No Service Charge Recovery for Pre‑Existing Structural Defects under Right‑to‑Buy Leases: Tower Hamlets v Brewster & Malting House Leaseholders

No Service Charge Recovery for Pre‑Existing Structural Defects under Right‑to‑Buy Leases

Commentary on Mayor and Burgesses of the London Borough of Tower Hamlets v Various Leaseholders of Brewster House and Malting House [2025] EWCA Civ 1591

1. Introduction

This Court of Appeal decision deals with a highly consequential question for right‑to‑buy leaseholders and social landlords: can leaseholders be compelled, through service charges, to fund extremely expensive works required to cure serious pre‑existing structural defects in their buildings?

Brewster House and Malting House are 1960s tower blocks in East London constructed using the Large Panel System (“LPS”), a method later found to have fundamental structural vulnerabilities, dramatically exposed by the Ronan Point collapse in 1968.6–7, 21 Decades after construction, detailed structural investigations commissioned by the London Borough of Tower Hamlets (“the council”) concluded that the buildings were unsafe even under normal loading (i.e. normal occupation).10–11 Major structural strengthening works, costing over £9.2 million, were then carried out.11–12

The respondents are right‑to‑buy leaseholders of flats in these blocks. The council sought to recover a large part of the costs (around £70,000–£95,000 per flat)13 via service charge provisions in their leases. Both the First‑tier Tribunal (“FTT”) and the Upper Tribunal (“UT”) held that the leaseholders were not liable. The council appealed to the Court of Appeal.

Lord Justice Males (with whom Snowden and Dove LJJ agreed) dismissed the appeal, holding that the service charge provisions – including a wide “sweeper” clause permitting recovery of costs of works for the “safety” of the building – did not extend to the cost of making good pre‑existing structural defects. The right‑to‑buy legislative scheme played a central role in that conclusion.

The judgment establishes and clarifies an important principle: under right‑to‑buy leases, general service charge provisions (including “safety” and “other costs” wording) do not, without clear and specific language, allow landlords to recover the cost of remedying pre‑existing structural defects that existed at the time the lease was granted.

2. Summary of the Judgment

2.1 Central Issue

The core question was whether the leaseholders were liable, via the service charge, to contribute to the cost of extensive structural works required to address the inherent defects in the LPS construction of Brewster House and Malting House.

The council relied on:

  • Clause 5(5)(o) – a broad “sweeper” landlord’s covenant to do all works “as in the absolute discretion of the Lessors may be considered necessary or advisable for the … safety … of the Building”; and
  • The definition of “Total Expenditure” in Schedule 5 – which includes “any other costs and expenses reasonably and properly incurred in connection with the Building”.2, 16, 18, 34

2.2 Held: No Liability to Contribute to Structural Defect Works

The Court of Appeal held:

  • The relevant LPS weakness was a pre‑existing structural defect present since construction.21–22
  • Clause 5(5)(o) – despite its wide terms and reference to “safety” – does not encompass the making good of such a pre‑existing structural defect that renders the building unsafe for habitation.48–53, 60
  • The general words “any other costs and expenses reasonably and properly incurred in connection with the Building” in Schedule 5 also do not permit recovery of such costs.61–62
  • For the two earliest leases (with additional structural defects wording in Schedule 5), the drafting – tracking the right‑to‑buy legislation – positively excluded recovery of costs of making good structural defects that were known to the landlord at the grant of the lease but not notified to the tenant.18–19, 54–56

Accordingly, the council cannot recover any part of the costs of the remedial structural works from the leaseholders through the service charge, under any of the leases.62, 64

2.3 Role of the Right‑to‑Buy Legislative Scheme

A key plank of the reasoning is that these leases were granted under the statutory right‑to‑buy regime. That regime:

  • Expressly imposes on the landlord an obligation to repair the structure and exterior and to make good structural defects.43–44, 46
  • Contains carefully framed limits on when and to what extent the landlord can recover the costs of making good structural defects from leaseholders.44–47

The court held that this legislative background is part of the relevant context for interpreting the leases, and that any obligation on leaseholders to contribute to structural defect costs must be spelt out clearly and consistently with those statutory provisions.40–42, 51–53

