JB Leitch Secure Further Building Safety Successes

The JB Leitch litigation team have further consolidated their reputation and expertise in building safety and tribunal matters, with two successful determinations for dispensation and the variation of multiple leases last week.

Both matters concerned the same property, comprised of two residential apartment blocks (of seventeen storeys with 182 individual apartments) with JB Leitch acting for the Right to Manage (RTM) Company.

Securing Dispensation

The first matter concerned an application for dispensation from all or some of the section 20 consultation requirements, in respect of qualifying works to install a fire alarm system at the property in order to reduce the extent of the waking watch currently in place and also to reduce the financial burden to Leaseholders by the operation of the waking watch.

The urgency of the work was identified in reports from both the Fire Service and a building safety consultancy commissioned to review the building cladding system, which found that that the High-Pressure Laminate Panels enclosing the roof top apartments were “…not fire resistant, has a Class D Fire Rating and is a significant fire risk to the property.” The report advised that the property was no longer suitable for a “stay put” strategy in the event of fire and a “simultaneous evacuation” strategy should be adopted. The Fire Service added their advice to “incorporate a simultaneous evacuation system to any block that has a form of flammable cladding.”

The respondent’s objections included that the intended works were an improvement and therefore not covered by the Lease and that there was no urgency or proper basis to dispense with the consultation. The respondent also noted that the applicant had sought to avoid Leaseholder scrutiny by the application and there was a failure to inform Leaseholders of the intention to apply for dispensation.

Our response countered that a significant risk of fire requires urgent action, as highlighted in the reports, that there had been appropriate engagement with Leaseholders via a series of updates and monthly bulletins, zoom meetings and a Notice of Intention. On the matter of costs, it was highlighted that the Lease did allow for “providing operating … and adding to any security, firefighting appliances … fire alarm system”.

Dispensation from full consultation was granted. The Tribunal found that this provision enabled the Applicant to carry out the proposed works of installing a fire alarm, and further acknowledged that there is a degree of urgency given that the alarm system will significantly improve the process of giving warning the residents to evacuate. The summary also noted that Leaseholders had received adequate documentation and updates, and that the costs of the system would mitigate those of the waking watch.

Lease Variation & Inclusion of Interim Expenditure

The second matter focused on a variation of all long residential underleases at the property, to allow inclusion of interim expenditure under the service charge clauses.

The need for the application was the discovery of fire safety issues at the property, with the Applicant experiencing difficulty in arranging insurance cover which is only available at a much higher premium than it estimated for the advance payment of the service charge. The Applicant wished to recover those higher premiums by way of a supplemental demand payable within the current financial year.  With the urgency of installing a fire alarm system, a supplemental demand would also need to be made within the same period. The terms of the Lease did not allow the Applicant to demand a service charge payment within the financial year, and as an RTM company has no funds of its own to cover service charge costs which arise. Our application addressed the following key points:

• Should a variation be made if the leases failed to make satisfactory provision?

The arguments raised in respect of the additional service charge obligation and limiting the variation on a one off basis would not work in accordance with the Landlord and Tenant Act. The provision, as JB Leitch drafted, allowed for interim demands to be served in respect of other expenditure including the fire alarm and any other unforeseen expenditure.

• Was the variation within the grounds of section 35(2)(e) of the Act, that is to say, did the underleases fail to make satisfactory provision?

It was highlighted that the Act states “recovery by one party to the lease from another party to it of expenditure incurred or to be incurred by him, or on his behalf, for the benefit of that other party or of a number of persons who include that other party.”

• Did the variation make satisfactory provision?

The Tribunal found that the draft does provide adequately for the service of interim demands, thereby enabling the Applicant to serve a supplemental demand more than once in the financial year without notice.

The Tribunal determined that the underleases failed to make satisfactory provision for costs that may be incurred and require to be paid in the course of the financial year and the proposed variation was required to meet this need.  It had been shown in that it would not be possible for the Applicant as a RTM Company to insure the property without the proposed variation. Also, it would not have been possible to carry out urgent works for the safety of the Leaseholders which arise and for which payment is required during a current financial year.

It is noteworthy that the Tribunal also found that the recovery by the Applicant from the Leaseholders of the expenditure incurred (or to be incurred) is for the benefit of the Leaseholders. Indeed, so far as the expenditure in the present circumstances it would be detrimental to the Leaseholders for it not to be paid.

Associate Katie Edwards comments: “Both cases serve to illustrate the ongoing prioritisation and urgency of safety works, the obligations of all parties and challenges in areas such as insurance. In a climate of uncertainty and evolving legislation, we are delighted to have provided both clear guidance and positive results for our client”.