A landmark High Court decision has confirmed that unsafe buildings can give rise to lease liability, operational closure and recoverable losses, even where there is no physical disrepair and the building falls outside the Building Safety Act 2022 regime.
At first glance, Essendi UK Hotels 2 Limited v London Property Company Limited [2026] may look like another cladding dispute but it signals a deeper shift in risks.
The Ibis London Wembley hotel showed no signs of physical deterioration. There was no cracking, water ingress or structural failure. However it was clad in aluminium composite material (ACM) with a highly combustible core. Both parties’ experts agreed that the ACM cladding panels were an “intolerable risk” of fire and must be removed.
Essendi operated the hotel as a tenant, while LPC was the landlord. Essendi argued that LPC was responsible for removing the cladding under the lease obligations citing landlord’s obligations and responsibility to ensure the building was in a “good condition” under the Regulatory Reform (Fire Safety) Order 2005.
The court found the landlord in breach of its obligation to keep the building in “good condition”, despite no physical disrepair. This marks a crucial evolution. Condition is no longer measured solely by fabric, but by safety.
Fire risk becomes a contractual trigger
The decision confirms that fire safety has moved beyond regulatory compliance into the contractual sphere. Through the lease’s “legal obligations” clause, duties under the Fire Safety Order 2005 were effectively incorporated. The ACM cladding was treated as a “dangerous substance”, requiring full replacement. No enforcement action was needed to trigger this outcome.
The commercial consequence: Closure risk
The most immediate impact was operational. The hotel operator/tenant closed the hotel; not because it was ordered to, but because it was the only defensible course. The court confirmed that the tenant’s decision was reasonable and caused by the landlord’s breach. This shifts how risk must be assessed.
Fire safety law is no longer confined to regulatory; it is commercially enforceable.
The tenant relied on the landlord’s covenants under the commercial lease to obtain what is in substance, a Remediation Order against the landlord, in circumstances where the Building Safety Act 2022 did not apply to the hotel in this case (Click here to read how the Building Safety Act will apply to hotels).
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What should you be doing now?
For those owning, funding or operating hotel assets, this is the moment to act:
Understand your risk profile: Do you know what sits behind your façade and whether it is safe?
Check your leases: Do the “good condition” and “legal obligations” clauses expose you to remediation or recovery claims?
Plan for operational decisions: If safety is in doubt, do you have a clear strategy on whether and when you would continue trading?
If you would like to discuss how this decision may affect your assets or investments, please get in touch with Li Yen Lim and our Building Safety Lawyers.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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