Overcoming the hurdles

Landlords face legal and financial hurdles in bringing their blocks of flats up to an acceptable standard

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The recent tragedy at Grenfell Tower in west London has brought into sharp focus the importance of having adequate fire safety in large blocks of flats. There has been much public debate about landlords cutting corners with fire protection or failing to retro-fit sprinklers. There are now calls for landlords to be required to bring older blocks up to modern standards of fire protection. This is an imperative but there are obstacles to achieving it. This article examines the legal and financial hurdles that landlords face in bringing their blocks up to an acceptable standard and proposes legislative reform to bring about the much needed works quickly.

Whose responsibility is it?

Everyone would agree that tenants of flats should feel safe and protected against the risk of fire, but who is responsible for funding the necessary work and will a landlord do a proper job if it cannot recoup the cost via the service charge?

Local authority landlords, or other providers of public sector housing, will usually have a varied mix of social housing tenants and tenants who have bought their flats on a long lease, usually under the Right to Buy. In local authority-owned blocks, the privately-owned flats may be let out on an assured shorthold tenancy in the private rental market. These blocks will therefore have a mix of social housing tenants, owner-occupiers and private renters.

Covering the cost

The money for the social housing tenants comes from the local authorities’ budget, but current legislation requires the management of flats let on long-leases to be self-funding through the collection of service charges. The amount that can be recovered from the owner-occupier leaseholders is, in certain circumstances, capped by the Social Landlords Mandatory Reduction of Service Charges (England) Directions 2014. Full recovery of the sums spent may therefore be impossible. The problem is even more acute in privately owned blocks because the landlord can usually only recover the cost of fire protection works via the service charge provisions in the lease if the lease obliges it to carry them out. While modern leases will normally allow for recovery, older leases are often less comprehensive.

Unless central government offers to cover the cost of the programme of works for private leaseholders as well as social tenants, landlords will try insofar as the lease allows to recover the costs from their long lessees. This is problematic because often the long-leases will not allow recovery of “improvement works”, which essentially means any works that are not repairs. If a sprinkler system is installed where there was previously none, that will be an “improvement” to the building.

St Saviours Estate

The difficulty in recovering sums spent on fire safety improvements was highlighted in Southwark Council v Lessees of St Saviours Estate [2017] UKUT 10 (LC). Following the 2009 Lakanal House fire in Camberwell, the London Borough of Southwark embarked on a borough-wide multi-million-pound investment programme to upgrade fire protection in its housing stock. This included major works to the blocks on the St Saviours Estate.

The long-lessees invoked the Landlord and Tenant Act 1985 to challenge the reasonableness and recoverability of various elements of service charge expenditure in the First-tier Tribunal, but the focus of the appeal to the Upper Tribunal was on fire-resistant front entrance doors to each flat, fire-resistant doors on the stairwells and fire-retardant coverings to the rubbish chute. It was common ground that the existing fire regulations did not require most of the front entrance doors to be fire-resistant because there was adequate means of escape. However, when constructed, the front entrance doors were fire doors. Southwark argued the almost-universal replacement of doors was due to disrepair, either because they no longer resisted fire and smoke to the as-built standard or because they had been replaced with a different door by the tenant. The tenants argued that the doors were not in disrepair and that the works constituted an improvement. The tenants were ultimately successful because Southwark’s evidence on the state of disrepair was inadequate. The tenants cannot be criticised for exercising their right to challenge the reasonableness of the major works, but this case is illustrative of the difficulties landlords can face in recovering the cost of upgrading their buildings.

Had the long-leases contained a clause allowing the recovery of fire protection measures as improvements, there would have been no difficulty in recovering the costs.

Where next?

Across the country, landlords are reviewing the safety of their blocks and are removing unsafe cladding. When this is replaced with an appropriate alternative and sprinklers have been retrofitted, the sums spent will need to be recovered and many landlords will encounter problems with recovering the cost of making the building safe.

It is vital that the law does not make landlords think twice before carrying out works that will keep tenants safe. Where recovery of the costs from long-lessees is uncertain or difficult for the landlord to achieve, it makes it more likely that works will be delayed or cancelled.  The money must come from somewhere and saying landlords should do works without any prospect of recovering it from long-lessees is unrealistic.

If the government decides that landlords – both public and private – are to be required to modernise fire protection in their blocks it must change the law. This is the most effective way of preventing lengthy and expensive litigation over whether the costs are recoverable.

In my view, parliament should legislate for three things: first, it should bring forward modern fire and building regulations for blocks of flats, which are clear about the minimum standard expected; second, it should require all blocks, whenever constructed, to comply with modern standards, in so far as it is possible, of fire protection; and third, it should imply into all long-leases a term that landlords must comply with current fire protection standards and that the costs incurred by compliance are specifically recoverable under the service charge.

This article was first published in the Estates Gazette.