Essendi v LPC: Liability Beyond the Building Safety Act

Overview

The recent High Court decision in Essendi UK Hotels 2 Ltd ("Essendi") v London Property Company Ltd ("LPC") marks a significant moment in the evolving landscape of UK building safety law. Essendi (the tenant and operator of a high-rise hotel in Wembley) brought proceedings against LPC after discovering in late-2024 that the hotel was covered in highly combustible materials. Essendi argued that LPC was contractually responsible under the lease for carrying out the necessary remedial works, notwithstanding its refusal to do so.

The case aligns with the attitudes and Government stance that occupiers/leaseholders should be held harmless when it comes to the cost of remediating fire safety defects.

The regulatory position

The building was clad in aluminium composite material panels with a polyethylene core (the "ACM Cladding") - the same material associated with the rapid fire spread at Grenfell Tower. 

The Building Safety Act 2022 ("BSA") did not apply because the property was a hotel rather than a residential building.

As an alternative route, Essendi relied on two key lease covenants: first, LPC’s obligation to keep the exterior of the building in “good condition”; and second, its obligation to comply with all “legal obligations". Essendi relied on the Regulatory Reform (Fire Safety) Order 2005 (the “FSO”) which imposes duties on the "responsible person". In this case, LPC was responsible for the external façade. Essendi argued that the ACM Cladding constituted a "dangerous substance" within the meaning set out in Article 2(1). Essendi's position was that the presence of ACM Cladding meant the building was not in a 'good condition' for the purpose of the lease.

LPC denied liability, arguing that a “good condition” covenant does not impose a general duty to remedy inherent safety defects

Deputy High Court Judge Stephen Davies rejected these arguments. He held that LPC was in breach of both covenants and granted specific performance, requiring the landlord to remove the ACM Cladding within 6 months and replace it with suitable alternative materials within 18 months. 

The meaning of "good condition"

One of the most novel aspects of the judgment is the court’s interpretation of what it means to keep a property in “good condition.” Traditionally, such clauses have been understood as relating to physical deterioration or disrepair, something the court accepted.

However, that presumption was overridden in this case due to the specific circumstances, including the post-Grenfell context, the nature of the building, and the lack of any service charge mechanism to recover the associated costs. 

Spotlight on the FSO

The court also held that the ACM Cladding constituted a “dangerous substance” for the purposes of Article 2(1) of the FSO, placing LPC in breach of its covenant to comply with “legal obligations.”

This aspect of the decision is particularly interesting as, although the FSO does not ordinarily confer a direct cause of action between private parties, the court effectively gave it contractual force via the provisions in the lease. This significantly enhances the practical impact of the FSO, which to date has not been the subject of very much discussion by the court.

Conclusion

The Essendi case represents a significant development in UK building safety law for two key reasons. It demonstrates how lease provisions, when interpreted in light of the FSO in the current regulatory landscape post-Grenfell, can be used to ensure landlords (which have accepted certain obligations under the lease) can be obligated to be responsible for remediating serious fire safety defects.

The extent of this case’s impact remains uncertain; however, the case sends a clear message to landlords (and those responsible for remediating defective buildings) that building safety disputes may no longer confined to the BSA.