Following the Grenfell fire of nearly three years ago, have you discovered that your apartment has unsafe cladding?
If you have, then you’re not the only one – there are 13 apartment buildings in Leeds alone that have been affected by this issue.
It’s likely that you have a lot of questions about this, not least how you find out who is responsible for replacing the flammable cladding? To help, we sat down with lawyer Phil Morrison, who heads up our Construction Team, to find out answers to some of the most frequently asked questions about this issue.
Who is responsible for paying for replacing flammable cladding?
“There is understandable concern amongst the owners of apartments in high-rise buildings as to the level of financial liability that these owners may have for the replacement of the cladding to their high-rise building.
The fire safety of buildings is governed by overlapping legislation under the Housing Act 2014; the Regulatory Reform (Fire Safety) Order 2005 (RRO) and Building Regulations. Under this legislation the responsibility for fire safety in apartment buildings can be imposed on the Landlord/Freehold Proprietor for the overall building, or the Management Company for the Common Parts and the Leaseholders for apartments and common parts.
As a result, it is likely that all of these parties will have responsibility for paying for (contributing to) the replacement of flammable cladding. However, there are various factors that influence where liability lies, and I would encourage those who are unsure to seek legal advice.”
As a leaseholder or freeholder, what process do you have to go through to identify who is liable for replacing the cladding?
“The potential claims that arise in this situation include a failure to meet the statutory obligations (mentioned above) for the design of the development, for the selection of materials used in the development and for the standard of workmanship used in the development.
The key issue is who a claim of this nature should be brought by and who it may be brought against. It will be important to establish the relevant facts, to understand how the particular cladding came to be installed and whether what was actually installed on the building is the same as what was specified to be installed. The parties and contracts to be identified are the developer, building contractor and design team. What is the contractual arrangement between the leaseholders and the developer, the design professionals and the contractor/sub-contractors?
It is unlikely that each of the leaseholders will have a direct contractual relationship with the parties who built and designed the building. Without this direct contractual relationship, any claim must be brought under the principal of negligence/tort. However, these are very difficult to win. The leaseholder may have a contractual claim against the developer/landlord.
The first point of call for leaseholders would be to review the NHBC/Zurich/Checkmate warranty issued in relation to the apartment, to see if this covers the cladding. Leaseholders will also need to look at the lease, freehold documentation and management company agreement - which will set out the obligations and liabilities of each of the parties and what will be covered under the service charge. In addition, they will need to look at the insurance documentation. If leaseholders are unsure, it is important to seek legal advice."
At the time of construction my apartment building complied with regulations, however it now doesn’t – where does the liability lie?
“If cladding complies with the Building Regulations in force at the time of construction, there is no requirement under the Regulations for upgrading existing fire safety measures to current standards. However, existing non-compliances with the current Building Regulations must not be made any worse in the course of alterations or building works. Powers also exist under the Building Regulations to require unauthorised material alterations to be rectified if a breach of the Regulations resulted from the work. At any time, an application can be made to the local authority building control for ‘regularisation’ of unauthorised work carried out after 1985, enabling retrospective approval to be granted, subject to the work being satisfactory.”
Have there been any other recent cases on the liability of replacing cladding?
“We’re still waiting on a lot of the outcomes from Grenfell; however, there has been a recent case relating to two blocks of flats in Manchester, now resolved by the courts, in favour of the leaseholders and freeholders suing their insurer.
In Manchikalapati and others v Zurich Insurance plc (t/a Zurich Building Guarantee & Zurich Municipal) and others  EWCA Civ 2163, the leaseholders were the purchasers of some, but not all, of the flats in a new-build residential development known as New Lawrence House in Manchester. Defects in the development became apparent and the leaseholders and the freeholder commenced legal proceedings against:
- Zurich Insurance plc (the insurer), who provided a new home warranty (the insurance policy) in relation to the flats.
- Zurich Building Control Services Ltd (the approved inspector), who provided approved inspector services certifying compliance with the Building Regulations.
The insurance policy included a maximum liability cap (MLC) but the Court decided that the MLC applied to the total value of all the flats in the development, not to each individual apartment - as had been argued by Zurich.
In Zagora Management Ltd and others v Zurich Insurance plc and others  EWHC 140 (TCC), claims brought against an insurer by leaseholders of flats within a development succeeded on the grounds that the properties were seriously defective and required major and expensive repairs which fell within the cover afforded by the building warranties issued by the insurer. However, due to the application of the maximum liability limitations in the warranties, the claims were limited to the purchase price of the flats as declared to the insurer.
Zagora and a similar case, Lessees and Management Limited Company of Herons Court v Heronslea and others  EWHC 3309 (TCC), have further reduced the scope of potential claims against approved inspectors, with the former confirming that a claim against approved inspectors under the Defective Premises Act (DPA) 1972 will not succeed, and the latter confirming that a claim for fraudulent misrepresentation may succeed, but only if the claimants can prove both deceit by the approved inspector and reliance, the second of which is a high hurdle to pass.”
My building has been identified as having unsafe cladding, which has meant that we have had to pay for Fire Marshalls – who is liable to cover this cost?
“In the first instance, the Fire Marshalls will be appointed by the management company and the costs recouped from the leaseholders through the service charges. Such costs may be recoverable from any party who is responsible for non-compliance of the cladding, if it can be shown that the Fire Marshalls were required as a direct result of this non-compliance.”
I want to remortgage - how will unsafe cladding affect this?
“Any mortgage provider will require that a written statement must be obtained from an approved surveyor/fire officer to confirm that the property meets the requirements of the current guidance from the Ministry of Housing, Communities and Local Government (MHCLG) in relation to the cladding system (both ACM and non-ACM materials). The statement must be prepared by a suitably qualified independent professional advisor who is a member of one of the professional bodies approved by the MHCLG in Information Note 1 (or any subsequent approved list - the building has an external facade which would fall under the same category). It is unlikely that the current mortgage provider will pull the existing mortgage, but it is likely that they will move the mortgage to a less advantageous rate.”
I’m looking to sell my property – how does the unsafe cladding issue affect this?
“As any likely purchaser is going to be purchasing with a mortgage, the same procedure that applied in the answer to the previous question will also apply here. Even if the purchaser is a cash buyer, it is likely that their legal advisors and surveyors will give them the same advice.”
I had a survey done when I bought the property more years ago which didn’t highlight any fire safety issues – can I rely on this? If not, why is this?
“Any surveyor, when providing a survey on a property, is required to carry these out, exercising the reasonable skill and care that would be expected of a member of his profession. The liability of any surveyor may be caveated/limited by his terms and conditions of appointment.
“In Ryb v Conway Chartered Surveyors and others (unreported), in the first instance, the court held that a chartered surveyor, who failed to identify that Japanese knotweed was present at a property and made no mention of it in his survey report, had been negligent. The measure of damages was not the usual measure of damages in surveyors' negligence cases (the difference between the price paid and the market value of the property). Instead, it was the difference between what a hypothetical purchaser would be willing to pay with and without the knowledge that the property was affected.
It is worth noting that identifying the compliance of cladding on a high-rise building may be construed as beyond the level of skill and care expected of an average surveyor.”
If you have any questions about anything featured in this blog, please contact Phil or the Construction Team through our website.
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