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Right to Buy Leaseholders not liable for works making good a structural defect

Good news for Right to Buy Leaseholders after the Court of Appeal handed down judgment in The Mayor and Commonalty and Citizens of the City of London –v- Various leaseholders of Great Arthur House [2021] EWCA Civ 431 in which the court was asked to consider whether landlords can pass on the cost of repairs required by structural defects to the leaseholders.

The court held that where repairs to a residential building are to make good structural defects or remedy damage caused by those defects, the cost of the repairs cannot be included in the service charge.

Great Arthur House on the Golden Lane Estate in London is a Grade 2 listed block of 120 flats that was built in 1957. It is occupied by long term leaseholders on 125-year leases granted by the Corporation of London pursuant to the Right To Buy statutory scheme.

Water penetration caused issues with the joints meaning repair works were essential and substantial, requiring works to both the structure of the building as well as the exterior. Under the terms of the lease it appeared that the leaseholders were liable for a contribution to costs.

The costs incurred by the landlord were approximately £8,000,000 which they sought to recover through the service charge of roughly £72,000 per flat.

The leaseholders argued that the phrase in the lease of “not amounting to the making good of a structural defect” meant that they were not liable to contribut. The Court of Appeal agreed and found that if when considering the effect of the works is to make good a structural defect, then the cost cannot be passed on to the leaseholders, and the fact the works also remedy deterioration makes no difference.

The judgment will be of particular interest to those leaseholders who occupy pursuant to a right to buy lease and are facing a substantive bill to repair the structure of their building.
This case will be of interest to leaseholders who occupy their property on a Right to Buy lease generally who may be facing repair costs to their building but in particular those facing work in relation to unsafe cladding.

Posted on 6 May, 2021 by Ortolan

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