The recent cladding decision in Essendi UK Hotels 2 Ltd v London Property Company Ltd [2026] EWHC 1354 (TCC) is an important development in the law relating to fire safety, cladding remediation and commercial leases.
The judgment, handed down on 5 June 2026, addresses a number of significant cladding and fire safety issues that had not previously been determined in this context. The claim concerned a high-rise hotel building in Wembley, let to the claimant tenant. In late 2024, the tenant discovered that the building was clad in combustible ACM panels, the same type of cladding used on Grenfell Tower.
The defendant landlord refused to remove and replace the ACM cladding. The tenant therefore brought proceedings relying on two covenants in the lease: first, a covenant requiring the landlord to put and keep the exterior of the building in good condition; and second, a covenant requiring the landlord to comply with all legal obligations. In relation to the latter, the tenant alleged that the landlord was required to replace the cladding by virtue of its obligations under the Regulatory Reform (Fire Safety) Order 2005. The case did not fall within the scope of the Building Safety Act 2022, because the building was a hotel rather than a residential block.
Following a two-week trial in March 2026, His Honour Judge Stephen Davies held that the landlord was in breach of both covenants relied upon by the tenant.
As to the covenant requiring the exterior to be kept in good condition, the Judge held that, in the post-Grenfell context, an obligation entered into after Grenfell to put and keep premises in good condition may require the removal and replacement of cladding, or the remediation of another inherent defect, where that defect creates a significant fire safety risk and requires remediation both to make the building reasonably safe for occupation and to comply with the obligations imposed on the responsible person under the Fire Safety Order.
As to the legal obligations covenant, the Judge held that the Fire Safety Order required the landlord to remove and replace the ACM cladding. In particular, the polyethylene core of the ACM panels constituted a “dangerous substance” for the purposes of Article 12 of the Order. The landlord’s failure to remove and replace the cladding therefore amounted to a breach of the lease.
The tenant was accordingly entitled to specific performance requiring the landlord to remove and replace the cladding, with the works to be completed within 18 months. The tenant was also entitled to damages for losses caused by the landlord’s breaches. Those damages remain to be assessed, but are likely to be substantial given the tenant’s decision to close the hotel to guests in mid-2025, which the Judge found was reasonably caused by the landlord’s failure to remediate the ACM cladding. The landlord’s counterclaim for an indemnity from the tenant failed.
The judgment is significant for commercial landlord and tenant law, particularly in relation to the interpretation and application of “good condition” and “legal obligations” covenants. It also appears to be the first decision to consider a party’s obligations under the Fire Safety Order in the context of combustible cladding and it is very important to note that the experts in the parties agreed that the cladding itself was in good condition and so there was no departure as per the lease and in this case that was not necessary for the obligation requiring a contractual trigger.