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You are here: Home / News / Leaseholders and freeholder of evacuated Manchester block win £10.8m insurer payout for ‘serious defects’

Leaseholders and freeholder of evacuated Manchester block win £10.8m insurer payout for ‘serious defects’

December 12, 2019 //  by Admin4

Residents are forbidden from living in New Lawrence House, now empty

By Harry Scoffin

A freeholder and his leaseholders secured victory at the Court of Appeal last week, with the insurer ordered to pay a £10.8m bill for works to make a Manchester development safe.

Although the faults pre-date Grenfell, it is the first court case win for private leaseholders over safety and structural defects since the tragedy.

Legal victory for residents of ‘unsafe’ tower block in Manchester

There has been a legal victory for people who invested money in what they thought was a block of luxury apartments. Those who marketed New Lawrence House in south Manchester promised it offered an ”outstanding” investment opportunity.

New Lawrence House in Hulme, south Manchester is a 104-flat site that stands empty. First occupied in 2009, many of the long leases were sold off-plan beginning March 2007.

A number of major issues relating to the build quality were reportedly uncovered in 2012 and 2013, including a lack of fire compartmentalisation, unsafe common parts with inadequate smoke ventilation systems, faulty windows, and unfinished leak-prone ceilings.

The week after the Grenfell Tower fire, the fire brigade intervened and leaseholders and renters were decanted.

Speaking to The Guardian last year, Andrew Broadhurst, a chartered surveyor who acquired the freehold in 2013, said: “The extent of the missing precautions here is verging on criminal. There were 300 people living here.”

Owners of Manchester flats face huge bills after forced evacuation

Owners of flats in a Manchester complex which was marketed as an “outstanding” investment opportunity are facing huge losses after the fire brigade banned people from living there. The first residents moved into New Lawrence House in 2009 but were forced to move out the week after the Grenfell Tower fire in 2017 after serious safety faults were identified.

New Lawrence House had originally been sold to buyers as an “outstanding investment opportunity”.

Earlier this year a court ruled that only £3.6m could be committed to fixing the safety faults, owing to the wording of a clause on the insurance policy, with sums awarded to each of the claimants varying from £99,9995 to £304,378.20.

This was despite the judge finding that the structural steelwork has no fire protection, representing a “major physical damage” and “present or imminent danger to the physical health and safety of the occupants” as laid out in the original Zurich policy.

In 2018, Zurich withdrew from the UK property warranty market, selling on its portfolio of building guarantees, with liability for the 10-year new homes policy on New Lawrence House now resting with East West, part of the Bermuda-based Armour Group.

Freeholder Zagora and 26 individual leaseholders, of 30 flats, challenged the original decision on the basis that the “entire cost of rectifying a present or imminent danger to the physical health and safety of occupants could substantially exceed the purchase price of an individual flat.”

The cost of fireproofing the structural steelwork alone has been estimated at £4.7m, which exceeds the £3.6m sum leaseholders had been granted in January by Manchester’s technology and construction court.

Most of their unsuccessful claims were not put back to judges.

The appeal case was heard across three days in October.

Other than in his interpretation of the policy’s maximum liability clause, allowing for the £10.8m insurer payout, Lord Justice Coulson agreed with Judge Stephen Davies’ position.

Coulson LJ cleared freehold landlord Zagora of the responsibility and said that any potential claim against the company would not constitute “compensation or damages” as per the policy, “nor is it ‘available’ to the claimants in any event,” he added.

He rejected the defendants’ claim that monies outside of the remedial works could not be recovered by the insured.

He also rejected the idea that the insured are dutybound to take legal action against all third parties with an interest in the site before claiming under the building warranty, saying:

“Standing back, there is in my judgment a manifest lack of reality in the submission that bullet point 11 requires the claimant leaseholders to pursue all other claims, of whatever kind, against any other third parties who might have some form of residual liability for the state of the building, before ZIP’s own liability kicks in.”

Coulson LJ suggested that a requirement of the insured to locate other entities and sue them first would make the policy “worthless”.

He went on to challenge the argument made by Mr Nicholas Baatz QC, for defendants Zurich Insurance Plc and East West Insurance Company Limited, whose interpretation of the warranty, he said, created a “dependency” on the “financial well-being of the other leaseholders… where the remedial works are too expensive for the claimants to pay for themselves, because of the large number of flats whose occupiers are not insured and who are not contributing anything by way of service charge.”

“In those circumstances, Mr Baatz would say that the claimants’ inability to fund the works mean that the works will never take place, and that therefore ZIP [Zurich Insurance Plc] have no liability at all to pay anything under the terms of the policy,” he continued.

“Again, I consider that that is not how the policy was intended to operate. It would allow the insurers to take advantage of the leaseholders’ impecuniosity to avoid liability altogether.”

He also ruled that the small balconies do fall under the warranty cover, arguing that whilst they were not demised premises in tenants’ leases, this was seemingly a deliberate move by the original developer so as to enable “access to the landlords or the managing company so as to effect any necessary maintenance or remedial work”.

It was found that East West are liable for defects in the underground car park.

The decision will encourage other leaseholders in properties suffering from major build quality and fire safety faults to pursue their insurers, if they fall within the 10-year cover.

Martin Scott, partner and head of the Walker Morris construction and engineering group who represented the freeholder and leaseholders, said:

“This is a landmark in a long hard fought battle, which has caused considerable stress and worry to our clients. I am now hopeful that the Court’s decision will finally see Zurich face up to its responsibilities.”

In comments to Inside Housing, a Zurich spokesperson confirmed that “it is East West, not Zurich, which is responsible for the court award.”

They added: “We recognise that the leaseholders of New Lawrence House have faced a long and difficult journey to obtain a resolution, and hope that the recent judgement against East West brings some certainty to them.”

Leaseholders at unsafe Manchester block entitled to £10.8m after insurance claim court appeal

Inside Housing, news, analysis, and comment about the social housing sector in the UK.

Original developer JCS Homes said that “at no point did Zurich Building Controls or Zurich Warranties give us cause for concern about safety or quality, at every stage of the project, sign off and approval was granted.”

“At the time, Zurich issued its warranty in 2010/11, the building, which had been inspected by structural surveyors, was fully compliant with all relevant regulations.”

The full appeal ruling can be read here: Manchikalapati & Others v Zurich Insurance Plc

Related posts:

Fury in Manchester as Lendlease wins £160m contract to refurb city hall, while dumping Grenfell cladding costs on leaseholders Artisan H2 LimitedFreeholder Artisan H2 Limited succeeds in insuring cladding site Albion Works … but not for fire Not waiting for Gove: Kelly Tolhurst MP urges freeholder Israel Moskovitz to halt court action against leaseholders over £2m cladding and building safety costs Leaseholders to sue government over fire safety measures Fletcher CourtHallmark Property Group seeks to put 44 flats worth £15m on top of a block with ACM cladding, waking watch, a B2 rating after EWS1 … and 75 utterly stressed out leaseholders

Category: Cladding scandal, Latest News, NewsTag: Armour Group, Building warranty, Cladding scandal, East West Insurance, Fire safety, Harry Scoffin, New homes warranty, New Lawrence House, Zurich

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