Tribunal rules that leaseholders must pay for cladding removal costs
The First Tier Tribunal Property Chamber has ruled that the leaseholders of Citiscape, a private tower block in Croydon, must collectively pay the cost of removing dangerous cladding from their building.
Following the Grenfell Tower fire, tower blocks underwent safety inspections to ensure that their cladding and insulation were not a fire risk. Citiscape was one of many buildings to fail the tests, as its external cladding contained aluminium composite material – a material that was deemed to have been responsible for the spread of the fire at the Grenfell Tower.
The leaseholders argued that the building's management company, FirstPort Property Services Ltd, should pay to replace the aluminium composite material panels from the building, claiming that the cost should not be added to their service charge as it was not a matter of disrepair. FirstPort Property Services Ltd asked the Tribunal to provide clarification on which party was liable for the costs.
The Tribunal held that:
- The leaseholders were liable to pay the £263,000 cost of a 24-hour ‘waking watch’ of fire wardens that had been in place at the building, as this had been a “reasonable” cost up until 19 December 2017. Further determination would be required to decide on the reasonableness of these costs after this date;
- The estimated costs of £483,000 for the replacement cladding, to be included in the service charge, was “reasonable”;
- The leaseholders may have claims against (1) the manufacturer of the cladding, (2) the developer, if they were negligent in the selection and installation of the cladding; and (3) the local authority, if the relevant building regulations were found to be not fit for purpose; and
- The leaseholders could appeal the ruling to the Upper Tribunal (Lands Chamber).
This ruling has been anxiously awaited by leaseholders in other buildings across the country that have also failed the safety tests, and who now face the possibility of large bills to remove similar cladding from their blocks.
Many Social Landlords have taken the view, post Grenfell, that they will pay for the removal/replacement of unsafe cladding from their own reserves rather than charge this expense to leaseholders. Given that this latest decision confirms that, if the lease permits, the costs of removing cladding (and interim measures such as a 'waking watch') are properly payable by the lessees through their service charge, the question could be asked; why should social landlords fund these costs themselves?
If social landlords use their reserves, money built up through the housing revenue account as a result of land acquired or developed through Grant Funding. Could social landlords be accused of using public funds to benefit private individuals (i.e. the individual lessees) contrary to the social landlord's charitable objectives?
How Capsticks can help
We have a national team of specialists in leasehold and service charge law, on hand to support any query related to this matter and can advise on the best possible steps to protect your organisation.
Get in touch with Clive Adams, Jonathan Hulley or Bridget Stark-Wills for further advice.