New judgment on hotel cladding, puts the safety of commercial properties in doubt

On 5th June 2026 the High Court handed down judgment in an important cladding case. The case involved Essendi UK Hotels 2 Limited v London Property Company Ltd [2026] EWHC 1354 (TCC). This case is the first of its kind: the landlord has been ordered to reclad an entire 16-storey building at their own cost, and millions of pounds in damages are still pending.

This was the result of cladding that had been on the building since 2006. Whilst the Building Safety Act 2022 played no part in the judge's ruling, the Fire Safety Order and lease covenants were successfully applied to this case. This means that landlords cannot hide from their legal obligations to fire safety, especially around external fire spread just because they don’t have a residential property, but where there is a sleeping risk. 

We explore what happened, what the court decided, and importantly what this ruling means in practice for commercial landlords and property managers.

The background 

The Ibis Wembley is a 16-storey hotel in Wembley, north-west London, sitting close to Wembley Stadium. It was reclad in 2006 and has 210 bedrooms. Its guests are mainly people attending events at the stadium for concerts and football matches, and are often staying overnight for the first time, frequently after a night out.

In 2005-2006, due to cladding panels that were failing off the building, a full reclad took place. During the process, the material specifications were changed: instead of solid aluminium, the whole building was reclad using an aluminium composite material with a plastic (polyethylene) core inside — these materials have been classified by the building research establishment as CAT 3 ACM. This was not flagged as dangerous at the time. The documentation said it was fire-compliant, and the job was signed off in May 2006.

Even though people were aware of the dangers of CAT 3 ACM, the consequences of those dangers were brought to light after the Grenfell Tower Fire on 14^th June 2017. The ACM panels with a non-combustion modified polyethylene core are highly combustible and flammable, it's been reported that around 5,000 m² of the product, which is an amount that would cover a single large tower block, was like adding the fuel power of a 19,000-litre oil tanker on the walls of a building. As the material melts, droplets can start a fire below as well above the seat of the original fire. The Ibis Wembley had been cladded in this material, which is now classified as Category 3 ACM, the most dangerous type for over a decade.

Why responsibility landed with the landlord

In 2007, the hotel’s operator Essendi (formerly Accor) sold the building to the landlord, then called Wembley Hotels Limited (WHL), for around £13 million, immediately leasing it straight back, so it could carry on running the hotel. This kind of arrangement, known as a sale and leaseback, is common in hospitality.

Because it was Essendi who had commissioned the cladding replacement work, this original lease included a specific clause: Essendi would carry responsibility for any defects in that cladding, but only until 22 May 2017. That date was chosen because it was exactly 12 years from the original contract, the point at which any claim against the contractor would legally expire. After that date, any cladding problem became the landlord’s responsibility. WHL later sold the freehold on to London Property Company Limited (LPC) in 2018 — the current landlord in this case. Essendi and LPC then entered a new lease in March 2019, which is the lease at the centre of this case

After the Grenfell fire, LPC commissioned fire engineers to investigate the hotel’s cladding. What happened next is described in the judgment as “something of a mystery.” Samples were taken, but not by the appointed engineers themselves and it was concluded that the panels were solid aluminium and posed no fire risk. The judge found this inexplicable: cutting open a sample panel would immediately reveal whether it was solid or composite.

The report then went through several revisions. Each time, at the landlord’s request, caveats recommending further testing were removed. The final version, issued in March 2018, gave the building a clean bill of health. Essendi was told. They had no reason to doubt it.

In 2020 and again in 2021, two further consultants both raised concerns and recommended invasive sampling. The landlord dismissed both, took no action, and crucially did not tell Essendi. 

In 2024, Essendi commissioned its own intrusive testing. The results confirmed the entire building was clad in category 3 ACM, with cavity barriers absent in most locations tested. The landlord was informed and denied responsibility. Following advice from a leading fire safety engineer that the hotel should not continue operating indefinitely with the cladding in place, Essendi closed the Ibis Wembley on 29 July 2025. It has remained closed since.

What the court said

The trial ran for two weeks in March 2026. The judge made all his breach findings on the current lease, which was entered into in March 2019, and stressed that the covenant was interpreted in a post-Grenfell context. Essendi advanced three legal arguments. The landlord was found responsible on two separate grounds.

The first was the ‘good condition’ covenant. The lease required the landlord to keep the outside of the building in good condition. LPC’s argument was straightforward: the panels weren’t falling off, they weren’t crumbling, they were physically fine, so there was nothing to repair. The judge disagreed. He said that in the post-Grenfell world, ‘good condition’ for a multi-storey building where people sleep means more than whether the fabric is sound. A building clad in material that would cause a fire to spread catastrophically is not in good condition, even if every panel is perfectly intact. The landlord had to replace the panels.

