Since the extent of the issues with the cladding to blocks of flats became clear after Grenfell, and it became clear that private blocks as well as social were affected, we have been waiting for the beginning of the legal fall out over who was to pay for rectifying the problems. For leaseholders in those blocks, this was always going to be a very serious issue.
This is an FTT decision, E & J Ground Rents No.11 LLP various leaseholders of Fresh Apartments, Salford, which is, I think, the first on cladding related issues, but it most certainly won’t be the last. The issue in this case was whether the costs of a ‘waking watch’ fire marshal provision, pending removal of cladding, were recoverable from the leaseholders.
Following testing of the cladding to the block which was found to be high risk, E&J started a ‘waking watch’. They said this was in line with the DCLG Guidance and the action plan drawn up by Greater Manchester Fire and Rescue Service. It was in compliance with their duties under the Regulatory Reform (Fire Safety) Order 2005. No enforcement notice or prohibition order were served.
The leaseholders contested whether the costs were payable under the lease.
The FTT found
i) The DCLG and the GMFRS were competent authorities and obligations under the 2005 Order were statutory obligations. Complying with the advice, guidance and ‘action plan’ therefore fell under the lease clause which included the costs of
Complying with the requirements and directions of any competent authority and with the provisions of all statutes regulation orders and by-laws made thereunder relating to the Building in so fas as such compliance is not the responsibility of the lessee or any of the lessees of the Properties.
The costs were recoverable under this clause.
ii) A further lease clause provided that the Lessor would
to insure or keep insured the Building (other than the plate glass in the Commercial Unit) in the name of the lessor against loss or damage by the Insured Risk
Costs of insurance were recoverable from the leaseholders. E&J raised a letter from the insurers, which stated:
Under the policy wording there is a general policy requirement that a policyholder shall take all reasonable steps to mitigate and/or avoid a claim. We have recently seen numerous similar incidents reported in high rise blocks where the authorities/fire brigade have provided and sought defined fire protection requirements on such properties (given combustibility concerns) including static fire wardens given life protection considerations. On all these our policyholder(s) have fully met these requirements we understand. Our expectation here would be that our policyholder would do likewise, to not do so would mean, in our opinion, a breach of the general policy requirements, upon which we are maintaining policy coverage, to take reasonable steps to avoid a claim under the policy.
While this was not straightforwardly an instruction to put in a waking watch, the FTT found that there was no other way to practically address the GMFRS action plan, and so not doing so would run a significant risk of breach of policy, and so failing to keep insured the Building.
The costs were also recoverable under this clause.
The costs of the application were recoverable under the lease and no s.20C order was made.
The opening salvo in what will be widespread battles over not just the costs of wardens but the costs of removing and replacing cladding. I suspect that insurance clauses and ‘comply with competent authority/statute’ clauses will be the ones most widely relied upon to charge leaseholders for this work. But of course, it will all be down to the lease wording. The wording of similar clauses will be stress tested in a manner that these usually uncontroversial and untested clauses have not seen before.
I believe that an FTT decision on the costs of removal of cladding of a block in Croydon is imminent, and we’ll report that when it is out.
Add in what will be extended disputes over the extent to which landlords can carry out fire safety work within the demised property – and even over who can replace flat entrance doors to be fire safe – and this is likely to be messy, difficult and inconclusive.