The High Court’s decision in Essendi UK Hotels 2 Ltd v London Property Company Ltd ("LPC") is an important development, particularly for parties dealing with fire safety defects in non-residential buildings.
The case concerned the Ibis London Wembley hotel, a purpose built, 16 storey, 210 room hotel which was clad with combustible cladding. The Court found that the cladding presented an “intolerable risk” and should be removed and replaced.
What makes the case particularly significant is that the building was a hotel, so the statutory remedies and enforcement powers under the Building Safety Act 2022 did not apply in the same way as it would for certain residential buildings. The tenant therefore relied on the terms of the commercial lease. The Court accepted that approach and held that the landlord was in breach of both its covenant to keep the retained parts in good condition and its covenant to comply with legal obligations, including obligations arising under the Regulatory Reform (Fire Safety) Order 2005.
The Court also held that the tenant’s decision to close the hotel in July 2025 was a reasonable response to the landlord’s failure to act, and that the tenant could pursue damages flowing from that closure, in addition to obtaining specific performance requiring the landlord to remove and replace the cladding.
Facts
The hotel was originally developed by Essendi in 2002. In or around 2005, replacement cladding was installed after problems arose with the original façade.
At the time, there was no evidence that Essendi or its advisers appreciated the specific fire risk associated with the replacement cladding, and the Court found there was no basis for finding that Essendi knew, or ought to have known, that the cladding posed a fire safety risk.
In 2007, Essendi entered into a sale and leaseback arrangement. Under the original lease, the landlord retained responsibility for the structure and exterior, but there were bespoke provisions in respect of the cladding which made Essendi responsible up to a “cut-off date” of 22 May 2017. LPC argued that these provisions meant Essendi remained responsible for the defects in cladding or had to indemnify the landlord. The judge rejected that argument, largely because LPC could not establish that Essendi knew or should have known about the dangerous nature of the cladding before the cut-off date.
In 2018, LPC acquired the freehold. A new lease was then granted to Essendi in 2019. Importantly, the judge noted that the specific cladding carve-out provisions from the original lease were not carried forward into the current lease. The current lease therefore fell to be interpreted on its own terms, including the landlord’s obligations in relation to the structure and exterior and compliance with legal obligations.
By 2024, investigations confirmed that the hotel cladding was dangerous from a fire risk perspective. Essendi notified the landlord and relevant authorities. Essendi then obtained further fire risk safety advice suggesting that the hotel should close until the unsafe cladding was removed. Essendi closed the hotel on 29 July 2025.
Decision
The defendant landlord (LPC) declined to remove and replace the cladding. The tenant (Essendi) therefore bought a claim under two covenants in the lease: (i) a covenant requiring the landlord to put and keep the exterior of the building in good condition; and (ii) a covenant requiring the landlord to comply with all legal obligations.
The High Court held that the landlord was in breach of both these covenants.
First, the Judge found that the covenant by the landlord to put and keep the building in good condition would include an obligation to remove and replace the cladding, or to address any other inherent defect which: (a) creates a significant fire safety risk; and (b) requires remediation, both to make the building reasonably safe for occupation and to comply with the obligations imposed on the responsible person under the Regulatory Reform (Fire Safety) Order 2005 ("FSO").
Secondly, the Court held that the landlord was in breach of its covenant to comply with legal obligations, including those held as the 'responsible person' under the FSO. In that context, the Judge found that LPC, as the responsible person, had a duty under Article 12 to eliminate or reduce as far as is reasonably practicable the risk arising from the presence of the cladding, which was found to be a "dangerous substance". This of itself necessitated that the cladding be removed and replaced with a non-combustible alternative.
This is the first decision that we are aware of under which the Court has considered a responsible persons' duties under the FSO in this context.
The Court ordered specific performance, requiring removal of the cladding within six months and replacement with suitable alternative cladding within 18 months overall.
The Court also held that Essendi’s decision to close the hotel was reasonable and caused by the landlord’s breaches. That leaves the tenant able to pursue damages arising from the closure.
What this means for landlords, tenants and property owners
For landlords, the decision is a clear warning that building safety risk in a commercial property cannot be viewed only through the traditional lens of “repair” versus “inherent defect”. If the lease requires the landlord to keep retained parts in good condition, and the building envelope contains a serious fire safety defect, the landlord may face an obligation to remediate even where the problem originated many years earlier and was not expressly addressed in the current lease.
The judgment also shows that Courts may be willing to interpret legal compliance covenants robustly where the FSO points towards remediation.
For tenants, the case shows that lease covenants can provide a route to compel action for remediation in non-residential buildings. That will be particularly relevant for occupiers of hotels, offices, student accommodation, healthcare premises and other non-residential or mixed-use buildings that fall outside the statutory residential building safety framework. However, the case also demonstrates the practical and commercial cost of delay. Essendi ultimately closed the hotel and will now have to pursue a damages claim, rather than obtaining a quick operational solution.
For property owners and asset managers, the judgment underlines the importance of investigation, record-keeping and decisive action where fire safety concerns arise. One of the striking features of the case was the history of uncertainty, repeated opportunities to investigate, and reluctance to engage fully with the possibility that the building's cladding was dangerous. The Court was critical of the lack of meaningful progress once the issue had been squarely raised. That is a reminder that failing to investigate or delaying decisions can materially worsen legal exposure.
For all entities who hold duties as a responsible person under the FSO, this decision confirms that the Court will interpret and enforce those obligations to promote the safety of people in and around the premises.
More broadly, this case will likely prompt closer scrutiny of standard lease wording across commercial real estate portfolios. Parties may now wish to revisit how leases allocate responsibility for the structure, exterior, fire safety compliance, and latent or historic defects.
Finally, the case is a reminder that the consequences of non-remediation are not limited to the cost of the works themselves. Here, the Court accepted that closure losses may be recoverable because the tenant acted reasonably in response to the landlord’s breach.
