High Court interprets repair covenant in Hotel lease and statutory fire safety obligations

Summary

In Essendi UK Hotels 2 Limited v London Property Company Limited [2026] EWHC 1354, the Technology and Construction Court has held that a landlord’s covenant to “keep in good condition” a high-rise hotel required the landlord to replace cladding due to fire safety obligations even though there had been no deterioration of the cladding in circumstances where the Building Safety Act 2022 does not apply to hotels.

Background

The Claimant, Essendi, operated a hotel in a 16-storey building owned by the Defendant, LPC. The current lease was entered into in 2019, following Essendi’s exercise of its contractual renewal option.

Investigations in 2024 indicated that the building’s cladding required remediation due to it being combustible. However, LPC did not consider it was required to replace the cladding. The hotel was closed in July 2025.

Essendi then brought a claim against the landlord on three grounds:(1) that the ‘keep in good condition’ covenant in the lease obligated LPC to remediate the cladding on the exterior of the hotel; (2) that LPC were in breach of the legal obligations clause by failing to comply with their duties under the Regulatory Reform (Fire Safety) Order 2005 (FSO); and (3) that LPC’s failure to remediate constituted a derogation from grant (i.e. they could not fully benefit from the lease and operate the hotel because of the alleged failure by LPC to replace the cladding).

What did the Court decide?

The ‘Keep in Good Condition’ Covenant

The lease required LPC to ‘put and keep the building… at all times in good and substantial repair and condition,’ including external fittings such as cladding. Essendi relied not on the repair limb of the covenant but on the separate obligation to keep the building in good condition.

The Court acknowledged the established position in earlier case-law (Credit Suisse v Beegas Nominees Ltd [1994] 4 All ER 803) that a duty to keep in good condition would not include a duty to undertake works to put demised premises into a safe condition where the lack of safety results from an intrinsic defect which caused damage, disrepair or physical consequences.

However, the Court rebutted this position because of the circumstances in this case. The current lease was entered into in 2019 which post-dated  the Grenfell Tower fire and therefore in the Court’s view, the good condition covenant included an obligation to put and keep the building in a condition that made it fit for use as a hotel.

The Court concluded that in the post-Grenfell period, for multi-storey buildings used for living and sleeping, an obligation to put and keep in good condition should include an obligation to remove and replace cladding or other defects that: create a fire safety risk, require remediation to make the building reasonably safe for occupation, and comply with the obligations imposed under the FSO.

Legal Obligations Covenant

Under of the terms of the lease, the landlord was obliged to ‘carry out works to the building where required by a legal obligation.’ Essendi argued this imposed on LPC a duty to comply with its obligations under the Regulatory Reform (Fire Safety) Order 2005 (FSO).

Read in isolation, the Court accepted that the relevant term in the lease did not impose a positive duty on the landlord in their own right. However, it had to be read alongside other clauses in the lease including a provision which required the landlord to undertake works for which it was responsible under the lease. In the Court’s view, read together, the provisions were sufficiently clear to make the landlord’s statutory duties actionable as a contractual matter. This meant that because LPC was the ‘responsible person’ for the purposes of the FSO in relation to the structure and exterior (including the cladding), and the type of cladding breached the FSO, the landlord was required under the provisions of the lease to comply with their obligations under the FSO.

Derogation from Grant

The Court rejected this ground. At the time the lease was entered into, the position regarding the cladding was the same as when the proceedings were brought. The Court concluded that the parties could not have intended, given the terms of the current lease and the relevant surrounding circumstances, that the landlord would have been obliged to pay for and take reasonable steps to ensure that the Hotel was able to remain open for the duration of that lease.

Key takeaways

This decision establishes that the general presumption, that a ‘keep in good condition’ obligation does not extend to remedying safety defects without physical damage or deterioration, is rebuttable in appropriate circumstances. For multi-storey buildings used for accommodation, such as hotels, where leases were entered into after the Grenfell Tower fire, and contain such covenants there may be liability on those who fail to comply with them whether landlord or tenant, particularly in relation to buildings excluded from the BSA 2022.

For more developments and insights on Building and Fire Safety please see here.

This Insight is for information purposes and you should seek professional advice on your particular circumstances. Please contact Chandni Pandya, Laura Bushaway or your usual Charles Russell Speechlys contact if you have any queries.