3. Legal and Factual Framework

3.1 The Buildings and Their Defects

  • Barleymow Estate – former industrial land, redeveloped as social housing in the 1960s. Brewster House and Malting House together contain 112 flats (80 tenanted, 32 long‑leasehold).5
  • LPS construction – large precast concrete panels bolted together. The structural integrity depends heavily on the walls; this proved vulnerable to abnormal events, as shown by the Ronan Point collapse in 1968.6–7
  • Initial strengthening – post‑Ronan Point works were carried out in the late 1960s, including at these blocks, to guard against collapse under abnormal loading (such as gas explosions).7
  • Further works 1990–1994 – following Docklands‑related investigations, more strengthening was done, again focused on abnormal loading scenarios.9
  • 2017–2020 investigations – prompted by cracks at another LPS estate and fire concerns, structural consultants Wilde Carter Clack recommended intensive reassessment. By July 2018 it was concluded for the first time that previous reinforcement was insufficient even for normal loading.10 Major works (external steel frame, wall reinforcement, internal frames etc.) were then specified and carried out, at a cost exceeding £9.2m.11–12

3.2 The Right‑to‑Buy Leases

The leases were granted between 1989 and 2005 under the right‑to‑buy scheme. They are materially similar, save that two early leases (7 Malting House and 44 Brewster House) contain additional structural defects wording in the service charge definition.5, 15, 18–19

3.2.1 Key Lease Provisions

  1. Lessee’s covenant to pay service charge – clause 4(4) obliges the leaseholder to pay the service charge, defined in Schedule 5.2, 15–16

  2. Landlord’s core repairing obligation – clause 5(5)(a) obliges the landlord:

    “To maintain and keep in good and substantial repair and condition:
    (i) The main structure of the Building including the … exterior walls and the foundations and the roof …”16

    The council ultimately abandoned reliance on this provision on appeal.34

  3. Insurance – clause 5(5)(c) requires the landlord to insure the building against a wide range of risks (fire, explosion, subsidence‑related collapse etc.).16

  4. “Sweeper” clause – clause 5(5)(o):

    “… to do or cause to be done all such works installations acts matters and things as in the absolute discretion of the Lessors may be considered necessary or advisable for the proper management maintenance safety amenity or administration of the Building.”16

    This is the central provision the council relied upon.

  5. Definition of “Total Expenditure” and “Service Charge” – Schedule 5:

    “‘Total Expenditure’ means the total expenditure incurred by the Lessors in any Accounting Period in carrying out their obligations under Clause 5(5) … and also of insuring against the making good of structural defects and any other costs and expenses reasonably and properly incurred in connection with the Building …18

    ‘the Service Charge’ means such reasonable proportion of Total Expenditure as is attributable to the Demised Premises …”

3.2.2 Additional Structural Defect Wording in Two Leases

The leases of 7 Malting House and 44 Brewster House include extra wording in the definition of “Total Expenditure”, tracking, in hybrid form, the statutory treatment of structural defects. In summary, “Total Expenditure” excludes:

“… such repairs as amount to the making good of structural defects other than structural defects already notified to the Lessee … or of which the Lessor does not become aware earlier than 5 years from the date of this Lease …”18

and then contains provisions about insuring against such defects and passing on a “reasonable proportion” of the insurance premium.18, 57–59 The associated Sixth Schedule, which should list notified defects, is blank.19

3.3 Proceedings Below

  • The leaseholders applied under section 27A Landlord and Tenant Act 1985 for a determination that the service charges claimed for the works were not payable.14
  • The FTT held that:
    • the works were not “repairs” or “maintenance” in the relevant sense (no deterioration from previous condition);24–25
    • clause 5(5)(o) and the “Total Expenditure” definition did not extend to remedying fundamental structural defects;26–27
    • for the two earliest leases, the express structural defect wording and the council’s knowledge of the LPS defect excluded recovery.28, 54–56
  • The UT agreed that the lease did not allow recovery of the costs through service charges, albeit on somewhat different reasoning regarding the relevance of the right‑to‑buy legislation.29–33

The council appealed to the Court of Appeal, but limited its argument to clause 5(5)(o) and the “other costs and expenses” limb of Schedule 5.34

4. Precedents and Authorities Cited

4.1 Repair vs Structural Defect: Quick, Aquarius, Assethold

In the FTT (and adopted by the higher tribunals), important earlier cases clarified the distinction between “repair”/“maintenance” and remedying inherent structural defects:

  • Quick v Taff‑Ely BC [1986] QB 809 – concerned whether condensation and mildew issues were “disrepair”. The case established that “disrepair” presupposes a deterioration from a previous physical state; if the property is as originally built but has inherent defects, curing those defects is not “repair”.
  • Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055 – similarly emphasised that “repair” involves remedying damage or deterioration, not improving an inherently defective design.
  • Assethold Ltd v Watts [2014] UKUT 537 (LC) – applied that principle in the service charge context, confirming that major works to remedy a fundamental design defect, in the absence of deterioration, may fall outside mainstream “repair/maintenance” obligations.

