Recent developments arising from the Grenfell tragedy
Readers will no doubt be aware that an independent public inquiry is currently ongoing chaired by Sir Martin Moore-Bick in relation to the tragic fire at Grenfell Tower on 14 June 2017. The formal opening of the Grenfell Tower Inquiry took place on 14 September 2017. Those interested in keeping abreast of developments can visit the Inquiry’s website here which also provides a live YouTube stream to the Inquiry hearings each day.
Separately, from a legal perspective, two recent developments are worthy of note.
A government consultation on banning the use of combustible materials on the external walls of high-rise residential buildings which are 18 metres or over was on published 18 June 2018.
Housing Secretary, Rt Hon James Brokenshire MP, stated that the cladding believed to have been used on Grenfell Tower was unlawful under existing building regulations and should not have been used. The government wants to ensure that there is no doubt about which materials can be used on high-rise residential buildings.
The consultation is inviting views on the government’s proposals to revise the building regulations to ban the use of combustible materials in the inner leaf, insulation and cladding that are used in external wall systems on these buildings.
Residents, industry and other interested parties will now be able to have their say on proposals affecting the safety of homes. The government is legally required to consult on substantive changes to the buildings regulations before any change in the law and this consultation will end on 14 August 2018.
What are the cost implications of the fire for leaseholders of other high-rise flats?
As one would expect, managers of similar flats around the country have, following the disaster, carried out their own inspections and assessed to what extent fire safety precautions need to be implemented and, where necessary, carry out replacement of their own buildings’ cladding.
From a landlord and tenant perspective, a key consideration is to what extent leaseholder’s will be asked to contribute towards costs, through their service charge, not only of replacement of cladding but also of interim safety measures.
A recent case heard at the Property Chamber, First-tier tribunal gives some guidance as to how these issues may be considered. The case was Firstport Property Services Limited v the various long leaseholders of Cityscape and involved two blocks of flats (one of ten stories, the other of six stories) at Frith Road and Drummond Road in Croydon. The decision was given on 9 March 2018.
In terms of taking away general legal guidance from this decision, it turns on its own facts, not only as to the state of its own cladding but also as to how the leases are worded. Therefore, with the caveat that other cases will not necessarily be decided in the same way, we highlight below key facts and points arising from the Tribunal’s decision.
Were the costs of a waking watch system reasonably incurred (as was required within the meaning of section 19(1)(a) of the Landlord and Tenant Act 1985)?
A waking watch system involves a fire marshal constantly patrolling the blocks of flats and, in the event of fire, ensuring evacuation. The hourly cost involved was £14.75 plus vat. The tribunal found that an initial decision to incur such costs had been reasonable in the aftermath of the Grenfell Tower fire. However, on 19 September 2017, the London Fire Brigade published a Fire Safety Guidance Note highlighting three possible approaches.
- The first is the installation of a common fire alarm system and is the preferable approach where cladding represents a significant hazard on buildings over 18 metres in height and cannot be removed in the short term.
- The second is reliance on a waking watch system to detect the presence of fire and manually initiate fire alarm sounders that would alert all residents to the need of evacuation.
- The third, but least reliable option, was the full waking watch system employed here and described above.
Accordingly, the Tribunal felt that following the publication of the Fire Safety Guidance Note, active consideration to the other approaches should have been given and three months was a reasonable time to consider those other approaches and ask tenants for their views. Therefore, it was reasonable to incur the full waking watch costs up to 19 December 2017. After that time, the Tribunal made no decision as to the reasonableness of such costs (observing that it would need further evidence from both sides before reaching such a decision).
Is a service charge payable by the tenants in respect of the waking watch costs?
Here, the answer was yes for a number of reasons.
- The services that the tenants were obliged to pay for included “… the requirements and directions of any competent authority.” The Fire Safety Guidance Note fell within the ambit of that provision.
- Equally, the waking watch cost was found to fall within the tenants’ obligations to pay toward “reasonable and proper expense … incurred by the manager in and about the maintenance and proper and convenient management and running of the Development.”
- Such costs also fell within the ambit of “providing and paying such persons as may be necessary in connection with the upkeep of the property.”
Is a service charge payable by the leaseholders in respect of the estimated costs for recladding?
To give context to this question, an initial estimate of costs of replacing the cladding of £483,000 had been included within the service charge budget and had led to interim service charge demands submitted to leaseholders.
Subsequently, a comprehensive replacement feasibility report had found that the cladding on the property was indeed of a type used at Grenfell. Replacement was recommended with updated costs of between £1.8 and £2.5 million.
A novel argument by the leaseholders that the estimated cost was unreasonable as it was too low was rejected by the Tribunal – it had only been an initial estimate given reasonably by an in-house surveyor without specialist cladding experience and, in any event, the leaseholders were not prejudiced by the low estimate.
Turning to the more important point of whether a service charge was payable by the leaseholders, the Tribunal found that a service charge was indeed payable.
- Here, Maintenance Expenses in the leases included “Inspecting rebuilding re-pointing repairing cleaning renewing or otherwise treating as necessary and keeping the Maintained Property comprised in the Block and every part thereof in good and substantial repair order and condition and renewing and replacing all worn or damaged parts therefor.”
- It also included “the expenses in rectifying or making good any inherent structural defect … (except in so far as the cost … is recoverable under any insurance policy for the time being in force or from a third party who is or who may be liable therefore).”
- The leaseholders’ argued that cladding could not be said to be in disrepair, as it remained as designed and constructed. However, the Tribunal found that the words “renewing or otherwise treating as necessary” went beyond simple repair, hence the inclusion of the words “order and condition.”
- Further, “rectifying or making good any inherent structural defect” was found by the Tribunal to encompass the removal of the defective cladding and its replacement with fire resistant cladding.
- Given the 999 year leases, the freeholder had effectively relinquished any capital interest in the flats. Therefore it was reasonable to conclude that the parties intended that all future costs associated with the blocks would be the responsibility of the leaseholders. This was reinforced by the fact that identical words defined the manager’s obligation to undertake works and the leaseholders’ obligation to pay for it.
- Finally, the leaseholders argued that before they could be asked to pay for the recladding costs, the manager must first seek payment from other parties (such as the original builder or current freeholder) and while there was the possibility of a third party claim, the manager could not ask the leaseholders to pay the cost. Again this argument was rejected by the Tribunal. Notwithstanding the phrase “ … except in so far as the cost … is recoverable … from a third party who is or who may be liable”, the Tribunal felt that any potential claims against third parties were entirely speculative. Whilst the manager or leaseholders may have claims against third parties, no claims could realistically commence until after the outcome of the Public Inquiry. The costs of maintaining these claims would be prohibitive and, in any event, recoverable through the service charge, leading to many years of litigation for the tenants. Meanwhile, flats would effectively be unsaleable. This was held not to be what the original parties to the leases would have intended as it would defy commercial common sense.
As property litigation specialists, WH Lawrence Solicitors is available to advise building owners, management companies and leaseholders on the various implications for their own buildings arising from Grenfell, including liability and recovery of service charges, claims against third parties and insurers, as well as claims for negligence. Please call William Lawrence on 020 7406 1457 to discuss your requirements further.