UK Government to pay for replacement cladding

On 9 May 2019, the UK Government confirmed that it will allocate £200 million to allow privately-owned high rise buildings to speed up the replacement of unsafe aluminium composite (ACM) cladding.

Private owners of high-rise buildings will have three months to apply for funding, but the Government does expect the owners to use reasonable steps to re-coup the costs from those responsible (or their insurers) for the installation of the cladding.

Repairs to social housing blocks have had the benefit of a £400 million fund.

Some private landlords have already "done the right thing" as the Government has been calling on them to do and undertaken replacement works at their cost.

Some leaseholders whose properties benefit from insurance-backed guarantees, like the NHBC, have also been reassured that the NHBC will contribute to the costs of replacement cladding. There are also examples where the original developer has been persuaded to pay for cladding replacement.

However, other landlords have taken the view that the costs can legitimately be passed on to leaseholders. Most tenancy arrangements place the obligation on the landlord to maintain the exterior and common parts.

There will usually be a corresponding obligation for the tenants to pay for such maintenance costs through the service charge arrangements. Some tenants have argued that the replacement of unsafe cladding goes beyond "maintenance", meaning that the costs cannot be passed through the service charge.

But most service charge provisions also allow the landlord to recover the cost of rectifying "inherent defects" in the building, which arguably extends to unsafe cladding.

Even if the "inherent defects" argument failed, a landlord is likely to argue that the cladding replacement is required under the Regulatory Reform (Fire Safety) Order 2005 – and most service charges allow for the recovery of costs incurred in complying with fire regulations.

The potential avenue for leaseholders to claim against the developer under the Defective Premises Act 1972 has brought hope to some who are faced with a large cladding bill – but this claim must be brought within six years of completion of the building.

Given these complexities, the Government's announcement is good news for leaseholders. But private owners must apply for the funding promptly – and ultimately, the buck may simply be passed to cladding contractors, and their insurers.