These authorities underpin the accepted position in this case that the works were not “repair” or “maintenance” of the structure in the conventional sense, but rather the remedying of a long‑standing structural design defect.21, 24–25, 31

4.2 Great Arthur House – Structural Defects in Right‑to‑Buy Leases

Two linked decisions – by Fancourt J in the UT21 and by the Court of Appeal41, 46, 53 – in City of London v Various Leaseholders of Great Arthur House are particularly significant:

  • UT: [2019] UKUT 341 (LC), [2020] L&TR 6 – Fancourt J drew the crucial distinction between:
    • structural defects (“something that arises from the design or construction … of the structure … to be contrasted with damage or deterioration that has occurred over time”); and
    • repair (remedying damage or deterioration).21
  • CA: [2021] EWCA Civ 431, [2021] HLR 36 – Lewison LJ stressed that, because the leases were right‑to‑buy leases, the legislative background was an aid to interpretation, and highlighted Parliament’s aim to provide “consumer protection” to tenants of modest means by insulating them, at least partially, from liability for structural defect costs.41, 53

Males LJ expressly endorses both the definitional approach to “structural defect” and the interpretive approach to right‑to‑buy leases adopted in Great Arthur House.21, 41–42, 53

4.3 General Contractual Interpretation: Arnold v Britton, Wood v Capita, McHale

The court re‑states the now orthodox approach to contractual interpretation:

  • Arnold v Britton [2015] UKSC 36, [2015] AC 1619 – emphasises:
    • primacy of the language chosen by the parties;
    • importance of context and commercial common sense, but not at the expense of re‑writing the bargain; and
    • in service charge provisions, courts should not extend general words to cover liabilities that clearly do not belong there.39, 62
  • Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173 – endorses a “unitary” exercise of interpretation combining textual and contextual analysis, applied by the FTT when construing clause 5(5)(o).26, 38
  • McHale v Earl Cadogan [2010] HLR 412 – Rix LJ’s observation that the court should not “bring within the general words of the service charge clause anything which does not clearly belong there” is expressly approved and applied.39, 62

4.4 89 Holland Park (Management) Ltd v Dell [2023] EWCA Civ 1460

In 89 Holland Park v Dell the Court of Appeal considered broadly similar service charge wording, including “sweeper” provisions and “other expenses” clauses. The issue there was whether substantial legal and professional costs incurred in a dispute with a neighbouring owner fell within those provisions.32–33, 63 Lady Justice Falk held that they did not, considering the structure of the lease and the nature and scale of the costs.

Males LJ notes the similarity of the drafting but stresses that Dell concerned a different subject matter (third‑party litigation costs, not structural defects). Nonetheless, the case supports the general interpretive approach: general words must be read in their context and not expanded to create qualitatively and quantitatively different liabilities.32–33, 60, 63

4.5 Insurance and Subrogation: Mark Rowlands v Berni Inns

Mark Rowlands Ltd v Berni Inns Ltd [1986] QB 211 concerned the allocation of risk between landlord and tenant where the tenant contributes to the landlord’s building insurance. The Court of Appeal held the landlord (and thus the insurer, by subrogation) could not recover from the tenant the very loss the tenant’s contributions were intended to insure against.58

Males LJ analogises this reasoning to the additional wording in the earliest leases: where the lease contemplates that the landlord will insure against the making good of structural defects, and pass on a share of the premium to the tenant, it would be inconsistent to make the tenant also pay the cost of making good those same defects. To do so would effectively give the landlord a “double indemnity”.57–59

5. The Court of Appeal’s Legal Reasoning

5.1 The Interpretive Framework

Males LJ applies the standard approach to contractual interpretation:38

  • The court’s task is to ascertain the objective meaning of the language used, considering:
    • the natural meaning of the words;
    • the contract read as a whole; and
    • relevant background (the “matrix of fact”) known to both parties.
  • There are no special rules for service charge clauses, but the courts are slow to infer that broad wording was intended to impose unexpected or ruinous liabilities on tenants, particularly in residential contexts.39
  • For right‑to‑buy leases, the statutory framework is part of the relevant background: the parties can be taken to have expected consistency between the leases and the legislation.40–42

