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Service Charge - Who Pays for Inherent Defects and Structural Repairs?

on Wednesday, 02 June 2021.

Many leases require the landlord to keep parts of the property in repair, and tenants to contribute to the cost of those repairs through a service charge. Difficulties can arise when considering who should pay to repair inherent defects in the property.

The Court of Appeal has recently grappled with this issue.

What Are Inherent Defects?

Inherent defects are problems with a property, arising from when the property was built. They will usually be caused by poor design, workmanship or materials being used.

They can be contrasted with disrepair, which typically arises due to the use of the property and the passage of time.

What Costs Can Landlords Recover from Their Tenants?

It was originally held to be the case that a landlord's covenant to keep a property in repair did not include an obligation to make good inherent defects. Therefore, a landlord would usually not be able to recover those costs from its tenants under a service charge.

The position was clarified following the decision in Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] QB 12. There, the court confirmed that remediation of inherent defects could qualify as a repair. This was a matter of 'fact and degree'. In applying the test, the court would consider:

  • whether the works affect a substantial part of the property or only part of it
  • whether the works would transform the property or give back to the landlord something that wasn't there at the start of the lease
  • the cost of the works as against the value of the property
  • the effect of the works on the value and lifespan of the property.

The 'fact and degree' test was refined in subsequent cases. It was later held that remedy of an inherent defect could not count as a repair unless there was some damage which had been caused which needed repair. Remedy of a defect where there was no damage could not properly be called a repair at all.

However, all leases are different, and it is important to consider the parties' obligations with reference to the specific wording of the lease.

How Has the Test Been Applied?

The issue was very recently considered by the Court of Appeal in The City of London v Various Leaseholders of Great Arthur House [2021] EWCA Civ 431.

The tenants of Great Arthur House held 125-year leases originally granted pursuant to the 'Right to Buy' scheme. The tenant of each lease was responsible for paying the landlord a reasonable part of the costs of carrying out 'specified repairs'. The definition of 'specified repairs' included the repair of the structure and exterior of the premises, but excluded repairs which amounted to making good of structural defects.

It was found that the construction of the framework of the building was of poor construction and suffered a number of issues. The landlord completed extensive works to fix these issues and hoped to charge each tenant £72,000 to cover the costs incurred.

The Court of Appeal held that these costs were not recoverable. The leases specifically excluded from the service charge the cost of repairs which amounted to the making good of structural defects. It did not matter that the works may have counted as 'repairs' under the 'fact and degree' test, where the lease specifically excluded the cost of such works from recovery.

Incidentally, the leases in this case specifically allowed for the recovery of costs relating to structural defects where the tenants were notified of them before entering into the leases, or where the defects were not known about by the landlord for ten years from the start of the leases.


Whether or not a landlord is entitled to recover the costs of remedying inherent defects from a tenant will depend both on the 'fact and degree' of the works and on the specific wording of the parties' obligations in the lease.

Where a landlord intends to remedy an inherent defect, both the landlord and the tenant should consider the works and the lease carefully to decide whether those costs can be passed on to the tenant.

If you are a landlord or a tenant and would like advice on repairing obligations or service charges, please contact Laura Seaman in our Property Litigation team on 07887 994279, or complete the form below.

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