This week’s legal update looks at yet another decision of the Tribunals following the fallout from the Grenfell Tower tragedy during the summer of 2017.  The focus of this particular case was the significant costs of a “waking watch” that has formed part of residential building fire safety ever since the tragedy.

In Assethold Limited -v- Adam [2022] UKUT 282 (LC) the landlord was appealing in the Upper Tribunal (“UT”) a decision made in the First-Tier Tribunal (“FTT”) that the costs of the waking watch had not been reasonably incurred by the them and were therefore not recoverable from the leaseholders under the service charge.

The background    

Assethold was the landlord of Corben Mews, a warehouse conversion in London forming two blocks (“the Building”). The respondents were the leaseholders of the flats forming part of the Building.

During February 2020, the landlord instructed a contractor, Hydrock, to survey the external walls of the Building and found that they were satisfactory, subject to the presence of timber decking on the balconies being changed to a different and more adequate material. This remedial work was undertaken.

Hydrock were then commissioned to undertake another inspection of the walls of the Building in August 2020, and in September 2020 issued a report concluding that the construction of the external walls were suitable for the Building and a significant fire risk was not present. 

However, Hydrock then undertook a third external wall assessment in January 2021 with their subsequent report, dated March 2021, advising that combustible materials were present and that the risk of fire was “extreme”. Remedial works were recommended and, in the interim, the installation of an extended fire alarm was advised or, as an alternative, the provision of a waking watch in the Building.  A waking watch consists of persons contracted to be permanently present in, and patrolling, the common parts of the building so as to warn the occupiers were fire to break out.  It is an extremely expensive service.

Immediately following the March 2021 report, Assethold, believing to be acting reasonably, instructed a waking watch to patrol the Building at a cost of £28,000 per month. In June 2021, Assethold issued the leaseholders with service charge demands to cover the cost of the waking watch. 

The FTT Decision

Following the service charge demands, the leaseholders, relying upon advice that they had obtained from their own contractors that contradicted those findings of the last Hydrock report, applied to the FTT for a determination on whether the costs of the waking watch were payable and placed reliance on two grounds:

1.       That the leases did not provide for Assethold to issue the “ad-hoc” demand that it had in the June of 2021 for the waking watch costs; and

2.       That the costs of the waking watch were not reasonably incurred - here the leaseholders were relying upon Section 19(1)(a) of the Landlord and Tenant Act 1985 (“LTA1985”).

S.19(1) LTA1985 states:

(1)    Relevant costs shall be taken into account in determining the amount of a service charge payable for a period—

(a)               only to the extent that they are reasonably incurred, and

(b)               where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard;

and the amount payable shall be limited accordingly.

The FTT agreed with the leaseholders. The leases did not provide for “ad-hoc” demands and the June demand was not payable, and, in any event, the costs of the waking watch were not reasonably incurred. The FTT was critical of the Hydrock reports in light of their inconsistent findings and determined that Assethold had failed to act reasonably in not obtaining a second opinion.

Assethold appealed.   

The Appeal to the UT

The liability to pay the ad-hoc demands was not an issue (as ultimately the cost would be picked up in the service charge at the end of the year as a deficit and thus it made no odds that the earlier June demand was contractually flawed).

Assethold was appealing the decision that the waking watch costs were not reasonably incurred. The decision of the UT is incredibly detailed with Assethold placing reliance upon the relevant test under S19(1) LTA1985.   

Assethold succeeded in their appeal under s.19(1)(a) LTA 1985 that the costs had been reasonably incurred.  The UT determined that Assethold had been properly entitled to rely upon the reports of Hydrock, a reputable firm specialising in fire safety, which recommended the waking watch as an appropriate interim fire safety measure pending completion of the fire safety remedial works. This was despite the harsh criticisms by the FTT in respect of the Hydrock reports.

However, whilst it was decided that the costs had been reasonably incurred under 19(1)(a) LTA 1985, the sum of the costs incurred in the waking watch were reduced by 50% to £14,000.00 as a result of the FTT’s assessment that the actual quality of the waking watch was not of a reasonable standard to justify the costs in full.  Accordingly, Assethold fell short in respect of s.19(1)(b) LTA 1985.  

Conclusion

This is a welcome decision for those tasked with the management of residential buildings, and not just in the fire safety arena. Where it can be shown that a landlord/management company has obtained appropriate professional advice from a reputable service provider prior to incurring costs, they will likely be protected from criticism in respect of such advice and carrying out any recommendations therein.

That said, just because it may be correct to incur such costs, the standard of the service in respect of those costs has to be reasonable and the manner of demands raised in respect of that cost must also be lease compliant (see here and here for advice on this latter point). Otherwise, a full recovery may not be achieved.  As is always the case in such matters, it is best to seek legal advice before incurring a cost in order to check that what you plan to do and how you plan to recover that cost, stands good prospects of working.

For more information, please feel free to contact a member of the team on 01435 897297 or info@kdllaw.com.

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