He endorses Lewison LJ’s view in Great Arthur House that the right‑to‑buy legislative scheme is an “aid to interpretation” of covenants in right‑to‑buy leases.41–42

5.2 The Right‑to‑Buy Legislative Scheme on Structural Defects

5.2.1 Housing Act 1980

Under Schedule 2, para 13(1)(a) of the 1980 Act, a right‑to‑buy landlord is deemed to covenant:

“to keep in repair the structure and exterior … and to make good any defect affecting that structure”.43

Crucially, paras 15–17:

  • voided any provision enabling the landlord to recover from the tenant “any part of the costs incurred … in discharging or insuring against” its structural defect obligations;44
  • but allowed limited exceptions where:
    • the structural defect was notified to the tenant before the lease; or
    • the landlord did not become aware of it until 10 years after the lease was granted.44–45

5.2.2 Housing Act 1985 and Housing and Planning Act 1986

The 1985 Act replicated and updated these provisions (Schedule 6, para 14(2)(a)), continuing the implied covenant to make good structural defects.46 The 1986 Act then refined the regime for passing on some of these costs:

  • Section 125(4A) required landlords to serve a notice on the tenant with a description of known structural defects affecting the dwelling or building.46
  • Paragraph 16B of Schedule 6 (inserted by the 1986 Act) restricted the tenant’s liability:
    • For known defects notified pre‑grant, the tenant’s maximum contribution was limited to the estimated sum notified (plus inflation).46
    • For unknown defects (not discoverable at grant), the tenant was broadly insulated from liability for the first five years, but liable thereafter only within the statutory framework.46–47

All the leases in issue were granted after the commencement of the 1986 Act, and thus against this legislative backdrop.47

5.3 The Meaning of “Safety” in Clause 5(5)(o)

5.3.1 The Critical Question

The council argued that the only question under clause 5(5)(o) was whether the works were “necessary or advisable for the safety of the building”; given the structural engineers’ advice, that was beyond dispute.36

Males LJ reframes the question more precisely:48

Is “safety” in clause 5(5)(o) intended to encompass the making good of a pre‑existing structural defect which renders the building unsafe for habitation, or is it confined to other, less fundamental safety‑related works?

He concludes that, read in its full context, “safety” in clause 5(5)(o) does not include structural defect works of this kind.

5.3.2 Context Within the Clause

“Safety” appears in a list alongside “management, maintenance, … amenity or administration”.49 This strongly suggests that clause 5(5)(o) is aimed at:

  • Routine, day‑to‑day operational matters in managing and maintaining the building; and
  • modest safety‑related measures that naturally sit alongside management and amenity (e.g., lighting, minor repairs to communal areas, fire safety equipment).

Males LJ gives examples: missing paving stones, defective stair lighting, missing handrails or fire extinguishers – all safety‑related, but fundamentally different in kind from remedying an inherent structural flaw threatening the building’s stability.49

5.3.3 Incompatibility with the Statutory Structural Defect Regime

Several aspects of clause 5(5)(o) sit uneasily with the statutory scheme governing structural defects:

  1. Discretion vs obligation – clause 5(5)(o) gives the council an absolute discretion to decide which works to carry out “for … safety” and then to recover their cost. By contrast, the statute imposes an unconditional duty on the landlord to make good structural defects; there is no discretion to do less or nothing.43, 50

    It would be incongruous if the same legislative scheme that mandates the landlord to remedy structural defects, and strictly limits recovery from tenants, could be circumvented via a discretionary “safety” power in a sweeper clause.

  2. Absence of clear reference to structural defects – the legislation deals expressly and in detail with “structural defects” and when costs can be passed on. If the parties intended leaseholders to fund the making good of structural defects, one would expect clear, express wording reflecting those statutory provisions, not reliance on a generic reference to “safety” in a sweeper clause.51–52

  3. Omission appears deliberate – the lease expressly addresses:

    • the landlord’s duty to repair and maintain the structure (and the right to recover those costs);16, 20, 52
    • many specific items of expenditure (caretakers, cleaning, heating, lifts, fire‑fighting equipment, sinking fund, etc.).17, 52
    Yet it is silent on leaseholder contributions to the making good of structural defects. Given the legislative focus on protecting right‑to‑buy purchasers from such liabilities, that silence points strongly towards a deliberate exclusion rather than inadvertent omission.51–53

