Cladding conundrum – who pays? …more issues stemming from the Building Safety Act 2022

The scenario

You’re the landlord of a 1960s residential block. Over the last sixty years the timber-framed glazed façade has suffered from water ingress, rot and general deterioration. Major remediation works are now needed. You’ve consulted your architect and the best way forward is to undertake a comprehensive scheme to fix the building’s external envelope by installing a new steel curtain wall system, effectively replacing the existing façade.

You know that the scheme will be costly. But, whilst you’re not cavalier about it, you’ll recover the costs through the service charge provisions in your leases. That’s right isn’t it?

The problem

No.

In the recent case Almacantar v De Valk, the Upper Tribunal found that the Landlord could not recover its costs in similar circumstances. The case centred on the Building Safety Act 2022 (“BSA”).

The BSA was Parliament’s response to Grenfell. Its stated aim was to protect leaseholders from the costs of remediating unsafe cladding and other historical building safety defects. The BSA introduced a complex web of protections, particularly for certain “qualifying leaseholders” in “relevant buildings” (generally, residential buildings over 11 metres or five storeys).

At the heart of the dispute in Almacantar was Schedule 8 to the BSA, which sets out when service charges for remediation works are, and are not, recoverable from leaseholders. Paragraphs 2–7 of Schedule 8 focus on “relevant defects” arising from works done in the 30 years before the Act came into force. But paragraph 8 stands out because it simply provides that “no service charge is payable under a qualifying lease in respect of cladding remediation.”

What?!

But surely it can’t be the case that the costs for repairing cladding works for a building constructed more than half a century ago can’t be recovered?

Surely paragraph 8 should be read in the context of the whole of Schedule 8 of the BSA and only apply to “relevant defects”? To allow otherwise, would cause huge problems for landlords with older buildings with life-expired components.

In any event you’re not at all sure that what you have at the property is really “cladding” within the meaning of the BSA.

The Upper Tribunal looked at all of these concerns and concluded as follows:

Does paragraph 8 only apply to “relevant defects”?

No.

The wording of paragraph 8 is clear and unambiguous. It is not limited by reference to “relevant defects” or the 30-year window that applies elsewhere in Schedule 8. Parliament deliberately created a distinct, broader protection for leaseholders in relation to unsafe cladding.

Is the façade “cladding”?

Yes.

It will be a question of fact in each case, but, broadly, if you have a non-loadbearing external envelope, attached to the building’s structural frame, designed to keep out the elements it will be cladding. The fact that it is original to the building and forms part of the external wall does not prevent it from being “cladding” for the purposes of the BSA.

What does “unsafe” mean?

“Unsafe” should be given its ordinary, natural meaning. It is not limited to fire safety risks (as with Grenfell-style ACM cladding), but can include any situation where the cladding system poses a risk to the safety of residents or the public; such as the risk of panels or windows detaching and falling due to decay.

What does this mean for landlords?

Cladding remediation costs may be irrecoverable if your building has “unsafe” cladding —even if it’s original, even if it’s not ACM or similar, and even if it’s simply life-expired.
No 30-year limitation. The protection in paragraph 8 is not limited to defects arising in the last 30 years. It applies to any unsafe cladding, regardless of age.
Definition of cladding is broad. Don’t assume that just because a façade is original or forms part of the external wall, it isn’t “cladding.” The technical and functional characteristics are what matter.
Qualifying lease status. Unless you actively seek qualifying lease certificates, leases will be presumed to be qualifying leases and the protections will apply.

Practical tips

Assess your building. Review the construction and condition of your building’s external envelope. If it could be classed as “cladding” and is unsafe, you may not be able to recover remediation costs from leaseholders.
Seek legal advice early. The BSA regime is complex and evolving. Early advice can help you navigate the pitfalls and plan your strategy.
“Qualifying Lease Certificates”. If you believe a lease is not a qualifying lease, take active steps to obtain the necessary certificates and evidence.

The key message

The Almacantar v De Valk decision is a landmark in the interpretation of the BSA. It confirms that the BSA’s protections for leaseholders in respect of unsafe cladding are broad, robust, and not limited by the 30-year window. For landlords, this means careful consideration is needed before seeking to recover cladding remediation costs via the service charge.

The End…?

Leave to appeal the case has just been granted, so the position may change in the not too distant future.

As always, the facts and circumstances of each case will be critical. If you are dealing with building safety issues, whether as landlord or leaseholder, our expert team can help you understand your rights, liabilities and options.

For further information, please contact Catriona Berman, James Styles or your usual real estate contact at Stephenson Harwood.

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