was also a question of outcome. The tribunal should not simply impose its own decision and where a landlord had chosen a course of action which led to a reasonable outcome the costs of pursuing that course of action would have been reasonably incurred, even if there was a cheaper outcome which was also reasonable. While the landlord was obliged to comply with consultation requirements before carrying out works of any size, thereby conscientiously considering the lessees’ observations and giving them due weight, he did not have any further positive duty to inquire about the tenant’s views. The tribunal, in considering whether the landlord’s final decision was reasonable, should accord the landlord a “margin of appreciation”. The Upper Tribunal had not erred in formulating the criteria it had and had made no error of law which would entitle the court to intervene (paras 23, 25, 37, 39, 43, 47, 53, 54).

Braganza v BP Shipping Ltd [2015] 1 WLR 1661, SC(E) applied.

Wandsworth London Borough Council v Griffin [2000] 2 EGLR 105, Forcelux Ltd v Sweetman [2001] 2 EGLR 173 and Garside v RFYC Ltd [2011] UKUT 367 (LC) considered.

Decision of the Upper Tribunal (Lands Chamber) [2015] UKUT 17 (LC); [2015] L & TR 24 affirmed.

Appearances: Wayne Beglan (instructed by Legal Services Department) for the council. Graham Coyle, representative, for the lessee.

Reported by: Nicola Berridge, solicitor.

Solicitors Journal case digest is prepared by the Incorporated Council of Law Reporting for England and Wales (ICLR)

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Property Landlord & Tenant