By Nicholas Kissen, Senior Adviser, LEASE.

On 9 March the decision in Firstport Property Services Limited v The various long leaseholders of Citiscape was delivered by the First-tier Tribunal (Property Chamber) (the F-t T).

Upholding the application made by the managers of the building the F-t T decided , under the terms of the lease in this particular case, the cost of providing fire marshals for a “Waking Watch” up to 19 December 2017 and the replacement of the cladding is recoverable through the service charges.

Background

Following the fire at Grenfell Tower on 14 June 2017 the manager first became aware within a matter of days that the cladding to the building might represent a fire risk.

The day after the London Fire Brigade attended the building the manager commissioned an independent subcontractor to provide a fire marshal (“Waking Watch”) at a cost of £14.75 plus VAT per hour and whose job essentially involved patrolling each block constantly and in the event of a fire to make sure the building was evacuated.

The budget for the service charge year beginning 1 September 2017 included an estimate of the cost of replacing the cladding in the amount of £483,000. This figure was advised by the manager’s internal surveyor.

The budget did not include an estimated figure for the waking watch costs.

Interim service charge demands were issued on 4 September 2017.

Following a second inspection by the London Fire Brigade a second fire marshal was provided for periods when the estate supervisor was not on duty.

The weekly cost of the waking watch is currently £4,216.59 (+ VAT) or £263,000 per year approximately.

A cladding replacement feasibility report commissioned from Chartered Surveyors recorded that the building has the type of cladding as Grenfell Tower and recommended replacement and gave two options:

• Completing the work as a single continuous project-estimated cost of around £1.8 million
• Phased approach-cladding removed and then replaced at a later date-estimated cost of around £2.5 million

In other words, at least a four times increase over the estimated costs included in the budget.

The issues in the dispute were bracketed under four questions

1. Are the waking costs being reasonably incurred?
2. Is a service charge payable by the leaseholders in respect of the waking watch costs?
3. Is the estimated cost of £483,000 for the recladding included in the 2017/18 budget reasonable within the meaning of section 19(2) of the 1985 Act?
4. Is a service charge payable by the leaseholders in respect of that estimated cost?

1. Are the waking costs being reasonably incurred?

The F-t T said it is impossible to criticise the manager for the initial decisions to implement a waking watch and to double the number of fire marshals. That being said after the Fire Safety Guidance Notice (FSGN) was published on 19 September 2017 the manager should have given active consideration to the other approaches recommended which are: 

• Installation of a common fire alarm system, said to be the preferable approach where cladding represents a significant hazard on buildings over 18 meters in height and cannot be replaced/removed in the short term; or
• Reliance on waking watches to detect presence of fire and manually to initiate fire alarm sounders that would alert all residents of the need to evacuate. This option would require a limited number of fire marshals to operate the alarm sounders within 10-15 minutes of operation of a smoke alarm within a flat

The third option being the full waking waking watch deployed in this case was “the least reliable” option.

The F-t T said three months would have been a reasonable time to consider the other approaches and to ask the flatowners for their views.

The F-t T considered it was reasonable for the Manager to initially commission fire marshals from an independent subcontractor and that there was no cogent evidence to suggest the hourly cost per marshal was unreasonable. It went on to say:

“Consequently on the basis of the evidence before us we are satisfied that the costs incurred in the waking watch to 19 December 2017 were reasonably incurred. On the evidence before us we cannot at this time reach a conclusion as to the reasonableness of the costs incurred beyond that date.”

2. Is a service charge payable by the leaseholders in respect of the waking watch costs?

The F-t T was satisfied that the waking watch costs is recoverable under the following clauses in the Citiscape lease:

• “Complying with the requirements and directions of any competent authority and with the provisions of all statutes and all regulations orders and bye-laws made thereunder relating to the Development insofar as such compliance is not the responsibility of the lessee of any of the Dwellings.”
  
  The FSGN issued by the London Fire Brigade on 19 September 2017 falls within the ambit of the “requirements and directions of any competent authority”.
  
• “All other reasonable and proper expenses (if any) incurred by the Manager in and about the maintenance and proper and convenient management and running of the Development”.

3. Is the estimated cost of £483,000 for the recladding included in the 2017/18 budget reasonable within the meaning of section 19 (2) of the 1985 Act?

The F-t T found that the estimated recladding cost was reasonable.

The new service charge year commenced about 11 weeks after the Grenfell fire that took place on 14 June 2017. The Manager commissioned three reports with the last being received on 21 July 2017. By that date the manager was aware that recladding would almost certainly be required.

The manager then had almost six weeks to obtain an estimate for the work involved in order to include it in the 2017/18 budget. 

The F-t T felt: “In such circumstances it was entirely reasonable to turn to the in-house surveyor. Equally there is nothing that leads us to conclude that the in-house surveyor acted unreasonably.”

The F-t T considered the leaseholders had not been prejudiced by the low estimate, because in the event that the on-account payments of 2017/18 are made there will be enough to remove the cladding and safeguard the underlying structure by covered scaffolding and so enable the manager to safely end the waking watch and cap its cost.

4. Is a service charge payable by the leaseholders in respect of that estimated cost?

The F-t T considered that the following underlined words among the Manager’s obligations in the lease went beyond simple repair –

“Inspecting rebuilding re-pointing repairing cleaning renewing or otherwise treating as necessary and keeping the Maintained Property comprised in the Block and every part thereof in good and substantial repair order and condition and renewing and replacing all worn or damaged parts thereof.

Furthermore the F-t T considered the Manager’s obligation of “rectifying or making good any inherent structural defects” encompasses the removal of the defective cladding and its replacement with fire resistant cladding.

The F-t T considered leaseholders may have claims against other parties such as the manufacturer of the cladding, in particular if any warranties were given as to its suitability; or the developers if they were negligent as to the selection and installation of the cladding.

“The difficulty with all these potential claims is that they are entirely speculative with uncertain outcomes”.

Points to note:

• This case turns on the wording of this particular lease and the evidence before the F-t T.
  
• Those continuing to incur ongoing waking watch costs should review that approach with the Fire Safety Guidance Notice in mind.
  
• Check the lease to see if the managing agent can insist that you pay towards the costs of fire safety measures.
  
  Look out for wording that refers to costs arising from:
  “Complying with the requirements and directions of any competent authority and with the provisions of all statutes and all regulations orders and bye-laws made thereunder relating to the Development insofar as such compliance is not the responsibility of the lessee of any of the Dwellings.”
  and/or
  “All other reasonable and proper expenses (if any) incurred by the Manager in and about the maintenance and proper and convenient management and running of the Development”.