5.3.4 Consumer Protection and the Severity of the Burden

Males LJ draws on Lewison LJ’s analysis in Great Arthur House:

“The purpose of the legislation was to encourage home ownership by council tenants; often persons of modest means … it is by no means surprising that Parliament gave a measure of consumer protection … by partially insulating them from liability to contribute towards the cost of rectifying structural defects …”53

Against that policy background, it would be surprising if sweeping, unspecific wording in a management/safety clause were intended to impose:

  • a potentially ruinous and “unknown and unknowable” liability on right‑to‑buy purchasers; and
  • one that is qualitatively different from, and vastly greater than, liabilities attached to all the other management and maintenance obligations listed in clause 5(5).26–27, 32, 53, 60

Males LJ accepts that the cost of works is not determinative by itself, but the nature and scale of the works are highly relevant contextual indicators. Remedying an inherent, fundamental structural flaw that threatens the continued habitability of the building is a different kind of obligation altogether from routine management or maintenance.60

5.4 The Additional Structural Defect Wording in the Earliest Leases

For 7 Malting House and 44 Brewster House, the analysis is even more pointed because the leases contain explicit structural defect provisions in Schedule 5.18–19, 54 These:

  • Exclude from “Total Expenditure” (and thus from the service charge) the cost of “such repairs as amount to the making good of structural defects”;
  • But carve out two exceptions where the landlord can recover:
    • structural defects notified to the tenant before the lease (to match statutory notice requirements); or
    • defects which the landlord does not become aware of until five years after the lease (hybridising the earlier 10‑year rule with the 5‑year grace period under the 1986 amendments).18, 54–55

The FTT made a carefully reasoned factual finding that:

  • the fundamental “defect” – the defective design of LPS – had been known since Ronan Point; and
  • the later investigations merely added to the understanding of that same underlying defect and suggested further remedies; they did not reveal a “new” defect.54–55

This finding was not appealed and is binding.56 It means:

  • the structural defect was known to the council at the time of the grant of those leases;
  • it was not notified to the tenants in the leases (the Sixth Schedule is blank);19, 54–56
  • accordingly, under the express terms of the leases (mirroring the statutory position), the council cannot recover the costs of making good that defect through the service charge.

5.4.1 Insurance and Double Indemnity

The additional wording also contemplates the landlord insuring “against the making good of structural defects” and passing on a share of the insurance premium to the tenant via the service charge.18, 57 Males LJ reasons that:

  • If the tenant is contributing to insurance specifically covering the cost of making good structural defects, the contractually sensible interpretation is that insurance – not the tenant – bears that cost if the risk materialises.57–59
  • Otherwise the tenant would both:
    • pay the premium; and
    • still be liable (via service charge) for the cost of the works, enabling the insurer (by subrogation) to sue the tenant, producing a “double indemnity” outcome condemned in Mark Rowlands v Berni Inns.57–58

Whether or not such insurance was actually taken out is immaterial; what counts is that the lease insists on that risk allocation as part of the bargain.59

5.5 The “Other Costs and Expenses” Limb

The council also relied on the tail end of the “Total Expenditure” definition, which covers:

“… any other costs and expenses reasonably and properly incurred in connection with the Building …”18, 37

Males LJ holds that for essentially the same reasons as under clause 5(5)(o), these words cannot be read as authorising recovery of the costs of making good pre‑existing structural defects.61–62

To allow such recovery would:

  • contradict the carefully crafted statutory limitations on leaseholder liability for structural defects; and
  • breach the principle (affirmed in Arnold v Britton and McHale v Cadogan) that courts should not import into general service charge wording liabilities that “clearly do not belong there”.39, 61–62

He describes it as “inconceivable” that such general language was intended to override the statutory duty imposed by para 14 of Schedule 6 (to make good structural defects) and to shift that burden onto tenants.61

6. Complex Concepts Explained

6.1 Structural Defect vs Repair

  • Structural defect – a flaw in the design, construction or original modification of the building’s structure. It exists from the outset, even if its consequences or severity become apparent only years later. Here, the LPS method itself was structurally defective.6–7, 21–22, 54–55
  • Repair – fixing damage or deterioration from a previous, better physical state (e.g. replacing corroded beams, fixing cracked pipes).21, 24–25, 31

The law draws a sharp line: making good an inherent structural defect is not “repair”. This matters because most repairing and maintenance obligations (and associated service charge rights) are limited to “repair” or “keeping in good condition”, not to redesigning an inherently flawed building.

