No qualifying leaseholder will be required to contribute to the cost to remediate unsafe cladding, even where it isn't a "relevant defect"

In Centre Point House, the 93 page decision of the First-tier Tribunal, provides useful reminders on the role of experts, where works to inherent defects fall within repair obligations, tendering exercises, and held that the leaseholder protections in respect of unsafe cladding, afforded under Schedule 8 of the Building Safety Act, apply to all unsafe cladding, not just for a "relevant defect".

Centre Point House (CPH) was constructed in around 1987. It has a cladding system which, since at least 2000, has been in want of repair. Following reports, investigations and discussions, the façade had continued to deteriorate, with instances of part of the façade falling from the building. 

In 2023, the Landlord, having decided to undertake works to overclad the façade (the Proposed Scheme), made an application for a determination of reasonableness and payability of the Proposed Works via the service charge, under s.27A(3) of the Landlord and Tenant Act 1985. 

The FTT first considered the question of whether, if costs were incurred for the Proposed Scheme, would a service charge be payable and, if so, by whom. The FTT determined  that the façade was not in good and substantial repair and condition,  and the leaseholders are obligated, under the lease, to contribute, via the service charge, towards the Proposed Works. 

The FTT also determined that the Proposed Scheme was works to put the façade in good and substantial repair and condition; this was largely  conceded by many leaseholders. However, some disputed this, arguing the works were an improvement. The FTT in making its decision raised concerns about the advice leaseholders obtained from their former expert, finding that the unnamed expert fell into error and went beyond his expertise. The expert gave legal advice and failed to consider whether he had the relevant expertise on façade systems; the expert ultimately becoming a subjective participant in the dispute, rather than an objective expert. 

With respect to tendering and market testing, the Landlord only receiving two tender  returns; only one was compliant. The FTT held that receipt of only two returns did not invalidate the tender process, reiterating that it is for the Landlord to balance the risks and make its election as to the approach to be taken; making a reasonable decision.

Turning to the BSA, it was common ground that CPH is a "relevant building" for the purposes of the BSA.

Paragraph 8(1) of schedule 8 provides that no service charge is payable under a qualifying lease in respect of cladding remediation. At the time of the hearing, the leaseholders hadn't provided (and hadn't been asked for) a leaseholder deed of certificate; they were presumed to hold qualifying leases.
 
The FTT held that the effect of paragraph 8(1) is that no qualifying leaseholder will ever have to pay for unsafe cladding remediation. It is distinct protection outside of the waterfall protections, not contingent on there being a "relevant defect". It was irrelevant that the cladding wasn't put on the building within the "relevant period", the 30 years prior to 14 February 2022. 

The FTT further considered what is "cladding". "Cladding" is not defined in the BSA, and there is no universal definition of a "cladding system" or "cladding" in the construction industry. The FTT considered the definition of cladding and RICS Guidance, and held that the facade at CPH fell within those definitions; the drafting in the BSA has been done widely, to include part of an external wall system and a separate part affixed on an external wall. 

"Unsafe" is also not defined in the BSA. It was held that "unsafe" is more than simply out of repair; it is a wide term to encompass a range of threats to the safety of the building, its residents or nearby members of the public. The experts were in agreement that the system at CPH was unsafe. 

Consequently, the FTT determined that the protection under paragraph 8(1) of schedule 8 applied to the qualifying leaseholders. No service charge is payable by them in respect of the Proposed Scheme. 

Moreover, as the contract for the Proposed Works was a qualifying long-term agreement within the meaning of section 20 of the 1985 Act, the FTT held that as the QLTA was entirely in pursuit of the Proposed Works, then none of the costs of it would be payable by those qualifying leaseholders.

Lastly, the FTT considered at the question of set-off but determined that the application made was not wide enough to bring within its scope the "liability question" in respect of set-off. 

It is understood that the landlord has applied for permission to appeal the decision. In the meantime, this decision is likely to be persuasive.

By allowing the cladding to deteriorate to such a condition that it was "unsafe", the Schedule 8 protections were engaged; those responsible for the repair and maintenance of buildings with claddings, should ensure that, where remedial works are required to cladding, if they wish to recover the cost of such works, that works are done before it is allowed to become "unsafe". 

Furthermore, in keeping with recent decisions, the FTT has given a further reminder of the importance of parties ensuring that the right expert is chosen, and that any expert appropriately takes into account any evidence that doesn't support their own conclusions. Experts are also reminded that it is for them to point out if they are not the appropriate expert for the job.