Good news for landlords. A recent case has confirmed that a landlord may choose any reasonable option in relation to carrying out work needed on a property. A landlord may then recover those costs through the service charge.
Under the Landlord and Tenant Act 1985, a landlord may only include costs in the service charge if they are reasonable. Section 19(1) of the Act states that a cost is reasonable if it has been reasonably incurred and any work or services are of a reasonable standard.
In the case of De Havilland Studios Ltd v Peries and another  UKUT 322 (LC), the salient issue was whether the landlord should either repair or replace the windows in a property. The tenant held a 125 year lease of a live/work unit. In the lease, the landlord had covenanted to keep the property, “in good and tenantable repair…”
In the First-tier Tribunal (Ft-T) hearing, a number of issues were heard, including the issue of the windows. All parties acknowledged that the windows were defective. What was at issue, however, was the nature of the corrective work to be done. The tenants wanted the landlord to replace the windows. The landlord argued that repairing the windows was adequate.
The Ft-T found that both repair and replacement were reasonable options but that replacement was the preferred option.
The Upper Tribunal found that as both options were reasonable, it was not for the Ft-T to decide on its own preferred option in opposition to the landlord’s wishes. The Upper Tribunal found that in choosing its own preferred option, the Ft-T had fallen foul of the law.
A landlord has free choice among reasonable options
The Upper Tribunal clearly restated the law; a landlord has a free choice among reasonable options. In confirming that both repair and replacement were reasonable, the Upper Tribunal took into account the following:
- while all experts agreed that replacement was the preferred option, none of the experts suggested that repair was unreasonable;
- the landlord was entitled to take into account the costs of both options and, in this instance, the fact that replacement would have been significantly more expensive than repair;
- repair would extend the life of the windows by up to 15 years; and
- repair would substantially improve the condition of the windows even though the outcome would not be as good as replacement.
This case is a clear restatement of the law in relation landlords’ obligations when recovering costs through a service charge. In particular, landlords will be pleased to have useful guidance on the factors that the Upper Tribunal took into account when determining reasonableness. Replacing the windows was clearly the better option. However, this was not the point. The point was that repairing the windows was not unreasonable. In addition, landlords can take comfort in the fact that the cost savings involved in repair was an important factor in the determination of reasonableness.
Disclaimer: While we do all that is possible in terms of ensuring its accuracy, this blog contains general information only. Nothing in these pages constitutes legal advice. You need to consult a suitably qualified lawyer from the firm on any specific legal problem or matter.