Controversial tycoon – here the commercial leaseholder of the Hilton Manchester Deansgate – escapes huge bill for bodged repairs
A-listers don’t like taking selfies outside the hotel … one guest had brown sludge coming out of the bathroom taps
Freeholder North West Ground Rents Limited defence? We’re not long-term custodians, we’re just ground rent speculators!
But why haven’t the leaseholders followed Mr Christodoulou’s example?
Controversial Monaco-based freeholder John Christodoulou found himself on the other side of the leasehold divide when he successfully fought off a £4 million repair bill at his Hilton Manchester Deansgate hotel in the landmark Beetham Tower.
The bill was for repairs to the glass windows which are now held in place by plainly visible steel plates.
Mr Christodoulou argued that they were an eye-sore – deterring the potential clientele at his 23-storey hotel – and last year the High Court agreed with him, deciding that freehold-owning landlord North West Ground Rents Limited, part of the £75 million Ground Rents Income Fund plc could pick up the bill instead.
It has just put in for planning permission which will allow the work to be redone.
The ruling does not automatically apply to the residential leaseholders at the iconic 47-storey skyscraper, who face bills of £40,000 each.
Mr Christodoulou’s Blue Manchester Limited, which has the hotel on a 999-year lease, successfully argued that it had been blighted by the gash works.
It told the court that North West Ground Rents Limited was seeking to avoid liability by hiding behind original developer Carillion, which did the work and has subsequently gone bust.
In a case that may cause wry amusement among leaseholders at Mr Christodoulou’s battle-scarred prime London sites, Canary Riverside and West India Quay, here his lawyers argued that the hotel was unsatisfied with the performance of the landlord.
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The intrusive “stitch plates” holding in the windows “adversely affects the appearance of the tower and hence the overall impact the hotel makes as a leading 4-star Manchester city centre hotel”, Mr Christodoulou’s lawyers argued.
The High Court was urged to “compel” Beetham Tower’s owner to undertake permanent remedial works that would restore the UK’s third tallest apartment building to its former glory.
North West Ground Rents Limited argued that it did not see itself as anything other than a punter in Beetham Tower’s legally enforceable income streams.
Its lawyer said his client’s “only commercial interest in the building was to collect relatively modest ground rental income” and that the £400,000 it paid for the freehold “was minimal in comparison with the premium paid … by the claimant to acquire the [hotel] leasehold (some £45 million)”.
“Given the long duration of the lease and the modest rental payable in comparison to the premium paid it could not properly have been intended that the landlord would be required to undertake extensive and expensive remedial works to remedy either inherent or design and construction related defects or defects which might … arise throughout the entire duration of the lease”.
This may prompt the thought among those who are not shareholders in North West Ground Rents: what on earth is this legal entity actually for, then?
Certainly no argument here of it being a “long-term custodian” of Beetham Tower, or a “responsible professional landlord” – both happy fictions put about by lobbyists for an unreformed leasehold sector.
“Persuasively though it was put, I do not accept this argument,” said Judge Stephen Davies, who noted that “it was the defendant’s decision to acquire the freehold reversion as a ground rent investment vehicle by taking on that risk as part of the package”.
Beetham Tower needs a £4million makeover after court found it in ‘disrepair’
It will cost at least £4million to fix Beetham Tower, the owners of the iconic skyscraper have said. Earlier this month, it emerged the owners of the Hilton Hotel, Blue Manchester Ltd, had sued the building’s owners, Ground Rents Income Fund (GRIF) over a serious fault affecting 1,350 glass panels.
Evidently, Judge Davies thought little of the bolted-on “stitch plates”:
“In my view there would have to be some compelling reason why a tenant such as the claimant should have to accept this as a repair for a building such as this other than as a temporary time-limited repair pending a permanent repair to restore the tower to its original appearance.”
North West Ground Rents was given 18 months to carry out the permanent remedial works or face contempt of court proceedings.
Mr Christodoulou’s Beetham Tower hotel company also won on the issue of unsightly temporary hoardings at the site.
This deterred A-listers, ruining the atmosphere of red carpet events and selfies by the guests, the court decided.
“Importance is increasingly attached by guests to making an impact when arriving at such red carpet type events in a prestigious private car, frequently recording and posting such arrivals on social media, and the presence of these barriers undoubtedly adversely affected these opportunities. The hotel also operated a valet parking service which for a period was curtailed by the presence of the barriers.”
The water supply at Hilton Manchester Deansgate had also been problematic:
“… one hotel guest did indeed experience discoloured water (or “sludge”, as he later described it) emerging from his tap and, not having been informed of this risk, was appalled and took photographs of the sink full of brown water. He sent these photographs and told his story to various newspapers who published the story in their online editions.
“Not surprisingly the hotel was extremely upset by this and holds the defendant responsible for any loss or damage it has suffered as a result.”
Judge Davies ruled that Mr Christodoulou could claim damages for these items.
The High Court case between Mr Christodoulou’s Blue Manchester Limited and the freeholder, part of the publicly quoted Ground Rents Income Fund, did not make an explicit decision on the matter of who should pay for the remedial works.
Place North West | Beetham Tower applies for cladding fix to window woes
The 47-storey tower, which was the tallest building in Manchester until 2018, is to undergo work to secure 1,440 windows that were found to be loose when it was inspected in 2014. A planning application has been submitted by London-based building consultant MBHC Cumming on behalf of landlord North West Ground Rents, a subsidiary of the tower’s owner, Ground Rents Income Fund, for the crucial repairs.
However, ominously for the freeholder, Judge Davies said: “I proceed on the basis that the defendant’s liability under the lease must be determined on the basis that there is, at the very least, a real question mark over its ability to recover any costs from the claimant.”
He noted that the ground rent investor is “a landlord who did not want to have to make any difficult decisions or undertake any significant expenditure”, even when confronted by Mr Christodoulou and “the hotel as a demanding tenant”.
Judge Davies highlighted that the leaseholders above Mr Christodolou’s hotel had not turned up to argue their side of the story:
“… I should make it clear that the terms of the residential flat leases are not in evidence nor has any argument been addressed to me in that regard. It follows that I should not and do not speculate as to whether or not the defendant may be able to recover some or all of any costs which it incurs from the residential flat leaseholders.”
In October 2019, leaseholders at Beetham Tower were told that they were on the hook for the £7.5 million renovation, expected to pay up to £40,000 per flat.
They have been given a 24 month period to find the cash.
It is not known whether Mr Christodoulou’s hotel will make any contribution.
Leaseholders at the London Docklands estates where Mr Christodoulou is the building freehold owner may greet the Beetham Tower decision with surprise.
At West India Quay, leaseholders say they have been waiting years for repairs to the exteriors of the building. A tussle over a £2 million bill for utility meter replacement is making its way through the courts.
At Canary Riverside, window repairs were a factor in the leaseholders’ decision to give Mr Christodoulou’s management the boot by successfully applying for a court-appointed manager. There have to date been more than 20 court dates dedicated to the site.
The court ruling is here:
No surprises here. Freeholders are quite content to be seen as custodians when they are receiving income but not when they are required to actually behave as custodians and fund crucial remedial work that addresses the fabric of the building they own (obvious parallels here with the cladding scandal…) They are also quite happy to wear a leaseholder hat when it suits them to make the argument the other way. The case helps to illustrate why the leasehold system is clearly not fit for purpose, favouring the wealthy and powerful – whichever side of the fence they sit.