Essendi UK Hotels 2 Limited v London Property Company Limited

Summary

The tower block housing the Ibis Wembley hotel is clad in the combustible aluminium composite material implicated in the Grenfell fire. Both sides' fire experts agreed it is an intolerable risk and must be removed. The dispute was who pays: the hotel operator as tenant, or the building owner as landlord.

The tenant sued the landlord under the lease, arguing that the landlord's good condition covenant and its legal obligations covenant, read with the Fire Safety Order, required the landlord to replace the cladding, and that not to do so derogated from its grant. The landlord denied liability and counterclaimed on the tenant's earlier remedial obligations, since the tenant had installed the cladding in 2005 when it owned the building.

His Honour Judge Stephen Davies found for the tenant. The landlord was in breach of both covenants, its counterclaim failed, and the tenant's decision to close the hotel was reasonable. The court ordered specific performance requiring the landlord to remove the cladding within six months and replace it within eighteen.

Background and facts

Essendi, formerly part of the Accor hotel group, is the tenant and operator of the Ibis London Wembley hotel. London Property Company is the landlord and owner of the building.

The external panels are category 3 aluminium composite material, a sandwich of aluminium sheets around a highly combustible polyethylene core, the type of panel that was a principal cause of the Grenfell Tower fire. The parties' fire safety experts agreed the panels are an intolerable fire risk and must be removed.

Essendi itself had engaged contractors to install these panels in 2005, when it owned the whole building. When it later granted a lease to the landlord's predecessor, it took on bespoke remedial and indemnity obligations for defects in the cladding until a cut-off date. That cut-off date fell just under a month before the Grenfell fire.

After Grenfell, the fire safety risk of these panels was recognised. Essendi called on the landlord to remove and replace the cladding. When that did not happen, Essendi closed the hotel on 29 July 2025 and brought proceedings. The trial decided liability, including responsibility for the closure losses, with quantum left to a later trial.

The issue

The court had to decide whether the landlord was liable to replace the cladding under the lease, on three routes: the landlord's good condition covenant, its legal obligations covenant read with the Fire Safety Order, and the covenant not to derogate from grant. It also had to decide whether the landlord could escape liability by relying on the tenant's earlier remedial and indemnity obligations, whether the closure was reasonable, and whether specific performance should be ordered.

The claim was an unusual one. The judge described it in these terms:

"Essendi's arguments are novel, in that it is relying on these landlord covenants under a commercial lease to obtain what is, in substance, a building safety remediation order against LPC, in circumstances where the Building Safety Act 2022 does not apply to certain categories of buildings, including hotels."His Honour Judge Stephen Davies, paragraph 3

The decision

The judge found for the tenant on the core questions.

The landlord was in breach of the good condition covenant by failing to remove and replace the category 3 cladding. Its defence and counterclaim, built on the tenant's obligations under the original lease, failed. The cut-off date for those obligations had passed just before Grenfell, and the landlord could not show that the tenant was strictly liable for the cladding being defective, or that the tenant was or should have been on notice of the fire safety risk before that date.

The landlord was also, and independently, in breach of the legal obligations covenant, by reference to its duties under the Fire Safety Order. The one route that failed was derogation from grant: the landlord had not breached the implied covenant not to derogate.

The tenant's decision to close the hotel on 29 July 2025 was caused, in fact and in law, by the landlord's breaches and was a reasonable decision in the circumstances. The court granted specific performance:

"Essendi is entitled to an order for specific performance requiring LPC to: (a) remove the category 3 ACM cladding panels within 6 months; and (b) replace them with suitable alternative external cladding within an overall period of 18 months."His Honour Judge Stephen Davies, paragraph 12

The tenant could also proceed to an assessment of its damages, including its closure losses, at a further trial.

Practical implications

This decision opens a route to cladding remediation outside the Building Safety Act. The remediation regime in that Act does not reach every building, and hotels are among those it does not cover. Where the statute does not apply, the ordinary terms of a lease can still put the burden on the landlord, and a tenant can enforce them by specific performance.

Landlord covenants are doing heavy work in the cladding context. A good condition covenant, and a covenant to comply with legal obligations read with the Fire Safety Order, were each enough on their own to make the landlord responsible for removing an intolerable fire risk. Owners of clad buildings let on commercial leases should read those covenants as potential remediation obligations, not routine boilerplate.

Historic remedial and indemnity obligations may not rescue a landlord. Even though the tenant had installed the cladding and given remedial covenants, the landlord could not fall back on them, because the cut-off date preceded Grenfell and the tenant was not strictly liable and not on notice of the risk at that time. Knowledge of fire safety risk is judged against what was understood then, and pre-Grenfell cut-offs may leave the current owner exposed.

Specific performance with a fixed timetable is available for cladding works. The court did not leave the parties to argue about cost while the risk remained, but ordered removal within six months and replacement within eighteen. A party facing an intolerable fire risk should consider whether the other side is already bound to act, and press for an order that gets the work done rather than a damages claim after the event.

The judge also criticised both sides for letting the argument about who pays defeat a sensible interim solution, with the result that one of them will bear avoidable closure and remedial costs. Where experts agree the building is dangerous, the commercial and litigation risk of standing on rights until trial is considerable.

Essendi UK Hotels 2 Limited (formerly Accor UK Economy Hotels Limited) v London Property Company Limited [2026] EWHC 1354 (TCC), Technology and Construction Court, His Honour Judge Stephen Davies sitting as a High Court Judge. Judgment handed down 5 June 2026.