Tower Hamlets v leaseholders: Court of Appeal confirms structural defect exclusion from service charges

The Court of Appeal has dismissed Tower Hamlets Council's appeal in a significant case concerning the extent of leaseholders' service charge obligations for remedying major structural defects in tower blocks constructed using the defective Large Panel System.

Brewster House and Malting House, built in 1967 on the Barleymow Estate in East London, were constructed using the Large Panel System—a method whereby mass-produced concrete slabs were bolted together to form walls and floors. This construction method's critical flaw became apparent following the 1968 Ronan Point disaster, when a gas explosion caused progressive collapse of a 22-storey block.

The buildings underwent initial remedial works in the late 1960s and further strengthening between 1990 and 1994. However, in 2018, following renewed safety concerns about LPS buildings, structural engineering consultants concluded that previous reinforcement was insufficient even for normal loading conditions. The council subsequently commissioned major remedial works estimated to cost over £9.2 million, with individual leaseholder contributions ranging from £70,000 to £95,000.

The lease provisions

The leases, granted under the right to buy scheme between 1989 and 2005, contained a maintenance obligation in clause 5(5)(a) and a "sweeper clause" in clause 5(5)(o) requiring the council to carry out "all such works...as in the absolute discretion of the Lessors may be considered necessary or advisable for the...safety...of the Building." The definition of "Total Expenditure" in Schedule 5 included "any other costs and expenses reasonably and properly incurred in connection with the Building."

Two early leases contained additional wording expressly excluding the cost of making good structural defects, save where such defects had been notified to the lessee or where the landlord became aware of them at least five years after the lease grant.

The Court's analysis

Lord Justice Males, delivering the leading judgement with which Lords Justices Snowden and Dove agreed, held that the critical question was whether "safety" in clause 5(5)(o) encompassed making good a pre-existing structural defect rendering the building unsafe for habitation.

The Court concluded it did not, for three principal reasons. First, the word "safety" appeared alongside management, maintenance, amenity and administration, suggesting concern with relatively routine day-to-day matters rather than fundamental structural defects. Second, the "absolute discretion" language was inappropriate for something the council was obliged under the right to buy legislation to remedy. Third, the legislation dealt expressly and in detail with structural defects and the limited circumstances permitting cost recovery—any requirement for leaseholder contribution would be expected in clear words.

The Court emphasised that right to buy legislation formed part of the interpretative background. Parliament's intention was to encourage home ownership amongst persons of modest means whilst providing consumer protection by partially insulating them from liability for rectifying structural defects.

Implications

The Court's decision reinforces established principles that general service charge provisions must be interpreted restrictively. The judgement confirms that fundamental obligations transcending routine building management require express provision, particularly where the right to buy legislative framework specifically addresses the matter. The decision applies regardless of whether leases contain express structural defect exclusions, as the general charging provisions simply do not encompass such works.

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