Cladding costs and recoverability

Following the Grenfell tragedy landlords will be keenly aware of the dangers of fire safety, particularly where cladding is involved.

In the recent case heard before the First-tier Tribunal (“the FtT”) the issue of whether costs of replacing cladding and providing a “Waking Watch” were recoverable from the leaseholders as part of service charges was considered.

The case related to two large blocks in Manchester known as Cypress Place (containing 245 apartments) and Vallea Court (containing 130 apartments), which both had cladding. The landlord correctly sent off samples for testing in accordance with the compulsory testing regime, and it was found that the cladding was of a type identical to that at Grenfell Tower. The landlord implemented an interim measure of a “Waking Watch” at one of the blocks, and it was determined that the cladding at both blocks needed to be replaced. The landlord thereafter served consultation notices on the leaseholders pursuant to Section 20 of the Landlord and Tenant Act 1985 in respect of the costs of the cladding replacement works. The landlord then made an application to the FtT for clarity on the issues that had been raised by the leaseholders.

The leaseholders opposed the recovery of the cost of these works by the landlord for several reasons, including an argument  that as one of the buildings had been built in accordance with Building Regulations, the cladding was compliant. If not, then the landlord ought to be liable for failure to comply with Building Regulations. Other arguments included that if the leaseholders were liable, they ought only to be liable for the difference between the replacement costs and the original costs. It was also argued that it was morally wrong to ask the leaseholders to pay for the replacement works.

In making its decision, the FtT carefully considered the terms of the leases and determined that adopting a common sense interpretation, both costs of the “Waking Watch” and replacement of the cladding were appropriate. The FtT also stated that the issues of whether the cladding was not compliant with Building Regulations was outside of their jurisdiction, as were any moral objections. They did not alter the contractual rights of the landlord to recover the costs. The FtT also recorded that there was no provision in the leases which would limit the recovery to the difference between replacement costs and original costs. The FtT was also satisfied that the costs of the Waking Watch were reasonable notwithstanding that they were not the cheapest available.

This case is good news for responsible landlords, but it must be treated with caution. The FtT’s decision centred on the terms of the lease and whether the charges fell within the service charge provisions. The terms of the leases must be the first port of call for all landlords, and in the case of any dispute wise landlords will seek the FtT’s guidance. Caution must also be taken by leaseholders when acquiring a lease of a flat, not only for safety reasons, but also for the risk that they may be liable for thousands of pounds in service charges for replacement of cladding, particularly in high rise blocks.