Repair costs: Assessing the liability of costs for repair of pipework under service charge (Southwark London Borough Council v Royce and another – 2019)

In a claim relating to the repair costs for pipework on an estate, the Upper Tribunal considered an appeal by the landlord as to whether systems were physically separate such that lessees on one estate were not liable for the costs of repair to pipework on the neighbouring estate.

The background

In Southwark London Borough Council v Royce and another [2019], the local authority was the landlord over two housing estates. A district heating system and a network of pipes served heating to both Carlton Grove and Acorn estates, and also served Acorn estate with hot water.

The landlord carried out replacement works to pipework that served the Acorn estate. Two lessees on Carlton Grove disputed that the service charge relating to the works to the pipework serving the Acorn estate were payable and refused to pay a proportion of the costs for those works. The leases stated that the lessees were liable for costs and expenses ‘of’ or ‘incidental to’ the landlord carrying out its repair obligations under the lease.

The First-tier Tribunal found that the systems serving the two estates were not fully integrated and it was possible to isolate sections of the pipework. Given that the sections serving Carlton Grove could be isolated, the court held that no contribution was owed by the lessees for the works to the pipework serving Acorn.

The decision

On the landlord’s appeal, the Upper Tribunal found in favour of the lessees, dismissing the landlord’s argument. The FTT had been correct in its conclusion that two separate pipework systems were in operation; if either estate had not existed, the other would still be fully served, so neither estate was dependent on the other for its heating or hot water. Each system could be replaced without interruption to the other.

In conclusion, the costs of works carried out to the system serving the Acorn estate were not incidental to, or an expense of, providing heating to Carlton Grove. As the system had not served the lessees’ properties or was even connected with them so as to provide heating, those lessees could not be liable for a contribution towards the costs of its repair.

Advice and action

A decision of which landlords of larger estates should be aware, this case is a reminder to ensure that lessees’ service charge apportionments are fair and reasonable, and can be substantiated.

Where service charges are demanded across an estate (or several), landlords and managing agents must be satisfied that those lessees from whom charges are demanded are in receipt of the services to which they relate.