The Upper Tribunal has reversed a decision of the First-tier Tribunal (Property) Chamber ("FTT") that waking watch costs had been unreasonably incurred by a freeholder in Assethold Limited v Leaseholders of Corben Mews (2022) UKUT 282 (LC).
In 2021 fire engineers, Hydrock, issued an updated external wall report for the building. The company's previous report, as well as a 2019 fire risk inspection, had found the building's risk profile to be satisfactory, but the later report determined that there was in fact an 'intolerable' fire risk to the occupants. The report recommended various remedial works and that until that work had been done a 'waking watch' or communal fire alarm system should be put in place.
The freeholder duly implemented a waking watch at a cost of £28,000 per month. It then obtained a further report from Safety Consulting Partnership Limited, which found that the fire risk at the building was actually low and a waking watch was not needed. The waking watch was then stood down.
The leaseholders subsequently challenged the reasonableness of the waking watch costs being passed onto them through the service mechanism in their leases.
Case law dictates that whether or not costs have been reasonably incurred should be treated as a two stage process. First, whether the landlord's process was reasonable and then whether the amount charged was reasonable. In this case the FTT agreed with the leaseholders that the costs were unreasonable. The first stage of the test had not been satisfied because the most sensible thing to have done following receipt of the second Hydrock report would have been to have instruct a second opinion from another fire safety expert. It then followed that the second stage of the test was also not satisfied.
The freeholder then appealed the FTT's decision and the Upper Tribunal found that the FTT had erred in its finding that the freeholder's reaction to the second Hydrock report was irrational.
"... the fact that this report reached a different conclusion from Hydrock’s and 4sites’s previous reports did not mean that there was a contradiction and did not itself mean that the latest report was wrong. The other difficulty is that I fail to see how any landlord, faced with a report from a reputable company signed by three professionals saying that the fire risk in the building was intolerable, could be said to be irrational for putting interim measures in place pending further reports or remedial work."
The Upper Tribunal also found that the FTT had erred in its assessment of the reasonableness of the outcome because it had based its decision on the basis of the hindsight provided by the evidence of the parties' expert witnesses - its objective assessment depended on the hindsight provided by them.
The cost was also reasonably incurred and payable. The FTT had previously found that the quality of service of the waking watch was poor and reduced the £28,000 to £14,000 on that basis (before finding it wasn't reasonable at all). There was no appeal of that finding, so the £14,000 was payable, though we note that the Building Safety Act 2022 leaseholder protections may assist the leaseholders here.
I have already said that to put in place an interim safety measure in response to a report that said the fire risk was “intolerable” cannot be said to have been irrational on the information then available. Nor can it be said to have been unreasonable. What the FTT had to decide was whether setting a waking watch in both buildings, pending further work or investigation, was a reasonable response to the advice the landlord received. It need not be the only reasonable outcome. But on the facts of this case only a supremely confident landlord would have done anything else. Judge Elizabeth Cooke
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