Cladding Replacement & Fire Safety Costs

Phil Parkinson & Katie Edwards of JB Leitch Ltd acted for the successful landlord and full details of the case are reported below.

Pemberstone Reversions (5) Limited v Various Leaseholders

MAN/00BR/LSC/2018/0016

Following the tragic events at Grenfell Tower in June 2017 a considerable amount of media coverage has been, and continues to be, focussed on combustible cladding and what interim fire safety measures are proportionately required in order to effectively mitigate risk at high rise developments. The consequential considerations of the implementation of such measures subsequently turn to the contentious question of who is liable to pay for them. Deliberations continue and opinions are diametrically opposed depending, naturally, on the persuasions of the party opining. To provide some clarity at one particular development in Manchester, the First-tier Tribunal (Property Chamber) (“FTT”) has recently delivered a determination on to whom liability should attach in respect of:

1. The costs of interim fire safety measures, specifically a ‘waking watch’.
2. The cost of replacement cladding.

The Case

The issue before the FTT related to a development within the Green Quarter in Manchester comprised of two separate blocks, Vallea Court and Cypress Place. Vallea Court was a block of 130 leasehold units and Cypress Place slightly larger at 245 leasehold units. The development had been subject to the compulsory testing regime for high rise properties introduced by the government in response to the Grenfell Tower fire. The samples tested identified that some of the cladding was category 3 Aluminium Composite Material, identical to the cladding that combusted so easily at Grenfell. Due to this it was necessary to introduce interim fire safety measures and Greater Manchester Fire and Rescue Service met with the landlord’s agent to discuss the implementation of the Department for Communities and Local Government’s advice. The advice, based on the fact that no suitable suppression system was in place, included either “the provision of a temporary communal fire alarm system comprising…fire detectors…in conjunction with fire alarm sounders in each flat” or the “provision of a fire watch by appropriately trained patrolling security officers/wardens”. A ‘waking watch’ was implemented in August 2017 whilst investigations have been on-going as to the most appropriate method of replacing the cladding and the optimum materials. The case before the FTT centred on whether the aforementioned interim fire safety measures and cladding replacement were service charge items and, additionally, whether the sums in question were reasonable in amount. The landlord, in essence, argued that the sums due were contractually recoverable. Various lessees engaged in the case and presented different arguments, including:

1. As the development had been built in compliance with building regulations (and was subsequently signed off in accordance with building regulations) the cladding replacement costs should not be a service charge item.
2. It was morally wrong to seek recovery of the replacement costs from the lessees.
3. If liability did attach to the lessees via the service charge, it should be limited to the difference between the replacement costs and the original costs and any such repayment should be on terms that cover the remainder of the unexpired lease term.
4. After an initial two month period, the ‘waking watch’ should have been replaced by a temporary communal fire alarm system.

The Decision

The FTT determined that the interim fire safety measures, including the ‘waking watch’, and the costs of replacing the cladding were service charge items and, therefore, recoverable as a matter of contractual obligation by the landlord from the lessees. The FTT further determined that the sums in question were reasonable in amount.

The key issue of liability was determined by the FTT for both the cladding costs and the interim fire safety measures on the following key heads:

1. The costs were incurred in compliance with the landlord’s covenants relating to the structural aspects of the buildings.
2. The landlord had obligations under a superior lease at the development.
3. The works and services were contractually permitted as being within the “general benefit of the apartments in the building”.
4. Undertaking such works and incurring the costs was within the “principles of good estate management”.
5. Costs were recoverable under the landlord’s discretion in “employing such persons as the Landlord may in its absolute discretion consider desirable or necessary to enable them to perform or maintain the…services”.

Summary of Key Points

Whilst the FTT have determined in the landlord’s favour in this case, the basis of reasoning behind the determination needs essential analysis before any principles are established. The FTT have carefully considered the contractual position and have made their decision based solely on the specific contractual terms in place between the respective parties. No general principle is established that such costs are ordinarily recoverable from lessees and each and every lease must be perused and scrutinised with necessary consideration given to where liability falls.

Philip Parkinson and Katie Edwards of JB Leitch Ltd acted for the successful landlord, Pemberstone Reversions (5) Limited in the case.