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09 May 2019

164: Breach of repairing covenant at Manchester’s tallest building

In Blue Manchester Limited v North West Ground Rents Limited, the tenant of a 999-year lease was successful in its claim against its landlord for damage to glass panels at Manchester‘s tallest tower.

The landlord was liable to carry out costly repair works to restore the outside of the building to its original condition under an order for specific performance.

Facts

The Beetham Tower in Manchester has 47 floors, with the first 23 floors let to Blue Manchester Limited (the tenant) as a Hilton hotel on a 999-year lease. A premium of £60 million was payable on grant of the lease plus the tenant also pays an additional £20,000 annual ground. North West Ground Rents Limited (the landlord) bought the freehold reversion from the original developer at a later date for £400,000.

In June 2014, the original contractor Carillion discovered that the sealant bond in the external walls of glass was failing. Carillion took action and added pressure plates to the window frames to hold the units in place. This was a temporary measure to allow a full investigation before sorting a permanent solution.

Carillion suggested a couple of alternative solutions to remedy the problem including complete replacement works, but in January 2018 Carillion went into liquidation.

The landlord covenanted in the lease to keep the common parts ‘in good and substantial repair and when necessary as part of repair to reinstate replace and renew where appropriate…’. The external windows, including the frames and faulty shadow light boxes, were included within the common parts. The tenant brought a claim against the landlord requiring works to be carried out to repair the failing glass panels.

Decision on disrepair

The High Court held that the tenant succeeded on the disrepair issue and was entitled to specific performance forcing the landlord to carry out permanent repair works.

The existing condition of glass panels did not comply with the landlord’s obligation to keep the common parts in good or substantial repair in the hotel lease and it was necessary to reinstate or to replace the panels. The High Court was satisfied that damages would not be an adequate remedy.

No allowances were made for the fact that the tenant had a 999-year lease of the building granted for a £60 million premium, whereas the landlord had paid only £400,000 for the freehold reversion and some modest ground rents. When the landlord acquired the freehold as a ground rent investment vehicle, the court considered it had taken on the risk of liability for repairing inherent defects in the building, however great the cost.

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