Dangerous cladding - who pays?

Following the Grenfell tragedy last year, there has been panic amongst owners of blocks of flats up and down the country prompted by the realisation that their own blocks may be clad in the same apparently lethal material that appears to have triggered the Grenfell disaster.  

Round the clock ‘waking watch’ patrols have been implemented by some landlords.  There have also been investigations into the cost of refurbishing or replacing potentially defective cladding.

But who pays for this replacement? Controversy surrounding this is raging.

The recent First-tier Tribunal decision in Firstport Property Services Limited v Various leaseholders of Citiscape provides some indication as to how this question may be addressed moving forwards. 

Citiscape is a development of two blocks of flats in Croydon.  They comprise approximately 95 flats in total.  The blocks were built in 2001 by Barratt Homes. 

A 24 hour waking watch has been implemented upon the recommendation of the London Fire Brigade at a cost £263,000 per annum.  It has been confirmed that the cladding on these blocks is the same cladding that was applied to the Grenfell Tower. The cost of replacing the cladding has been put at between £1.8 million and £2.5 million.

The question in this Tribunal case was whether the management company, Firstport, was liable for the cost of replacing the cladding or whether the leaseholders were liable under the service charge provisions.

It all boiled down to the interpretation of the service charge provisions contained in the leases. 

The leases provided that the leaseholders were responsible for paying charges defined as “Maintenance Expenses”.  These Maintenance Expenses were defined as including costs associated with:-

“inspecting rebuilding re‑pointing repairing cleaning renewing or otherwise treating as necessary and keeping the Maintained Property comprised in the Block…in good and substantial repair order and condition and renewing and replacing all worn or damaged parts…”

The leaseholders argued that the replacement of the cladding was not a “repair”.   Their argument was that the cladding was not out of repair, it was simply dangerous. 

The Tribunal did not accept this argument.  It found that the wording of the leases and the leaseholders’ obligations went beyond simple “repairs”.  The Tribunal took the view that the wording “renewing or otherwise treating as necessary” clearly contemplated something over and above a simple repair.  Similarly, the words “keeping the Maintained Property… in good and substantial repair order and condition” also went beyond a simple repair. The Tribunal concluded that the fire risk from the cladding meant that the blocks could not be said to be “in good and substantial repair order and condition”.

Accordingly, the cost of replacing the cladding fell within the scope of “Maintenance Expenses” for which the leaseholders were liable.

The facts of this case are of course specific. The decision of the Tribunal turned entirely on the interpretation of the wording of the leases in this particular case.  The extent and the definition of repairing obligations of course varies from lease to lease and so the Firstport Property Services decision should not be regarded as a precedent. But it is a useful reminder for parties to pause to study carefully the precise wording of repairing obligations. It is all too easy for a leaseholder to adopt too narrow an interpretation of a clause that, on the face of it, appears to relate solely to works of repair.   

If you have any questions about this article please contact Andrew Turner on 01242 586841 or AET@hughes-paddison.co.uk