Cladding issues – who is responsible?

Written by James Scarfi, Solicitor in our Property Litigation department.

Following the tragic Grenfell Tower fire of 14 June 2017, the government scrutinised the safety of all modern high-rise buildings. The subsequent enquiry to the incident unveiled that the fire was caused by a faulty refrigerator, and the fire spread rapidly due to the external cladding which had been installed recently. The Building Safety Act 2022 (“BSA”) was part of the government’s response to improve the safety of tall buildings.

The BSA seeks to protect residential leaseholders from facing the costs of work to remediate cladding.

This article focuses on the case of Lehner v Lant Street Management Company Ltd [2024] UKUT 135 (LC) (“Lehner”) where the UK Upper Tribunal (Land Chamber) (“UKUT”) considered the appellant’s (Mr Lehner’s) appeal of the First Tier Tribunal, Property Chamber’s decision (“FTT”).

Mr Lehner owned the lease of Flat 44, at 4 Sanctuary Street, London, SE1. The flat is contained in a 5-storey block of flats. The appeal concerns Mr Lehner’s liability to contribute, via service charges, towards the removal and replacement of combustible insulation and installing additional fire stopping in the cavities between the interior and exterior surfaces of the walls of certain parts of the building. The FTT had determined that Mr Lehner’s share of the service charge contribution to complete these works was £1,244.85. Mr Lehner challenged that conclusion.

What the Building Safety Act 2022 says

Paragraph 8 of Schedule 8 of the BSA provides protection for “qualifying” leaseholders in respect of paying service charges in relation to “cladding remediation”. Cladding remediation is defined in the BSA as “the removal or replacement of any part of a cladding system that forms the outer wall of an external wall system and is unsafe”.

A “qualifying” lease is defined in section 23 of the BSA. In summary, the lease must be a long lease (granted for a term greater than 21 years), the owner of the lease must be liable to pay a service charge and the lease must pre-date 14 February 2022.

The dwelling must also have been the tenant’s only or principal home on 14th February 2022, or (if it is not the tenant’s only or principal home) the tenant owns no more than 2 other dwellings in the UK apart from their interest under the lease.

FTT’s judgment

The FTT applied a narrow interpretation of the paragraph 8 protection afforded to qualifying leaseholders. The tribunal held that that removing external cladding panels, stripping out the original insulation and replacing with new insulation etc was not considered “cladding remediation” as defined by paragraph 8. This was the FTT’s basis for their determination that Mr Lehner was liable for the service charge contribution.

UKUT’s judgment

The UKUT held that they had no doubt that the FTT’s interpretation of “cladding remediation” was wrong. They held that when an Act of Parliament which is made applicable to a large trade or business, the interpretation of the Act should not be considered to a nicety and instead should be read according to a reasonable and business interpretation with regard to the trade or business it is dealing with. The UKUT held that the ordinary meaning of “cladding system” includes materials installed behind the external screen. Therefore, they concluded that the FTT were wrong to dismiss Mr Lehner’s reliance on paragraph 8, schedule 8 of the BSA and that Mr Lehner was not responsible to pay the service charge contribution towards the cladding remediation.

What does this mean?

Qualifying leaseholders will not be burdened with the responsibility for contributing to remedying any unsafe cladding remediation costs. The cost of this will be met by the building owner. The building owner may then be able to seek their costs from the developer of the building, or the contractor who was directly responsible for the defect.

The paragraph 8 protection only extends to qualifying leaseholders. Non-qualifying leaseholders will only avoid responsibility for contributing to the cost of remedying cladding defects if the building owner is either the person responsible for the defect(s) or the building owner is associated with the developer who is responsible for the defect(s). In any other scenario, non-qualifying leaseholders will be responsible for contributing to the costs of remedying the unsafe cladding repairs if their lease provides for the landlord to recover it.

Jurisdiction

As it stands, the paragraph 8 protection applies to all qualifying leaseholders in England and Wales. It is expected that the Welsh Government plan to implement a slightly different regime to England (including its own definition of “relevant building”, which appears likely to have no height restriction. The Building Safety (Wales) Bill is anticipated this autumn.