Cladding, lease wording and fire safety obligations: Part 2 – Lessons from Study Group

On 15 July 2026 we commented on the High Court case of Essendi UK Hotels Essendi v London Property Company: Cladding, lease wording and fire safety obligations which considered whether a landlord was liable to address unsafe cladding at a building that was not regulated by the Building Safety Act 2022 (the BSA).  The High Court concluded in that case that the landlord was responsible.  Around two weeks before Essendi, the High Court determined another cladding case, again involving a building not regulated by the BSA.  The outcome of Into Nominee One Limited & Another v Study Group UK Limited & Another was that the unsafe cladding was not something the landlord carried responsibility for.  A question arising out of these two decisions is whether they are consistent with one another.

The facts of Study Group

Study Group was a rent arrears case.  The landlord sued for unpaid rent totalling c£9m.  The position of the tenant (and its guarantor) was that the building was unsafe due to cladding and other safety related issues that had been identified in 2022, after the lease was granted.  The tenant was not previously aware of these safety issues.

It was not in dispute between the parties that external wall defects had been discovered in 2022, nor was it disputed that remedial work would take between 2 and 3 years to complete and that it was unlikely the premises could be used for the purpose of the tenant’s business (an academic institution) until such work was carried out.  This being so, the tenant’s case was, put simply, the condition of the building meant the premises could not be used for its intended purpose and the parties should be discharged from their respective obligations under the lease, including the tenant’s obligation to pay rent (i.e. the lease should be treated as ‘frustrated’). This argument was advanced on two alternative bases:

• At the time the lease was entered into, the parties intended that the premises would be used for academic purposes and neither the landlord nor the tenant knew that the premises could not be put to that use; and
• It was a consequence of the Fire Safety Act 2021 and the BSA (legislation that post-dated the lease and which was therefore not in contemplation when the lease was granted) that the premises could not be put to the intended use.

The case was summarily determined in favour of the landlord, meaning the court considered there was no real prospect of the tenant’s defence to the rent arrears case succeeding.  The High Court found the lease allocated the risk associated with the discovery of defects, including those that were cladding related, to the tenant, save in the case of insured risks.  This demonstrated that the parties had contemplated that defects such as those discovered in 2022 might be identified in the future and that, where no insurance cover was available, the tenant would bear the associated risk.   Neither the Fire Safety Act 2021 nor the BSA altered the relationship between the parties under the relevant lease.  Furthermore, neither Act was the root cause of the premises being considered unsafe for occupation.  If the cladding defects had been discovered before each Act came into force, they would still have required remediation by the tenant at its own cost under the terms of the lease in order for the premises to be put to their intended use.

The outcome of Study Group was that the tenant’s resistance to the arrears claim failed and it was held liable to the landlord to pay rent for the premises even though they could not be put to the use envisaged when the lease was granted.

Are the decisions in Study Group and Essendi really inconsistent?

On first reading they may appear difficult to reconcile. However, the short answer is no.

The starting point in each case was the lease, specifically how each allocated risk for specific issues that may arise during its term.  In Essendi the landlord covenanted to keep the exterior of the hotel in good condition.  In Study Group responsibility for the exterior of the premises rested with the tenant.  Had the exterior of the premises in Study Group been reserved to the landlord and/or the landlord assumed responsibility for its condition, the outcome may have been different, fundamentally because the tenant would have been able to look to the landlord’s obligations to the exterior and try to construct an argument similar to that which found favour in Essendi.  This being said, it must be borne in mind that Essendi was in part based on a finding that the good condition requirement imposed an obligation on the landlord that went beyond repair (i.e. a breach of the obligation could exist even if there was no disrepair).  That was a fact-sensitive finding, based on the precise wording of the covenant in the Essendi lease and the wider context in which the lease was granted.  It does not set a general precedent that good condition covenants will be construed similarly in other cases.

Takeaways

Both cases highlight principles and arguments from a landlord and tenant perspective that can be deployed when considering matters of fire safety in a non BSA context.  When faced with something similar the starting point will be the relevant property contract: This means considering the following points:

• What does the document provide in terms of allocation of risk?
• If the relevant provisions are capable of more than one interpretation (such as a ‘good condition’ covenant) are there other provisions in the contract that aid interpretation?
• In the event of ambiguity, what evidence is available from the time the contract was negotiated and entered into to assist on an evidential basis with what was intended by the ambiguous term?
• If there is simply no provision for the risk at all, is it possible to imply something into your property contract to allocate the risk now.  Do not, however, assume that implying terms to cure a drafting issue will be possible in all cases.
• At the risk of stating the obvious, reliance on implied terms or extraneous evidence to assist construing lease terms is never ideal, and there is no substitute to ensuring your property documents make clear provision for the allocation of risks, particularly for latent defects that would not fall within traditional repairing obligations.

Building safety and fire safety in a post-Grenfell will continue to be at the forefront of the minds of property developers, investors and occupiers.  Even if (like in Essendi and Study Group) the BSA is not engaged, it is imperative that in this new landscape your property documents are designed to address such matters.

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