6.2 Service Charge

A service charge is a sum payable by a tenant/leaseholder to reimburse the landlord’s costs of providing services or carrying out works. The lease must:

  • define the services/works the landlord is required or permitted to undertake (e.g. repair, maintenance, insurance); and
  • specify which parts of that expenditure are recoverable from tenants, and how contributions are apportioned (e.g. by flat size, equal shares).

Here, “Total Expenditure” under Schedule 5 identifies the landlord’s recoverable costs, which are then apportioned to individual flats as the service charge.18, 20

6.3 Sweeper Clause

A sweeper clause is a broadly worded provision designed to “sweep up” items not explicitly listed elsewhere – often phrased as “any other expenses reasonably incurred in …” or, as here, “all such works … as may be considered necessary … for the … safety … of the Building”.16, 26

Such clauses are common in service charge regimes, but:

  • they must still be interpreted in context; and
  • courts are wary of using them to impose burdens that are wholly different in nature and scale from the liabilities expressly contemplated in the lease.

6.4 Right to Buy and Implied Covenants

Under the right‑to‑buy scheme:

  • Council tenants acquire a statutory right to purchase the freehold or a long lease of their home at a discount.
  • The legislation automatically implies covenants into right‑to‑buy leases, including the landlord’s duty to repair the structure/exterior and to make good structural defects.43, 46
  • The legislation limits the circumstances in which landlords can pass on structural defect costs through service charges, mainly by:
    • requiring pre‑grant notices of known structural defects; and
    • capping or deferring contributions, especially in the early years of the lease.44–47

These statutory protections are an integral part of the “deal” Parliament intended for right‑to‑buy purchasers.

6.5 Subrogation and Double Indemnity

When an insurer pays out under a policy, it typically acquires (by subrogation) the insured’s right to sue any third party responsible for the loss. However:

  • if the party who caused the loss has contributed to the premium for the very policy that responds to the loss, the law may infer that the insurer cannot pursue them – effectively treating them as co‑insured or risk‑beneficiaries (as in Mark Rowlands v Berni Inns).58
  • Otherwise, the paying party would be both:
    • financing the insurance; and
    • still ultimately bearing the loss – a form of “double indemnity” in favour of the landlord or insurer.

Males LJ uses this logic to interpret the additional structural defect insurance wording in the earliest leases: tenants cannot reasonably be taken to have agreed both to fund insurance against structural defect works and also to fund those same works directly.57–59

6.6 Section 27A and Section 20C, Landlord and Tenant Act 1985

  • Section 27A – allows leaseholders or landlords to apply to the tribunal to determine whether a service charge is payable and, if so, in what amount and by whom. The leaseholders used this route to contest the structural defect charges.14
  • Section 20C – allows the tribunal (and court) to order that the landlord cannot pass its legal costs of proceedings through the service charge. The council accepted such an order here, given the test case nature of the appeal.35

7. Impact and Implications

7.1 For Right‑to‑Buy Leaseholders

This decision significantly strengthens the position of right‑to‑buy leaseholders facing large‑scale remedial works for inherent structural problems in their buildings.

  • Leaseholders under similar right‑to‑buy leases cannot be required to fund the making good of pre‑existing structural defects via:
    • generic “safety” language in sweeper clauses; or
    • broad “other costs and expenses” wording in service charge definitions;
    unless there is clear, properly drafted wording expressly dealing with structural defects, consistent with the statutory regime.48–53, 61–62
  • Where leases include explicit structural defect provisions (like those in the earliest leases here), leaseholders will be able to:
    • test whether the landlord knew of the defect at grant; and
    • scrutinise whether proper statutory notices were given and any caps or timing protections observed.
  • The decision confirms the broader principle that right‑to‑buy purchasers, typically of modest means, enjoy a degree of legislative “insulation” from catastrophic structural liabilities, reflecting Parliament’s consumer protection intent.53

7.2 For Local Authorities and Social Landlords

The judgment has serious financial and policy implications for councils and social landlords holding large stocks of right‑to‑buy flats, especially in older or non‑traditional construction:

