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The facts
The cladding in question was added to the building in 2005 by the then owner, Essendi UK Hotels 2 Ltd (“Essendi”). In 2007, Essendi sold the building but took a lease (the “Original Lease”) from the new owner. The Original Lease included bespoke provisions making Essendi responsible for cladding defects until 2017, thereafter, responsibility passed to the landlord.
In 2018, London Property Company Ltd (“LPC”) bought the hotel and became Essendi’s landlord under the Original Lease. In 2019, the parties entered into a new lease (the “New Lease”). The New Lease did not retain the bespoke cladding provisions.
The New Lease did, however, contain a landlord’s repairing covenant to keep the building in good and substantial condition (the “Good Condition Covenant”), and a covenant to comply with legal obligations that require the carrying out of works to the building (the “Legal Obligations Covenant”).
It was argued by Essendi that LPC was liable to remediate the combustible cladding under the Good Condition Covenant and/or the Legal Obligations Covenant.
The general rule for repairing covenants is that the obligation is not engaged unless and until there has been some form of deterioration from a previous physical condition. This was particularly relevant here because the cladding, although combustible, was not in disrepair or in a deteriorated physical condition.
The Court’s findings
The Court found in favour of Essendi.
The Judge held that the requirement for actual damage or disrepair was only a rebuttable presumption, capable of being displaced where the circumstances justified it. He concluded that this was such a case. Among the key factors in the Judge’s decision, was that the New Lease was entered into after the Grenfell Tower tragedy, at a time when there is far greater appreciation of the fire safety risks associated with the cladding in this case.
Accordingly, the Court concluded that LPC was liable under the Good Condition Covenant to remediate the combustible cladding.
The Court also concluded that the cladding was a dangerous substance under the Regulatory Reform (Fire Safety) Order 2005 (SI 2005/1541) (RRO 2005) and LPC was the responsible person in relation to the structure and exterior. On this basis, the Court concluded that LPC was obliged, under the Legal Obligations Covenant, to replace the combustible cladding.
Comment
This case is significant because it demonstrates that lease covenants can, in effect, do the work of a remediation order where the Building Safety Act 2022 does not apply. It also tells us that physical disrepair is not an immovable barrier to enforcing a landlord’s repairing obligation in relation to fire safety defects.
Notably, the judgment also reflects the courts’ willingness to interpret lease covenants through a post-Grenfell lens, taking into account the heightened awareness of fire safety risks that now shapes both regulatory expectations and commercial practice.
The case is also important for its finding that the cladding is, or contains, a “dangerous substance” within the meaning of the Regulatory Reform (Fire Safety) Order 2005. This is understood to be the first time the Court has made such a finding.
The decision is undoubtedly significant and could have far-reaching implications for the building safety sector. However, with an appeal anticipated, the full impact of these developments remains to be seen.
If you need assistance with cladding, repairing obligations or other fire safety disputes under a commercial lease, please contact our Real Estate Dispute Resolution team via our online enquiry form, or call +44(0)3333 231580.
