Earlier this month, judgment was handed down in the case of Essendi UK Hotels 2 Ltd v London Property Company Ltd case (1). This case concerned a number of significant cladding and fire safety issues affecting a commercial lease of a high-rise building in London.
In this article we examine the findings of His Honour Judge Davis and outline a number of key takeaways for landlords and developers.
Essendi (formerly Accor), the claimant in the case, previously owned the 18-storey Ibis hotel near Wembley Stadium in London. In 2005, it installed aluminium composite material (ACM) cladding panels on the building, a type of cladding that came under intense scrutiny following the Grenfell Tower fire.
In 2007, Essendi sold the freehold of the building on a sale and leaseback arrangement and continued to operate the hotel. London Property Company, the defendant in these proceedings, bought the freehold in 2018.
Several years after the 2017 Grenfell Tower fire, Essendi’s experts reported that the hotel’s cladding was a fire risk. Essendi closed the hotel in July 2025 pending replacement of the cladding.
At trial, both Essendi and London Property Company agreed that the fire risk presented by the cladding was intolerable and that its replacement was necessary. However, each party contended that responsibility for the cost of remediation rested with the other.
The Building Safety Act 2022 allows tenants of higher-risk buildings to apply for a building safety remediation order against their landlords, obliging them to make the buildings safe by a specified time. Find out more about the registration requirements in our previous article.
In this case, the Building Safety Act didn’t apply, since hotels are excluded from the statutory definition of a higher-risk building. Essendi’s case focused on the following three landlord covenants in its lease:
To keep the property in good condition
To comply with legal obligations
Not to derogate from the grant of the lease
Essendi applied for a specific performance order requiring London Property Company to carry out the remediation works at its own expense. In effect, it was applying for a building safety remediation order, but via a contractual route rather than a statutory one. Essendi also claimed for profits lost during the period of closure.
His Honour Judge Davies found for Essendi on the first two covenants which rendered it unnecessary for the court to consider the claim for derogation from grant. He noted that:
The covenant to keep a property in good condition doesn’t extend to every possible defect in a property. It's a question of fact and degree. Once the danger presented by ACM cladding became known, the property couldn’t be used by Essendi for its intended purpose and so fell short of being “in good condition”. This conclusion was reached on a strict liability basis, such that London Property Company’s lack of knowledge as to the presence of ACM cladding was irrelevant. The property was unsafe and, accordingly, the covenant was breached.
The legal obligations covenant in this case centred on the duties imposed on a responsible person under the Regulatory Reform (Fire Safety) Order 2005. These duties include implementing and maintaining appropriate fire safety measures to ensure a building is safe from fire, encompassing steps to reduce the risk of fire and its spread, as well as the removal and replacement of dangerous substances. London Property Company, as landlord, was found to be the “responsible person” as it had control over the structure and exterior of the building and in order to comply with its obligations under the lease, it had to replace the ACM cladding which constituted a fire risk.
Essendi had taken a “novel” approach by using the lease covenants to obtain what was essentially a building safety remediation order, even though the Building Safety Act didn’t apply to this property. Since London Property Company was in breach of the covenants, it was also held liable for the closure of the hotel and the associated costs.
There are two factors that made the outcome particularly painful for London Property Company:
Essendi had assumed responsibility for defects and disrepair for the first ten years of the lease, a responsibility which expired just one month before the Grenfell fire. Even though Essendi had installed the ACM cladding, London Property Company as landlord was still liable for replacing it.
While landlords can often recover the cost of such works from tenants via a service charge, no such mechanism existed under this lease. As a result, London Property Company was left to bear the full cost without any means of recovery from Essendi. His Honour Judge Davies observed in his judgment that, had the lease included a service charge provision, the parties’ positions would likely have been reversed.
Although this case concerned a hotel and therefore fell outside the scope of the Building Safety Act, it nevertheless illustrates the courts’ increasingly robust approach to fire safety. In particular, the court was prepared to achieve, in substance, the same outcome as a remediation order, albeit through the enforcement of contractual obligations rather than via statutory powers.
The nature of the building was a relevant consideration. It was a hotel, and in particular one located in close proximity to a football stadium, which heightened its fire risk profile and amplified the significance of the cladding defect. That said, it's unlikely that a court would now regard highly combustible ACM cladding as acceptable on any higher risk building.
It's essential for landlords and/or developers to respond to building safety issues promptly and effectively, as delays can have significant cost implications. In particular, if leaseholders are not notified of potential defects in a timely manner, this may impact recovery through the service charge.
It's also notable that the dispute became significantly more costly as a result of the parties becoming entrenched in determining liability for the remediation works, rather than undertaking those works promptly and resolving the issue of cost allocation thereafter. Had the cladding been removed without delay, the hotel may have remained operational or, at the very least, any period of closure may have been materially reduced.
The implied recommendation is for parties to adopt a “remediate now, argue later” approach to prioritise making buildings safe and minimising loss.
Finally, His Honour Judge Davies expressed pointed criticism of one of the witness statements - and of the solicitor responsible for drafting it - on the basis that it failed to comply with Practice Direction 57AC of the Civil Procedure Rules, notwithstanding that both the witness and the solicitor had signed a statement of compliance. This serves as a clear reminder that, although PD57AC may be onerous in practice, the courts expect strict adherence to its requirements.
Overall, the case serves to confirm that building safety is not a peripheral issue, but now lies at the heart of how the courts construe condition and any resulting liability.
For more information about building safety please contact our property disputes and construction teams.
(1) Essendi UK Hotels 2 Ltd v London Property Company Ltd [2026] EWHC 1354 (TCC) |
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