A perfect storm is brewing for litigation against landlords by leaseholders in 2025. New freedom to build upwards to hit the government’s targets for new homes combined with its attempts to speed up building safety remediation following the Grenfell Tower tragedy are likely to create dual tensions. Mustafa Sidki, a specialist in commercial property litigation and dispute resolution at leading South East law firm Thackray Williams, explores the implications for commercial landlords.
More than six years on from the Grenfell Tower tragedy, the government is implementing a “Remediation Acceleration Plan” in response to the slow pace of remediation of buildings with unsafe cladding and fire safety risks, to support leaseholders and bolster the subsequent Building Safety Act 2022 (“the Act”).
In itself, the Remediation Acceleration Plan might be expected to increase litigation by leaseholders against landlords. But the potential for disputes is heightened by the government’s announcement shortly before Christmas that, as part of its reform of planning laws to resolve the UK’s “acute housing crisis”, it is relaxing rules on building extra storeys on top of blocks. The government aims to enable landlords to ‘build up’ into the airspace above residential buildings by utilising existing rights under residential leases to develop the roofs to help reduce the 1.5 million homes deficit.
Potential legal risks in development
Developing on top of buildings is straightforward when using modular construction methods, however landlords and property developers need to consider the impact of development on their covenants with leaseholders for quiet enjoyment of their flats. While such covenants don’t prohibit development, there are cases where the manner in which works were carried out were considered in breach of landlords’ covenants.
Development can lead to causes of action for damages, impeding “rights to light”, nuisance, derogations from grant, losses of amenity, Party Wall Act breaches and, with reference to the Act, fire safety issues where the Act’s threshold for a “high-risk building” is met.
A “high-risk building” is one over 18m tall or consisting of at least seven storeys, with at least two residential units. The Act imposes specific duties upon landlords to manage safety risks of such buildings and improve their design and construction. Failure to meet the Act’s provisions results in significant penalties and liabilities; when developing, landlords are required to ensure that they integrate safety considerations into the design and construction processes.
Leaseholder remediation options
Leaseholders can obtain Remediation Orders and Remediation Contribution Orders from the First-tier Tribunal under sections 123 and 124 of the Act when landlords breach their duties. A Remediation Order compels landlords to remedy defects within a specified time and a Remediation Contribution Order compels landlords to make payments in connection with the remediation of relevant defects.
The government has been forced to speed up the process of making homes safe following complaints by leaseholders, the Building Safety Regulator, the fire service and local authorities. These bodies have experienced difficulties when trying to untangle the opaque corporate structures of some landlords and enforce access by independent assessors, who have faced recalcitrance from landlords when attempting to carry out inspections.
Landlords of leaseholders living in unsafe homes that they have been unable to sell will be provided with a deadline of the end of 2029 for buildings with unsafe cladding or other fire safety risks to be remediated, or face prosecution under a new criminal offence, as well as existing financial liabilities under the Act.
Landlords cannot offload their liabilities. Even where managing agents or contractors have been appointed to repair and maintain a building, they will still be subject to penalties for non-compliance, even if it was their managing agent’s underperformance which caused breaches of duties under the Act.
Proactive strategies for landlords
Prudent landlords are proactively obtaining expert technical advice from surveyors and lawyers to ensure that they meet the requirements of the Act. With a clearer understanding now emerging about how the Act will be interpreted by tribunals, reaching a pragmatic agreement with leaseholders is an attractive option for landlords.
Exploring settlement of disputes via alternative means, such as mediation, should be a landlord’s primary focus, because a legally represented party, attending a mediation overseen by a specialist property mediator, would expect to reach settlement in 75% of cases.
This high success rate arises as the shared costs of mediation provides both parties with financial skin in the game. Plus, given that parties are usually legally represented, they have access to the expert support they require to reach a creative settlement agreement that is simply unavailable to a litigant in a trial before a tribunal, where judges are restricted to adjudging a dispute based upon a binary interpretation of the law.
This approach enables all parties to minimise costs, reduce stress and move forward, especially given that increasing tribunal applications are causing delays in litigation, meaning that if you go down that route, you can expect not only a costly experience, but a lengthy one.