Landmark High Court ruling shifts hotel cladding liability

However, in Essendi UK Hotels 2 Ltd (formerly Accor UK Economy Hotels Ltd) v London Property Co Ltd [2026] EWHC 1354, the High Court ordered a landlord to replace dangerous cladding to a hotel near Wembley, even though that cladding had originally been installed by the tenant.

After the Grenfell fire, the tenant (Essendi) raised its concerns with the landlord that the cladding might have a dangerous polyethylene core between its aluminium panels – Category 3 highly combustible panels. The Landlord disputed this. The tenant carried out its own investigations in 2024 which established that it did.

Following receipt of advice from two fire experts, including consideration of whether mitigation measures could be taken to enable the hotel to be kept open until the cladding was removed, the tenant came to the conclusion that it should close the hotel and did so on 29 July 2025. 

The court also held that the decision to close the hotel was reasonable and that the reasonable losses the tenant company would therefore suffer are recoverable from the landlord. The amount of those losses needs to be agreed by the parties or settled by another trial.

The tenant owned the freehold and constructed the building itself in 2005. It later entered into a sale and leaseback arrangement with another company, which, after that, sold the freehold to London Property Co Ltd. That lease made the tenant responsible for any defects in the cladding arising before a “cut-off date” of 22 May 2017. That was the 12th anniversary of the date of the building contract that the tenant had entered into with a contractor for the construction of the hotel and therefore the last date that Essendi could take action against the contractor if problems arose with the building or the cladding.  

That lease expired in 2017 and was finally replaced with a new one in 2019, which made the cladding the landlord’s responsibility. Under the new lease, the landlord was liable to put and keep the building structure, exterior and cladding in good and substantial repair and condition (a good condition covenant) and undertake works required by legal obligations (legal obligations covenant). The landlord had no right to recover such costs from the tenant under a service charge.

The general presumption when interpreting a “good repair and condition” clause in a lease is that it is not engaged until there is actual disrepair. In this case, however, the judge held that, post-Grenfell, in the case of a multi-storey building with sleeping accommodation, a “good condition” covenant can require the removal of dangerous cladding even where there is no actual disrepair.

The lease also contained an obligation on the landlord to comply with the law in relation to the structure and cladding. Under The Regulatory Reform (Fire Safety) Order 2005 the landlord was the “responsible person” for the structure and exterior. The cladding was held to be a “dangerous substance” under Art 2(b) of the Order and thus the landlord was held liable to remedy it.

Not every lease of such a building (other than those protected under the Building Safety Act) will enable a tenant to make its landlord carry out remedial work to the structure or cladding, where the landlord retains responsibility for either: much will depend on the wording of the lease. Indeed, a lease might make the landlord responsible but able to recover the costs from the tenant under a service charge.

However, this case emphasises the importance of fire and building safety risks, particularly where there is a tall building in which people sleep. We wait to see if leases of, for example, office buildings might, depending on their wording, also be interpreted by the courts so as to ensure that at least one party must remediate dangerous cladding or other serious fire safety risks where there is no actual disrepair. 

There will be careful consideration of “good condition” covenants and covenants to comply with legislation.

If you're concerened that your commercial lease is hiding an unaddressed cladding risk, get in touch with our Commercial Property team on 020 8290 0440 to arrange a consultation.