How are Landlord’s and Leaseholders dealing with the consequences of Grenfell?
12 April 2018 by Lawrence Adams
Chances are, if you are a landlord or tenant of a high rise housing block, the Grenfell tragedy won’t have escaped your attention. In the days following the fire, local authorities across the United Kingdom undertook reviews of fire safety in their residential tower blocks, many private landlords would have carried out similar checks. It is estimated that approximately 600 high-rise blocks of flats in the UK have similar cladding to that used in Grenfell. In the interim, the Department for Communities and Local Government (DCLG) have offered and local action plans have been drawn up by Fire and Rescue Services. In order to comply with their duties under the Regulatory Reform (Fire Safety) Order 2005, many landlords have taken to employing a ‘waking watch’ while the remedial works are carried out.
The cost of the ‘waking watch’ and the rectification works to flammable cladding is expected to be huge. Undoubtedly, the Courts will be inundated in the coming years with litigation to determine who should be liable for the cost of carrying out these works. The First Tier Tribunal decision in Firstport Property Services Ltd v various leaseholders of Citiscape offers an initial indication as to how these cases might be dealt with. It follows an earlier decision in E & J Ground Rents No.11 LLP various leaseholders of Fresh Apartments, Salford which saw leaseholders unsuccessfully challenge their landlord who sought to recover the cost of waking watchmen.
The Citiscape case is the first to deal with both the costs of waking watchmen and the cost of the rectification works. The leaseholders in this instance were given estimates of £483,000 for the removal and replacement of the cladding, with a further £1.5 million to £2 million to follow. ‘Waking watch’ costs would amount to £263,000 per year also to be charged to the leaseholders under the service charge provisions.
Understandably, the leaseholders were not too happy and the First Tier Tribunal was asked to decide whether the waking watch charges were payable and/or reasonable and whether the estimated advance charge for the replacement cladding was payable and/or reasonable.
The decision was based upon the interpretation of the relevant service charge clauses in the lease. The tribunal found in favour of the managing agent on the question of the waking watchmen costs, that these were chargeable under the lease. In the absence any evidence that the charges were unreasonable, the Tribunal found that the costs were reasonable.
The tribunal also found that the cost of the replacement panels was to be paid by the leaseholders. The leaseholders had argued that the cost was not a repair or maintenance cost under the terms of the lease, as the cladding was not out of repair. The terms of the lease stated that the leaseholders were to pay for ‘renewing or otherwise treating as necessary’ which went beyond simple repair. The blocks were required to be kept ‘in good and substantial repair order and condition’ which also went beyond simple repair. The managing agent was also require to rectify or make good any ‘inherent structural defects’. The leaseholders were on the hook for these costs too as the managing agent had already been rebuffed by the insurer and it was found that there was not sufficient certainty to suggest an insurance claim would succeed.
Where does this leave leaseholders? The answer is, not in a good place. The answer to the above questions will of course turn on each individual case. The decision in the Citiscape case indicates that there may be other avenues open to leaseholders to explore. The judgment suggests looking at the manufacturer of the cladding, the builder of the tower block and even the Local Authority if there were issues in the certification process.
Each individual tower block is likely to form its own source of a dispute as leases and warranties are poured over.
If you are a leaseholder and find yourself in a similar situation with cladding issues or other service charge issues, do not hesitate to get in touch with our landlord and tenant law specialists – call 01206 700113 or email [email protected]