Repairing covenants - does aesthetic appearance matter?

• United Kingdom

• Real estate litigation

10-06-2019

Blue Manchester LTD v North West Ground Rents LTD [2019] EWHC 142 (TCC)

The High Court confirmed earlier this year that landlords must consider aesthetic appearance when assessing repairs as they may be obliged to reinstate original design features.

The case concerned The Beetham Tower, a landmark skyscraper in Manchester, the external facades of which are made up of glass panels to form a “wall of glass”.

In 2014, the structural sealant used to fix the glass panels to the Tower began to fail.  The landlord implemented a temporary solution, which included fitting stitch plates to the panels and erecting ground level safety hoardings.

A dispute arose between the landlord and tenant regarding the extent of the landlord’s repairing obligations.

The tenant contended that the landlord was obliged to undertake permanent repairs to the façade to bring it back to its original appearance.  It brought claims against the landlord for, amongst other things, specific performance.

The landlord argued that the temporary repairs satisfied its repairing obligations as it stood.  Its hope was to pursue claims against the insurers of the main contractor of the Tower, Carillion (now in liquidation), to enable it to fund a permanent solution.

The court held that the existing temporary repairs were insufficient, partly due to aesthetic consideration.  As a result the court made an order for specific performance requiring the landlord to restore the façade to its original condition, giving it 18 months in which to do so . Whether the cost of repairs could be recovered from Carillion, was a separate issue.

Key points

• An important case as claims for specific performance requiring a landlord to comply with repairing covenants are relatively rare.  In this case however, the court felt that the works could be defined with specific certainty and damages were not an adequate remedy.
• The case is also important as there are no reported cases as to whether solely aesthetic appearances could be relevant to the court’s decision in these matters.
• The court was not swayed by the fact that the landlord had purchased the freehold for a relatively modest payment of £400,000 as a ground rent investment vehicle receiving fairly modest sums in return. 
• A reminder therefore for investors purchasing on this basis to consider the potential risk and cost implications of having to carry out such works.  It is possible that some such costs could be recovered from tenants by means of service charge payments.  Where the arrangement allows consider, alternatively, whether a managing company  owned by the tenant should hold such repairing responsibilities.
• A temporary solution to disrepair might be appropriate but only if the more permanent solution was also being pursued.
• Claims against contractors relating to design/construction defects should be pursued promptly, in order to avoid any insolvency issues arising