In the wake of the fire at Grenfell Tower, many landlords are reviewing whether additional fire protection measures are required. These additional measures can be very expensive, and difficulty arises over whether the landlord can recover the cost of these works from the leaseholders.
The starting point for determining this must always be the lease. Typically, leases allow landlords to recover repair costs from the leaseholders by way of the service charge (subject to appropriate consultation in the case of residential leases) provided that those costs are reasonable, but improvement works would not generally be recoverable unless there is a provision in the lease. So what constitutes an improvement?
Some works are obviously improvements, for example installing sprinklers in a building which did not already have these. The situation is slightly less clear cut with other works. For example, a Tribunal found that the cost of installing new fire resistant doors in place of fire doors which had fallen below the as-built standard or had been replaced by the tenants was not recoverable, due in part to a lack of evidence as to the state of disrepair of the existing doors.
It is apparent from case authority that although a landlord is obliged to ensure repair and statutory compliance, if the building is not in disrepair and complies with safety requirements works would not usually fall under repair costs, even if an element may be considered unsafe. This is particularly pertinent when considering whether to remove or replace cladding. A development in Croydon has put in place a 24 hour fire watch until funds can be raised to remove cladding, whilst Camden Council is looking to recover cladding costs from the contractors involved in its installation. Who is ultimately responsible for these costs?
This year is likely to see a flux of Tribunal claims challenging the reasonableness of residential service charges relating to fire safety measures. If Landlords are unable to pass on costs to lessees, it is possible that there will be a spike in claims against contractors for installing defective cladding. However, this would be a costly and time consuming exercise even in the event of success (which may not be clear cut), and would not resolve the immediate problem of the building being considered unsafe.
The focus to date has, rightly, been on residential tower blocks, but the issues about the cost of fire safety measures apply equally to commercial buildings. Although different considerations apply to resolving commercial service charge disputes, whether or not works constitute improvements remains a key issue for a court to resolve.
The landscape has changed as a result of Grenfell and it may take time yet for the full implications to come to light. However, if improvements works have to be undertaken, irrespective of who is paying, consultation with lessees is important and landlords may have to be flexible with payment arrangements if the costs are being passed on to lessees.