Cladding and Fire Remediation: Who Pays Under a Scottish Commercial Lease?

Fire safety and cladding is among one of the most relevant issues in Scottish commercial property at the moment. With evolving regulations and high-profile incidents, landlords and tenants need to understand where the obligation - and the cost - falls. Here are the key considerations.

The Tenant's Repairing Obligation

Under a full repairing and insuring (FRI) lease, the tenant takes on full repairing and insuring obligations, with insurance most commonly obtained by the landlord but paid for by the tenant.

Most modern commercial leases require tenants to accept the premises in good condition, maintain them in "good and substantial repair and condition" throughout the term, and to return them to the landlord in that state at expiry.

The standard of "good repair" is assessed by reference to the age, character, and location of the property - essentially, how you would expect to find the premises had they been managed by a reasonably minded owner.

Does "Keep" Mean "Put"?

Following the 2015 Scottish court decision in @SIPP Pension Trustees v Insight Travel Services Limited [2015] CSIH 91, a tenant's obligation to "keep" premises in good and substantial repair generally includes an obligation to "put" them into that standard - even without express wording to that effect.

Extraordinary Repairs and Inherent Defects

At common law, a landlord is responsible for extraordinary repairs. However, modern leases commonly transfer this responsibility to the tenant through wording such as that the tenant is liable to repair and maintain irrespective of the cause of damage.

Using this wording, courts have found tenants liable for repairing damage caused by inherent design defects. In Ravenseft Property Ltd v Davstone (Holdings) Ltd [1980] QB 12, a tenant was held responsible for inserting expansion joints when repairing brick cladding that had failed due to their omission in the original design. While an English decision, the potential implications for fire-safety-related cladding defects are clear.

Statutory Obligations: The Fire (Scotland) Act 2005

Under the Fire (Scotland) Act 2005, any person with control of non-domestic premises - which includes a tenant with maintenance and repairing obligations - must carry out a fire risk assessment and take "such fire safety measures as are reasonable in the circumstances."

Crucially, there is rarely a one-size-fits-all answer. Fire risk assessments typically will not mandate cladding removal as the sole solution. Where a dangerous substance exists, the obligation is to eliminate or reduce the risk "so far as is reasonably practicable" - and if replacement is not practicable, to control the risk and mitigate the detrimental effects.

This means a tenant may be able to comply with statutory obligations through less costly measures - fire wardens, enhanced detection systems, or improved alarm systems - without replacing the cladding itself.

Building Regulations: A Hidden Trigger

Changes to building regulations do not automatically require a tenant to upgrade the premises to meet current standards. However, when carrying out works under the lease e.g. to meet its repairing obligations, the tenant must comply with current regulations - not the standards in force at lease commencement.

Since April 2026, replacing an external wall cladding system requires a building warrant (except for "minor repairs"). If there was damage to cladding and it goes beyond minor repair, the building warrant process could end up requiring full replacement with compliant materials - potentially escalating what began as a routine repair into a major capital project.

End-of-Lease Considerations

Where cladding issues arise near lease expiry, tenants may have stronger arguments to mitigate liability. The measure of loss at lease end is determined by what a reasonable landlord would do in the circumstances, taking into account the building's condition, value, and market. If the cost of replacement of the cladding far exceeds the resulting increase in value brought about by the replacement, a court may conclude that no reasonable landlord would undertake the work and instead award the landlord only the diminution in value caused by the cladding issue.

Key Takeaways

1. Start with the lease. Liability always turns on the individual lease wording - there is no substitute for careful analysis of the specific repairing and statutory compliance clauses.
2. Statutory obligations interact with repairing obligations. Fire safety legislation and building regulations may not require cladding replacement, but complying with the repairing obligations may result in the need to upgrade the premises to meet the current Building Regulations of the fire safety legislation.
3. Consider the insurance angle. Insurers may refuse cover or increase premiums without certain fire safety works, and what insurers require feeds into the test of what a reasonable owner would do.
4. Timing matters. The landlord's remedies differ depending on whether the issue arises during or at the end of the lease, with tenants potentially having more scope to limit exposure at expiry.