The Building Safety Act Blind Spot: Essendi Hotels v London Property Group

In this episode of Unpacking the Case, Richard and Lizzie discuss Essendi Hotels UK 2 Limited v London Property Group, a High Court decision examining responsibility for unsafe cladding in a commercial lease.

The case concerns a budget hotel near Wembley that was forced to shut its doors after combustible cladding, similar to that involved in the Grenfell Tower tragedy, created serious fire safety concerns. With the Building Safety Act offering no protection because the property was a hotel rather than residential accommodation, the dispute turned on a fundamental question of landlord and tenant law: who was responsible for putting the problem right?

Whether you advise on hotels, offices, retail or mixed-use developments, this episode highlights why careful drafting of repair and compliance provisions has never been more important.

Relevant cases: 

Credit Suisse v Beegas Nominees Ltd [1994]

Welsh v Greenwich London Borough Council (2000)

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This podcast is for informational purposes only and is not intended to provide legal or professional advice. No liability is accepted by Davitt Jones Bould for any reliance placed on its content.

Transcript

Lizzie Collin
Welcome back to Unpacking the Case. In this episode, we're looking at a case that asks what happens when a hotel has to close because its cladding is considered a serious fire risk. But the legislation everyone associates with cladding defects, the Building Safety Act, doesn't actually apply. This case centres on a budget hotel near Wembley that was forced to shut its doors because of cladding issues similar to that seen on Grenfell Tower. The tenant wanted the building made safe. The landlord said it wasn't their responsibility. With no help from the Building Safety Act, the dispute came down to the wording of the lease and some long-established principles of landlord and tenant law. If you're dealing with commercial property, the answer often lies in repair covenants, the structure of the lease and what the parties actually agreed to years before anyone had heard of ACM cladding. We'll also look at 2 earlier authorities that shaped the court's thinking. Let's unpack the case. Good morning, Richard.

Richard Snape
Good morning, and what a pleasant one, Lizzie. It was categorised within the economy group of hotels, which means it's cheap. And it was near Wembley Stadium in London. It was on the South Way to Wembley Stadium. They acquired the site in 2001, the freehold to the site, and built the hotel, or had the hotel built for them. And in 2002, began to operate and have people in this 16-storey hotel with over 210 bedrooms in it. And they, so they sort of started trading. They were the freeholders originally. But in 2005, 2006, they had problems with the construction, not with fire safety on this occasion, but there had to be all kind of structural works. There were, cladding was falling on people on the way to Wembley Stadium. And they, as a consequence, well, the cladding had to be So they're replaced in the light, it's quite substantial by the sounds of it. In 2007, they sold the reversion and got a lease back of the premises. They sold it to an associate of London Property Group and eventually London Property Group became landlords. And they took on responsibility for the exterior, unfortunately for themselves. They were responsible for maintenance and keeping the exterior of the hotel in good condition. And they took on that liability just a month before Grenfell. Grenfell was on June the 14th, 2017. Doesn't seem that long ago, actually. And post Grenfell, they were doing various inspections, like two or three years ago, and filed it kind of category 3 ACM cladding, the same kind of cladding, aluminium composites, with a polyethylene core that had caused the Grenfell fire to spread so rapidly. So they obviously had to do with something about him. And it was decided in July of 2025 that the risks were so great that they would have to close down the hotel. And basically, the landlord London Property Group refused to do anything about replacing the cladding and claimed it was Ascendi's fault and that's what gave rise to the case. Which, you know, the problem is that The Building Safety Act, the worst drafted piece of legislation I've ever come across, as I was quoted in Times and Sunday Times has seen, basically doesn't apply to hotels. For whatever reason, though, the official one is because hotels come within the regulatory reform fire safety or they should, so they should have risk assessments anyway, but you've got to ask what the difference is between a 16-storey hotel. with people sort of sleeping now and the likes in a 16-storey residential block, which are treated differently. Well, that's what gave rise to the case, Lizzie.

Lizzie Collin
So what happened when it went to court?

Richard Snape
Well, they tried to argue three things. Firstly, Sandy argued that the landlord's responsible to keep the property in good condition. Secondly, they also had an obligation, a standard obligation to comply with any legal obligations. And thirdly, which wasn't really dealt with, but you've got an obligation not to derogate from grant. So for those various reasons, they wanted the landlord to do something about it. They wanted specific performance of the landlord's obligations if they had obligations plus damages. Shall I go through the good condition?