The second was the Fire Safety Order. Most commercial leases include a clause requiring the landlord to comply with all relevant legislation. The judge found that the Fire Safety Order 2005 independently required LPC to act. The polyethylene core of the panels was a ‘dangerous substance’ under Article 12 of the Order. LPC was the responsible person for the exterior of the building. They were obliged to remove the risk, and by refusing to do so, they were in breach of both the law and the lease.

The landlord’s main defence was that Essendi had installed the cladding and should carry the responsibility, but this failed. The judge found no basis for saying that Essendi knew, or could reasonably have known, about the fire risk before the May 2017 cut-off. Nobody in the industry understood it before Grenfell. The timing, however harsh, was clear.

The third argument was that the landlord had derogated from grant, Essendi claimed that by allowing the building to become so dangerous that it had to close the landlord had effectively taken away the very thing the lease was meant to provide: a working hotel. The judge rejected this argument because a derogation from grant requires the landlord to have actively done something that deprives the tenant of the benefit of the lease. What the judge found here was that LPC's failing was inaction – failing to replace the cladding – rather than an active step that interfered with Essendi's use of the hotel.

LPC was ordered to remove the cladding within 6 months and complete the full replacement within 18 months. Essendi is entitled to damages for the hotel closure, the amount to be assessed at a further hearing and expected to be substantial.

The judge was also blunt about the landlord’s conduct during the investigation. Reports were revised to remove expert caveats. Concerns raised by multiple consultants were dismissed. None of it was passed on to Essendi. The judge stopped short of finding deliberate concealment, but was critical of LPC's reluctance to investigate further and its failure to share what it knew with Essendi. 

There was also no service charge. The lease contained no mechanism for the landlord to recover the cost of building works from the tenant. The judge noted this himself: it's the obvious reason the case was fought so bitterly. If the lease had included a service charge, the landlord could have done the work and billed Essendi for it. Without one, LPC bore everything. That’s why a hotel sat empty while two companies fought in court for months. 

Why this matters beyond one hotel

The Building Safety Act doesn’t protect commercial landlords. This ruling shows what does. The Building Safety Act 2022, Parliament’s direct response to Grenfell, does not apply to hotels, offices, or most commercial buildings. It covers residential buildings only. The judge confirmed this explicitly. Many commercial landlords have assumed, therefore, that they sit outside the cladding crisis. This judgment strips away that assumption.

Through two standard lease clauses found in almost every commercial lease in England – a ‘good condition’ covenant and a ‘legal obligations’ covenant – the High Court achieved for a hotel exactly the result that the Building Safety Act achieves for residential blocks.

Barristers at 4 Pump Court described the judgment as "very significant both as a matter of commercial landlord and tenant law" and noted that it appears to be "the first decision to consider a party's obligations under the Fire Safety Order in relation to combustible cladding."

What should commercial landlords do now?

Technical Director Kimon Spyrou, a Chartered Building Surveyor and Chartered Building Engineer, with over 16 years' experience in Fire Consultancy and high-rise buildings, explains what this ruling means for commercial landlords and what actions they should take.

"The lesson from Essendi is blunt: don't assume that because the Building Safety Act doesn't apply to your hotel, office or student block, you're outside the cladding crisis — you're not. 

The Fire Safety Order has been on the statute book since 2005, and this judgment confirms it can compel a landlord to strip and replace dangerous cladding at their own cost, reinforced by the 'good condition' and 'legal obligations' covenants sitting in almost every commercial lease. 

A building clad in CAT 3 ACM is not in 'good condition' just because the panels haven't fallen off — the polyethylene core has a heat of combustion comparable to petrol, and every intact panel is a litre of fuel waiting for a source of ignition.  

My advice to commercial landlords is simple:

CAT 3 ACM is also not the only dangerous panel type – if in doubt, get it checked by a competent professional.

Find out what your building is actually wrapped in before someone else does it for you. Commission genuine intrusive investigation with competent professionals, act on what the fire engineers tell you rather than editing their caveats out, and don't wait for a tenant, an insurer or a court to force your hand.

The cost of knowing is a survey; the cost of not knowing, as LPC discovered, is an empty building, a full reclad and a damages bill still being counted."

Understand the hidden dangers within your property. We can offer impartial advice that can simplify your path to full compliance. Contact us today.  

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You can read the full judgment here