Tenant Succeeds In Specific Performance Claim Against Landlord For Breach Of Repairing Covenant (High Court)

The High Court (HHJ Davies) held that a landlord was in breach of its repairing covenant….

….and the tenant was entitled to specific performance to compel the landlord to replace defective glazing panels at Manchester’s 47-storey Beetham Tower.

Beetham Tower was built by Carillion Construction Ltd (Carillion) in 2006. The tower had fully glazed, external elevations. In 2014, Carillion discovered that the sealant bond was failing in some of the glazing units and fitted stitch plates to 1,350 units. This was intended as a temporary measure. However, a permanent solution had not been implemented by January 2018, when Carillion went into liquidation.

The tenant had a 999-year lease of part, of the first 23 floors, which it operated as a hotel. Under the hotel lease, the landlord covenanted to keep the common parts, including the external facade, in good and substantial repair. The cost of repairing inherent or design and construction-related defects could not be recouped through the service charge. The High Court noted that although the landlord had bought the freehold reversion for £400,000 as a ground rent investment vehicle (compared to the £60 million lease premium), it had taken on the repair risks.

The High Court held that, even with the stitch plates, the glazing units were in disrepair and the landlord was in breach of its repairing covenant. The landlord must arrange the like-for-like replacement of the existing glazing units, unless investigation and analysis by a suitably qualified consultant showed that was not reasonably practicable other than at a disproportionate cost. The court noted the aesthetic consideration in this case, as the tower’s facades originally had a clean, modern and unitised appearance, which was significantly and adversely affected by the stitch plates.

The tenant was also entitled to damages for the delay with the permanent repairs, disruption for unnecessary hoardings and water supply issues.

Although this case contains no new law and turns on its facts, it is an interesting example of a tenant successfully claiming specific performance against a landlord. The judgment also includes a helpful overview of the principles relating to liability for disrepair and specific performance.  It is also interesting that the court rejected the landlord’s argument that holding the landlord liable ignored the commercial reality that the tenant held a 999-year lease granted for a £60 million premium, whereas the landlord had paid £400,000 for the freehold reversion and its commercial interest was collection of the relatively modest ground rents. When the landlord had acquired the freehold reversion as a ground rent investment vehicle, it had taken on the risk of liability for repairing inherent defects, or design and construction related risks, as part of the package.  (Blue Manchester Ltd v North West Ground Rents Ltd [2019] EWHC 142 (TCC) (31 January 2019) – http://www.bailii.org/ew/cases/EWHC/TCC/2019/142.html).

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