Lizzie Collin
Yes, please.

Richard Snape
They said that keeping the property in good condition can involve Not across the board, not from for every safety issue, but because of fire safety, post Grenfell, they said that could involve things like, this wasn't disrepair, there was no disrepair, it had been bad from day one and it was inherently defective, but they said that post Grenfell in relation to fire safety and combustible cladding, that could fall in your contractual obligation to keep the premises in good condition. There are cases that have suggested such. There's a case called Credit Suisse and B Gat in 1994, which had sort of dealt with it, and a residential case called Welsh and Greenwich Borough Council in the year 2000, I think. But there have been other cases. There was another residential flat case called First Cross and Teesdale in 1983, which had said otherwise. But they said that Grenfell was such a change, it would pin the liability, contractual liability, people rapidly in good condition. I don't know what you think of this one. The judge basically said that, you know, if anything, hotels are going to be more dangerous than high-rise residential blocks, because you're dealing with people who don't know the lay of the land like you do if it's your home. but also who have likely to have gone to football matches when they stay after they when they stay afterwards, and they'll be drunk and on drugs, which I presume is the... It's.

Lizzie Collin
A universal use for all hotels, isn't it?

Richard Snape
Is it? They advertise as such, but all these people will be drunk and on drugs.

Lizzie Collin
It's quite the assumption to make, isn't it?

Richard Snape
Yeah, but anyway, perhaps they had a drink or two some of them. I don't know. But anyway, there we go. So you were in breach of that contractual obligation. They secondly dealt with the legal obligations. And this was a, I thought, a strange argument. So it succeeded. It's the Regulatory Reform Fire Safety Order of 2005, which came into force in October 2006. And it says the responsible person has various, you know, obligations to have a fire safety risk assessment and then carry out the recommendations. And Article 12 of the order says that if there's a dangerous substance in the premises, the responsible person is duty bound to either eliminate it or reduce the risk as far as is reasonably practical. And as cladding would be such a dangerous substance. And the responsible person is the person in control. And they said because the landlord has taken over obligations for the exterior, they're the responsible person, they have to do something about it. What I find surprising about that is Article 39 of the Fire Safety Order expressly says that it doesn't give rise to civil liability. So you can't sue under the Fire Safety Order, what you can sue under the contractual obligation to comply with legal obligations. And so for those reasons, the landlords were in breach of their contractual obligations. They were tenants got specific performance that you had to remove the cladding within six months and within 18 months you had to remove the whole thing. They would be also entitled to damages. Remember that the hotel ceased to be used as a hotel at the end of July of 2025. And so they could get damages on that basis. The court didn't decide on the level of damages that will be decided at a later stage. But it's an important one.

Lizzie Collin
And why is it so important?

Richard Snape
Well, firstly, you know, if it's correct, then you have to be very, very careful as a landlord and checking your conditions and the likes, because if there's some sort of events in the future, heaven forbid, like Grenfell, suddenly you might find that good condition obligation where it requires you to carry out major works or the tenant, and likewise, quite honestly. And secondly, you know, the fact that contractual obligations, legal obligations, clauses, that you must comply with legal obligations, or you're deemed to have complied with them, then they can give rise to potential contractual civil liability as well. You know, it's been discussed A lot. It's only just over a week since it was reported, but it's been discussed A lot. He's telling you something about it. And it's usually been discussed on the basis as this is great news for tenants. And I don't think it is because usually the responsible person, for the individual units is the person in control and that's the tenant. Or if they've got full repair and insurance obligations or if there's, you know, just a standalone building and the tenant's responsible for the exterior, then presumably the same will apply, that the tenant will be potentially liable contractually. They must comply with statute, which means they comply with the fire safety order, and if they don't, they can contractual damages. We'll have to see what happens. I also think it's, you know, the leases were entered into in 2007, 10 years before Grenfell. And it seems because of this catastrophic event of Grenfell, you know, the liability would have shifted, which seems a bit odd to me as well. But there we are, Lizzie. We'll have to see what happens with it.

Lizzie Collin
Thank you very much, Richard.

Richard Snape
My pleasure.