Iain McIlwee, FIS CEO explores the impact of the judgment in June on the case Essendi UK Hotels 2 Ltd v London Property Company Ltd on the construction supply chain.
For understandable reasons, much of the industry’s attention since Grenfell has focused on residential buildings and the implications of the Building Safety Act. A recent High Court decision, however, is a reminder that fire safety liability is not confined to residential property. The judgment in Essendi UK Hotels 2 Ltd v London Property Company Ltd concerns a hotel rather than a residential building, but its significance extends well beyond the parties involved. It illustrates how existing legal duties, lease obligations and fire safety legislation can combine to create substantial remediation liabilities in commercial buildings. For contractors, designers, specialist subcontractors and manufacturers, the key message is straightforward: the direction of travel on fire safety accountability is not limited to the Building Safety Act and does not stop at the residential sector.
The dispute centred on a high-rise hotel clad with Aluminium Composite Material (ACM) panels containing a polyethylene core. As a hotel, the building sits outside the residential scope of the Building Safety Act 2022. When concerns about the cladding emerged, the landlord argued it was not responsible for funding replacement works. The tenant disagreed and relied on standard lease provisions requiring the landlord to maintain the building in good condition and comply with legal obligations. The court found in favour of the tenant and concluded that the landlord was obliged to remediate the fire safety risk. While the legal arguments were specific to the lease, the wider significance lies in the court’s interpretation of fire safety responsibilities in other buildings.
The case is significant because of the role played by the Regulatory Reform (Fire Safety) Order 2005. The court found that the landlord’s obligations under the Fire Safety Order were relevant and that the unsafe cladding created a duty to act. While the Building Safety Act has dominated industry discussion over recent years, this decision is a useful reminder that other pieces of legislation continue to provide routes through which fire safety failures can be challenged. In here is recognition that serious fire safety defects cannot simply be treated as historic construction issues. The court effectively concluded that a building cannot be considered to be in “good condition” where known fire safety risks remain unaddressed. In practical terms, this means that remediation of unsafe materials may be viewed not as an improvement, but as part of an owner’s obligation to keep a building safe and serviceable. This reflects a broader trend we have seen across the industry since Grenfell. Expectations have changed. Whether through regulation, enforcement activity, insurance requirements or litigation, the focus is increasingly on outcomes and building performance.
For those responsible for buildings such as hotels, student accommodation and care environments, the implications are potentially significant, but these ramifications impact the supply chain too. Although the judgment was between a landlord and tenant, experience tells us that liability rarely stops with the building owner. Where substantial remediation costs arise, parties will naturally examine their contractual rights and seek to recover losses where they believe responsibility may sit elsewhere. That can bring designers, contractors, specialist installers and product manufacturers into the frame. This is particularly relevant where questions arise around specification decisions, substitutions, interfaces or the suitability of products used within a building.
It is important to note the case does not create new liabilities for the supply chain. What it does demonstrate is that commercial building owners may face increasing pressure to address historic fire safety issues and, where the can, pursue recovery from others involved in the delivery of a project. Faced with remediation costs, operational disruption and potential business interruption losses, owners are likely to look closely at their contractual rights and seek to recover costs from those involved in the design, specification, manufacture or installation of the affected systems. That could bring designers, manufacturers, and contractors into scope where questions arise around product performance, compliance, installation quality or specification decisions. While the judgment does not create any new causes of action, it may increase the likelihood of claimants pursuing existing remedies, including breach of contract claims, actions under collateral warranties, claims against professional consultants under their appointments, recovery under indemnity provisions, negligence claims and, where applicable, claims arising from breaches of Building Regulations under Section 38 of the Building Act 1984.
Importantly, unlike residential claims pursued under the Defective Premises Act, these commercial claims do not benefit from the Building Safety Act’s 30-year retrospective limitation period. Instead, they remain subject to the more traditional limitation framework: generally six years for claims under simple contracts, twelve years where contracts or warranties have been executed as deeds, and up to fifteen years for certain statutory and negligence-based claims. As a result, whilst the case is likely to focus attention on potential recovery actions across the supply chain, the practical question in many instances will be whether a viable claim remains within time. For projects completed within the last 12 to 15 years, however, this judgment is likely to prompt renewed scrutiny of historic decisions relating to fire safety, product selection and system performance.
A key takeaway from this case is that the industry’s post-Grenfell reset is continuing to evolve.
The case reinforces a principle that is becoming increasingly familiar: where significant fire safety risks are identified, courts are likely to look beyond technical arguments about historical responsibility and focus on whether those risks are being adequately addressed. For everyone involved in the construction and operation of buildings, that should serve as a reminder that competence, documentation and clear accountability remain our strongest safeguards against future disputes.
FIS Members has a range of support services should a company experience a legacy claim via our Building Safety Toolkit here.
FIS has a range of courses to help companies understand the Building Safety Act an its impact on ALL buildings, these are available via the FIS Academy.
