The Technology and Construction Court has recently handed down judgment in Essendi UK Hotels 2 Ltd v London Property Company Ltd [2026] EWHC 1354 (TCC), a significant decision concerning responsibility for dangerous cladding under a commercial lease.
Whilst much of the post-Grenfell litigation has focused on residential buildings and the Building Safety Act 2022, this case concerned a hotel and demonstrates that traditional lease obligations may provide a route to compel building safety remediation where the statutory building safety regime does not directly apply.
Background
The dispute concerned the Ibis London Wembley Hotel, a 16-storey hotel operated by Essendi UK Hotels 2 Ltd (formerly Accor UK Economy Hotels Ltd) (“Essendi”). The building had been reclad in 2005–2006 using aluminium composite material (“ACM”) panels containing a polyethylene (PE) core.
Following investigations undertaken after the Grenfell Tower tragedy, it became apparent that the panels were Category 3 ACM cladding. Both parties’ fire safety experts agreed that the cladding presented an intolerable fire risk and required removal and replacement.
Essendi, as tenant and hotel operator, argued that the landlord, London Property Company Ltd (“LPC”), was responsible for carrying out the remediation works under the terms of the lease. LPC denied liability and argued that Essendi had originally procured the cladding when it owned the building and should therefore bear responsibility.
The case also considered whether Essendi was entitled to recover losses arising from its decision to close the hotel in July 2025 because of the fire safety risks.
Can dangerous cladding place a building in breach of a repairing covenant?
One of the principal issues before the Court was whether the presence of dangerous ACM cladding meant that the building was not being kept in the “good and substantial condition” required by the landlord’s covenant.
LPC argued that the cladding itself remained physically intact and that the covenant was not intended to require wholesale replacement of an otherwise functioning building component. The Court disagreed.
The Judge held that a building element may fail to satisfy a good condition covenant where it presents a serious safety defect, even if it has not physically deteriorated. The fact that the ACM panels created an intolerable fire risk meant that the building was not being kept in the condition required by the lease.
The judgment confirms that the concept of “good condition” is capable of extending beyond physical disrepair and may encompass serious safety defects affecting the continued safe use of a building.
Compliance with legal obligations
Essendi also relied upon provisions in the lease requiring the landlord to comply with legal obligations affecting the retained parts of the property. The Court found that LPC’s obligations under the Regulatory Reform (Fire Safety) Order 2005 were engaged. Given the accepted fire safety risks associated with the Category 3 ACM cladding, LPC’s failure to remove and replace the cladding constituted a breach of those obligations. Importantly, the Court held that this represented an independent basis for liability, separate from the good condition covenant.
Could the landlord shift responsibility back to the tenant?
A key feature of the case was that Essendi had originally commissioned the recladding works in 2005–2006 when it still owned the building. LPC sought to rely upon provisions in an earlier lease which allocated responsibility for cladding defects to Essendi until a specified cut-off date in May 2017. LPC argued that Essendi either knew or ought to have known before that date that the cladding was defective and dangerous. The Court rejected that argument.
Having regard to the wording of the lease and its wider commercial context, the Judge held that the covenant extended beyond conventional physical disrepair. The intolerable fire risk presented by the ACM cladding meant that the building was not in the condition required by the lease, notwithstanding that the panels themselves had not physically deteriorated.
The decision therefore demonstrates that, depending on the wording and context of the lease, a condition covenant may extend to serious safety defects even where there has been no conventional physical deterioration.
Was the hotel closure reasonable?
Another important issue concerned Essendi’s decision to close the hotel in July 2025. LPC argued that the closure was unnecessary and driven by litigation strategy rather than genuine safety concerns. The Court rejected that suggestion. The Judge found that Essendi’s decision was reasonable in light of the expert fire safety evidence and that the closure was caused by LPC’s breaches. Accordingly, Essendi was entitled to pursue a claim for losses arising from the closure, with the amount of those losses to be determined at a later stage.
Specific performance ordered
The most significant aspect of the judgment is likely the remedy granted. Rather than limiting Essendi to a claim for damages, the Court ordered specific performance requiring LPC to remove the dangerous ACM cladding and replace it with suitable alternative materials.
The order required the ACM cladding to be removed within six months and replaced within an overall period of eighteen months. This demonstrates the Court’s willingness to grant mandatory orders where serious building safety defects remain unresolved and where damages alone would not provide an adequate remedy.
Why this Decision matters
The decision demonstrates that traditional landlord and tenant obligations may provide an effective route for addressing serious building safety defects outside the Building Safety Act regime.
It also shows that liability may turn on more than whether a building component has physically deteriorated. Depending on the wording and commercial context of the lease, serious safety defects may place a building outside the condition required by the parties’ contractual obligations.
For owners, investors, landlords and occupiers of commercial buildings, the case serves as a reminder that lease obligations should be reviewed carefully when building safety issues arise, as liability may ultimately depend on the wording of the lease rather than solely on statutory building safety legislation.
How CCC Can Help
Building safety disputes often involve complex questions concerning lease interpretation, responsibility for defects, statutory compliance and recovery of remediation costs. At Contract & Construction Consultants (CCC), we assist contractors, developers, landlords, tenants and property owners with the preparation and defence of construction claims, including disputes relating to cladding remediation, extensions of time, loss and expense, final accounts and adjudication proceedings. Early legal and contractual analysis can often be critical in identifying where responsibility lies and protecting a party’s position before disputes escalate.
