To what extent can a landlord claim improvement costs from tenants? The Upper Tribunal has recently clarified the limits on what can be claimed; and following an earlier ruling, superior landlords must consult tenants – and sub-tenants – before carrying out major improvements.

Costs of improvement[1] Landlords must be cautious about reclaiming repair and renovation costs from tenants through their service charges. In a recent case involving a block of flats, many of the flats had single-glazed windows with wooden frames set in metal surrounds. However, not all of them were in good repair and needed repairs and redecoration. Some of the tenants asked for double-glazing to be installed, for which they agreed to pay.

The landlord took the decision to replace the wooden frames with all-metal frames while the double-glazing work was being carried out – adding the costs of those metal frames to the service charges to all the tenants. Not surprisingly, the two tenants who had not had double-glazing installed objected to paying and argued that the work was an improvement to their flats, and not a repair. Therefore, it could not be charged to them through their service charge.

The landlord argued that given as some of the wooden frames needed work, it was better to replace them all with metal frames at the same time. The Upper Tribunal rejected its argument and found that the real reason for replacing the frames was to make the property more energy-efficient, thus reducing the maintenance costs. It was an improvement not a repair, and the costs could not be added to the claimants’ service charges.

The general principle is that the work which the landlord is obliged or entitled to carry out is limited to that which is reasonably required to remedy the defect. This can include ancillary work rendered necessary by the carrying out of repairs, but not additional work done at the same time for the sake of convenience which is an improvement to the property.

It’s clear that the courts will interpret the meaning of ‘repair costs’ narrowly to achieve fairness to all the tenants. However, the UT made clear that a common-sense approach is necessary.

There are immediate practical implications for landlords needing (or currently planning) to carry out improvements to their properties, and particularly those buildings with an F or G energy performance rating who are deciding how best to improve their properties to comply with new rules in April 2018. The costs of improvement will be payable out of their own pockets and not chargeable to the tenants – even if their purpose is to reduce the future running costs of the building.

Major works[2] What’s a superior landlord’s responsibility if it seeks to carry out major repairs on a property and charge all the costs to the tenants? An important ruling makes clear that superior landlords must consult with both immediate tenants and sub-tenants before carrying out major works – otherwise they will be limited to claiming just £250 from each of them.

Under the Service Charges (Consultation Requirements) (England) Regulations 2003, residential landlords seeking to carry out major repairs which would lead to a contribution of more than £250 in their service charge must consult with them first, otherwise they cannot claim more than £250. In this case, there were tenants and sub-tenants. The superior landlord proposed works to property that had been let to the tenant, however, there were a lot of sub-tenants who were liable to the costs of the repair through their service charges. There were some important issues:

  • Who had the superior landlords first consulted with?
  • Did the tenant have to consult separately with the sub-tenants (as their landlord)?

The UT ruled that only the landlord proposing to have the works done (ie. the superior landlord) had to consult – the tenant did not also have to consult with the sub-tenants. However, the superior landlord was also required to consult directly with the sub-tenants as they were to be charged for the costs through their service charges. This, said the court, was the natural effect of the statutory language.

As for the potential practical difficulties for superior landlords raised in the case, Martin Rodger QC, Deputy President, said: “A superior landlord who does not know the identity of all of the sub-tenants liable to contribute through their own sub-leases to the cost of qualifying works has a number of relatively straightforward courses of action available.”

[1] Tedworth North Management Limited v Miller [2016] UKUT 522[2] Various Occupational Leaseholders of Foundling Court and O’Donnell Court, Brunswick Centre, London v (1) Camden LBC; (2) Allied London (Brunswick) Ltd and others [2016] UKUT 366