What impact does historic neglect have on a tenant’s liability to contribute to the cost of repairs?

Are tenants entitled to a reduction in service charge costs to reflect the fact that work has cost more than it would have done, had it been undertaken earlier? The litigation in Daejan Properties Ltd v Griffin [2014] UKUT 206 (LC); [2014] PLSCS 172 concerned the cost of replacing concealed structural beams, which had corroded. Indeed, one of the beams had actually failed and the landlord had had to carry out emergency repairs to rectify the problem. This led to the discovery that the remaining beams were dangerous and that they too required replacement. The building in question was a three-storey Victorian terrace and the beams had been corroding for years. Unfortunately, there had been nothing to alert the landlord to the problem until one of the walls cracked and rotated outwards. Nonetheless, the landlord was in breach of covenant, despite having no actual knowledge of their condition. This was because the landlord’s repairing covenants required it to keep the structure of the building in repair and its obligation to repair did not depend on it having actual notice of the condition of the beams. The rule is that, where part of a building is not demised, but remains in the possession of a landlord who has covenanted to keep it in repair, the risk of undetected deterioration falls on the landlord whether or not it has, or could have, knowledge of the condition of that part: British Telecommunications plc v Sun Life Assurance Society plc [1996] Ch 69. The Upper Tribunal accepted that tenants can, in some circumstances, rely on historic neglect to reduce the cost of a service charge. However, the tenants must first show that, but for the landlord’s failure to make good a defect when it should have done, part of the cost eventually incurred in remedying that defect, or the whole of the cost of remedying consequential defects, would have been avoided. The tenants argued that earlier intervention would have meant the beams could have been repaired, rather than being replaced. They also claimed that some of the remedial work could have been avoided, or that the cost could have been reduced, had the work been done as part of one continuous programme, instead of being completed in separate phases. The tribunal rejected the tenants’ challenge to the cost of the repairs. The tenants had acquired their leasehold interests in the property at different times. The earliest interest dated back to 1983, by which time the beams were already in need of replacement, as opposed to repair, and the rule in Lewes v Ridge [1601] (which is replicated in section 23(1) of the Landlord and Tenant (Covenants) Act 1995) prevents tenants from claiming damages for breaches of covenant committed by their landlord before their leases were assigned to them. The tribunal also accepted the landlord’s evidence that it was unlikely that there would have been any significant savings, had the work been carried out as part of one project. Consequently, it upheld the landlord’s claim to include the cost of the work, totalling more than £300,000, in the service charge. Allyson Colby is a property law consultant