Lawbite: Building Safety Beyond the BSA — Hotel Landlord Ordered to Replace Dangerous ACM Cladding

Summary

The High Court has handed down an important building safety judgment outside of the framework of the Building Safety Act 2022 ("BSA"). The decision will be of interest to landlords, tenants, developers, and investors dealing with serious fire safety defects in commercial premises.

The case concerned the Ibis London Wembley hotel (“the Hotel”), a 16-storey, 210-bedroom building exceeding 18 metres in height. The building is clad in category 3 ACM panels that the fire safety experts in this matter agreed represented an "intolerable risk" of fire. The BSA does not apply as the building was a hotel, not a residential or mixed-use building falling under the BSA’s regime.

In this matter the tenant, Essendi, was successful in relying on conventional landlord and tenant covenants to compel remediation by its landlord, London Property Company Limited ("LPC”).

The Cladding

Essendi occupied the Hotel under a series of leases from April 2007. In late 2024, Essendi discovered the external cladding comprised highly combustible category 3 ACM panels of the type associated with the Grenfell Tower fire. Essendi sought specific performance, arguing that LPC was required to replace the cladding under the lease.

It relied on three routes: (i) breach of the landlord’s covenant to put and keep the relevant parts of the building in good and substantial condition; (ii) breach of a covenant requiring compliance with legal obligations, in particular obligations under the Regulatory Reform (Fire Safety) Order 2005 (“FSO”); and (iii) derogation from grant.

LPC denied liability.

“Good condition” covenant

The Court accepted that generally a "good condition" covenant will not, without more, require a landlord to remedy an inherent defect causing no physical damage. However, that general presumption was displaced here by context: a purpose-built 16-storey hotel used for sleeping accommodation. In addition, the current lease was entered into after Grenfell and the significant change in the industry’s understanding of the risks posed by ACM cladding.

The Court held that the good condition covenant required LPC to put the building into a condition which, having regard to its age, character, locality, height and intended use, made it reasonably fit for that use from a fire safety perspective. In practical terms, that meant removing and replacing the ACM cladding.

Legal obligations covenant

Essendi’s claim also succeeded on a separate basis, under the legal obligations covenant and FSO.

The polyethylene core of the ACM panels constituted a "dangerous substance" and, as such, the FSO required LPC to remove the dangerous materials and replace them with alternatives. LPC was in breach of that covenant by failing to remove and replace the ACM cladding.

The legal obligations covenant in the lease made any breach by LPC of its’s statutory obligations under the FSO contractually enforceable between landlord and tenant.

Derogation from grant

Essendi was unsuccessful in showing derogation from grant.

The Court noted, among other things, that the state of the building had not changed since the current lease was entered into; rather, the true fire safety position had simply become known. It also took account of the terms of the lease, including wording that no warranty was given that the premises could be used for the permitted use.

Specific performance

The Court ordered specific performance, requiring LPC to remove the cladding within six months and replace them with suitable alternative cladding within an overall period of 18 months.

In reaching that conclusion, the Court referred to the principles set out in the decision of Blue Manchester Ltd v North West Ground Rents Ltd, which came before the same Judge in 2019, and which also involved serious building safety issues and specific performance. In the Blue Manchester case the Judge was satisfied that an order for specific performance should be made, and it was similarly appropriate in this case.

Key to the court’s conclusions was its finding that damages alone were not an adequate remedy. The cladding represented an intolerable fire risk, the hotel had closed, and the works were necessary to make the building reasonably safe for occupation. There was also no doubt as to what LPC was required to do.

Key Points

• Building safety remediation obligations may arise outside the BSA, depending on the wording of the lease. A "good condition" covenant will not automatically require a landlord to remedy every inherent safety defect, but context is key.
• Statutory fire safety duties under the FSO may become contractually enforceable between landlord and tenant where the lease contains a covenant to comply with legal obligations.
• A good reminder to address responsibility for historic and inherent building safety defects expressly when negotiating leases, renewals, and variations.
• Specific performance can be granted to enforce a landlord's repairing covenant, particularly where damages are inadequate and the works required are sufficiently certain.