Since the tragic Grenfell fire in June 2017 the safety review and replacement of cladding on apartment buildings has been subject to intense focus. The first of a tranche of applications dealing with this difficult issue has been heard in the First Tier Tribunal.
Brady Solicitors have been dealing with queries from leaseholders, management companies and freeholders considering next steps, liability for maintenance, and how the project can and should be funded. In addition there should be consideration of the interim safety steps such as a “waking watch”, in the sense are they appropriate, costed sensibly and implemented effectively? Carmela Inguanta, Bradys’ Head of Litigation reviews the case and comments on the wider issues:
E&J v Addabbo & other lessees, 138 Chapel St Salford; FTT 24/1/18 concerned a block of 141 apartments with three differing types of cladding, with one being viewed as particularly non fire-retardant.
The managing agents and the Manchester Fire Service had introduced a constant patrol or “Waking Watch” on the building. The aim was to create early warning of any fire to avoid the experience of Grenfell where the fire had spread very quickly through the cladding. Risk assessors had conclude a Waking Watch should be in place to comply with DCLG guidance.
The case centred around the issue of the freeholders’ obligation to maintain and ensure the property remained in “good and substantial repair” and the leaseholders’ obligation to pay for that maintenance.
There were four main considerations for the Tribunal:
- Does the lease enable the freeholder to recover the cost of the Waking Watch through the service charge; this effectively was a contractual matter?
- Should the costs of the Waking Watch be taken into account in determining the service charge?
- Does the “Waking Watch” become a Qualifying Long-Term Agreement under S20 of the 1985 Act?
- Was the freeholder entitled to bring the application?
The Tribunal dealt with the issues in a structured manner:
Was the Waking Watch “reasonably incurred?
The Tribunal was satisfied that a Waking Watch was expenditure that was reasonably incurred and that the Greater Manchester and Fire Rescue Service is a competent authority to direct the freeholder to comply with statute. While the applicant was not specifically directed to provide a Waking Watch, this was the mechanism chosen to comply with the Fire safety order and Fire Service Action Plan.
Should the cost of the Waking Watch be included in the service charge?
The Tribunal agreed with the applicant that the cost of providing the Waking Watch is recoverable from the lessees of the property as part of the service charge pursuant to the provisions of the lease.
Did s.20 apply?
The Tribunal agreed that the Waking Watch was not a Qualifying Long-Term Agreement (QLTA). The freeholder issued a fresh purchase order each month to instruct the supplier for the month ahead and successfully argued that this was not a rolling month-to-month contract.
Were the proceedings appropriate?
Finally, on costs, the Tribunal decided the applicant was entitled to bring proceedings to establish its entitlement to recover these costs through the service charge and thus the Tribunal did not award costs against the applicant.
From a case centric and lease analysis this decision offers no surprises. It is useful to see the first specific guidance from the FTT but, as always, the approach should start with the liability outlined in the lease and what measures are reasonable in the circumstances. It is also worth remembering that this decision will not be binding on other decisions.
However, with some leasehold commentators suggesting there are around 200 blocks under scrutiny following cladding concerns, we wait to see the approach not just from the FTT but also from Government.
The Association of Residential Managing Agents (ARMA)has lobbied Government to understand the time sensitive costs and the burden it could place on leaseholders.
To avoid safety being compromised whilst lengthy legal battles are fought, ARMA’s proposal is that Government provide an interest-free loan to leaseholders to cover the cost of this work.
There is no dismissing the impact on leaseholders of a bill of this nature but this seems far bigger than the usual freeholder vs leaseholder liability debate. Should we be looking for a longer-term and more wide-reaching resolution to change building regulations and require ongoing developer responsibility? With more FTT cases expected and continued debate on cladding risk liability and payment this difficult topic is expected to be at the top of the leasehold agenda for some time.