  • Budgetary risk – councils may have to bear the full cost of making good pre‑existing structural defects, even where works are essential for safety and vastly expensive (as here, ~£9.2m), unless leases contain clear and valid structural defect charging provisions compliant with the statutory scheme.
  • Limits of drafting – generic “catch‑all” provisions, even with “safety” language and “absolute discretion”, will not be read as shifting statutory structural defect burdens absent explicit, unequivocal terms.48–53, 60–62
  • Need for statutory compliance – where leases do contain express structural defect charging clauses, landlords must:
    • have complied historically with notice requirements (e.g. s125(4A) Housing Act 1985); and
    • respect any statutory caps or timing rules (e.g. initial grace periods), failing which recovery may be limited or barred.46–47, 54–56
  • Insurance strategy – in cases where leases envisage structural defect insurance (as with the earliest leases here), landlords are incentivised to consider whether and how such cover can be obtained. However, landlords cannot rely on tenants to fund both the insurance and the underlying works.57–59

7.3 Broader Doctrinal Impact on Service Charge Interpretation

Beyond right‑to‑buy and structural defects, the judgment reinforces several broader principles:

  • Contextual limits on general words – following Arnold v Britton, McHale and 89 Holland Park v Dell, the court emphasises that general expressions in service charge clauses cannot be used as a “back door” to impose qualitatively different liabilities from those expressly and specifically provided.39, 60–63
  • Legislative background as context – in statutory lease contexts (notably right‑to‑buy), the governing legislation is part of the interpretive matrix; leases are expected to “conform” to it, absent clear contrary language.40–42, 51–53
  • Fundamental vs routine obligations – the judgment highlights the conceptual difference between:
    • everyday management, maintenance and minor safety measures; and
    • fundamental works that overhaul or reconstruct defective structural systems.
      • Courts are reluctant to treat the latter as falling within the same service charge mechanisms unless the lease makes that intention unmistakable.49–53, 60

7.4 Possible Relevance to Other Building Safety Cases

Although the case specifically concerns LPS tower blocks and structural defects, its reasoning may influence other building safety disputes, particularly:

  • cases involving inherent design defects discovered long after construction; and
  • arguments that general “safety” or “other costs” clauses in long leases permit recovery of extraordinary, high‑value remediation costs from residential leaseholders.

In each such case, the precise wording of the lease, the legislative background, and the nature and scale of the works will be critical. The Tower Hamlets decision will likely be cited where landlords attempt to use generic service charge language to recover the costs of curing fundamental, longstanding defects that pre‑date the leases.

8. Conclusion: Key Takeaways

This judgment can be distilled into several core propositions:

  1. Pre‑existing structural defects are not “repair” or “maintenance”.
    They arise from design or construction flaws, not from deterioration over time. Remedying them sits outside typical repairing covenants, unless expressly provided.21, 24–25, 31
  2. Right‑to‑buy legislation is central to interpreting right‑to‑buy leases.
    The statutory regime both:
    • imposes on landlords a duty to make good structural defects; and
    • carefully limits when and how those costs can be recovered from leaseholders.43–47
    Leases are presumed to conform with that scheme, and general wording will not be read as undermining it.40–42, 51–53
  3. Generic “safety” and “other costs” clauses do not extend to structural defect works.
    Clause 5(5)(o) is confined to day‑to‑day management, maintenance, amenity and safety measures, not major structural reconstruction. The same applies to the “any other costs and expenses” limb of “Total Expenditure”.48–53, 61–62
  4. When leases expressly address structural defects, their detailed terms and any statutory analogues are decisive.
    Where, as in the earliest leases, the drafting:
    • excludes recovery of costs of making good structural defects known at grant but not notified; and
    • contemplates insurance against structural defect works funded by tenants;
    landlords cannot circumvent those arrangements by re‑characterising the same costs under broader wording.54–59
  5. Courts will not import “ruinous” or extraordinary liabilities into service charge clauses by implication.
    Consistent with Arnold v Britton, McHale and 89 Holland Park v Dell, the Court of Appeal insists that service charge clauses be read in their proper context and that general expressions not be stretched to cover liabilities “which do not clearly belong there”.39, 60–63

In practical terms, the council must bear the full cost of making Brewster House and Malting House structurally safe, notwithstanding the leaseholders’ contribution to more routine maintenance and management costs. The case stands as a significant affirmation of the protective intent of the right‑to‑buy scheme and a warning against relying on generic service charge drafting to impose extraordinary structural remediation costs on residential leaseholders.

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