Cladding costs 2026: can a leaseholder challenge your demand?

If a leaseholder in one of your mixed-use blocks writes to you tomorrow and says the cladding remediation charge on their service charge is unreasonable, can you produce the evidence that shows it is not? That question is now landing on directors' desks across London, Manchester, Birmingham, Leeds and Glasgow, because the numbers behind it are getting harder to defend with a spreadsheet and a covering letter.

As at the end of July 2026, there are 4,697 residential buildings 11 metres and over in height identified with unsafe cladding, an increase of 228 since the end of June, according to the Building Safety Remediation monthly data release for July 2026. Of those, 2,551 buildings (54%) have either started or completed remediation works, and 1,833 (39%) have completed them. That leaves a large number of buildings where the cost conversation is still live, and a large number of leaseholders who are starting to ask what they are paying for.

The Building Safety Levy and the service charge question

The Building Safety Levy is a charge on developers of residential buildings in England, collected by local authorities, intended to help fund remediation of unsafe cladding. It is not a service charge item, and it is not something a leaseholder pays directly. But the levy sits alongside the remediation programmes that do end up on service charge budgets, and that is where the confusion starts.

For a director of a mixed-use portfolio, the practical question is not whether the levy applies to you. It is whether the cladding remediation costs you are passing through to leaseholders can survive a challenge. Under the terms of most residential leases, a leaseholder can challenge a service charge demand at the First-tier Tribunal if they believe the cost is unreasonable or not reasonably incurred. That right does not disappear because the work is cladding remediation. What changes is the evidence you need to defend it.

The Cladding remediation unit costs analysis for 2025 puts the mean cost of remediation at £1,843 per m² of cladding remediated, with an expected range between £743 and £2,943 per m² at Q2 2025 prices. For buildings with less than 500m² of cladding remediated, the mean unit cost rises to £2,656 per m². For buildings with more than 5,000m², it falls to £1,318 per m². Those figures are published by MHCLG and used to benchmark costs put forward by applicants for grant approval. If your remediation costs sit well above the published range, a leaseholder's challenge becomes easier to argue, not harder.

What the inspector looks at in a mixed-use building

Mixed-use developments bring a particular complication. The building may have residential flats above commercial units, a management company that sits between the freeholder and the leaseholders, and a service charge structure that splits costs between different classes of occupier. When the Building Safety Regulator or a fire and rescue authority inspects, they are looking at the building as a whole. When the leaseholder challenges the service charge, they are looking at their own apportionment.

The inspector will want to see the remediation specification, the tender process, the contractor's credentials, and the building control sign-off. The leaseholder will want to see why their share of the cost is what it is. If your apportionment methodology has not been reviewed since the remediation scope was agreed, you have a gap. If the commercial units are paying a different percentage than the residential units for the same cladding work, you need to be able to explain why.

This is where the true cost of BSA compliance starts to show up in places directors do not always expect. The remediation itself is one line. The evidence to defend the charge is another.

Who holds the duty and what happens when it is missed

For higher-risk buildings, the Accountable Person holds the duty to manage building safety risks, and that includes ensuring remediation is carried out and evidenced. For buildings 11 metres and over, the remediation programmes are monitored by MHCLG, and the data is published monthly. The July 2026 release shows that 14 buildings with ACM cladding have yet to start remediation, and one building has had local authority enforcement action taken against it. Those are the visible failures. The quieter failures are the ones where remediation is complete but the cost recovery is not defensible.

If a leaseholder challenge succeeds, the tribunal can reduce the service charge demand, order a refund, or require the landlord to re-tender. For a director, that means the cost does not just stay in the building. It comes back to the board as an unbudgeted liability, and it sits alongside the compliance breach that triggered the remediation in the first place.

What you can check now

Start with the remediation cost per square metre for each building in your portfolio that has cladding works. Compare it to the published range. If it is above £2,943 per m², you need a documented reason. If it is below £743 per m², you need to be sure the scope is complete.

Then check the apportionment. Can you show, for each mixed-use building, how the cladding remediation cost has been split between residential and commercial occupiers, and why that split is consistent with the lease? If the answer is a spreadsheet that has not been updated since the tender, that is your exposure.

Finally, check the evidence file. If a leaseholder wrote to you today, could you produce the tender returns, the cost breakdown, the building control sign-off, and the apportionment calculation without asking anyone for more time? The May 2026 remediation data release shows that 2,179 buildings are still in the pre-eligible stages of the Cladding Safety Scheme. If yours is one of them, the cost conversation has not even started yet.

Your 60-second self-check

• Could you produce the remediation cost per m² for every building in your portfolio with cladding works, and show how it compares to the published range?
• Could you show the apportionment calculation for cladding remediation costs in each mixed-use building, and confirm it matches the lease?
• Could you produce the full evidence file for a leaseholder challenge today, without asking a colleague for anything?

If none of those answers is yes, the free 5-minute Director's Risk Check at hermanwa.com/risk-check will show you which statutory deadlines and penalties apply to your portfolio, each with its official source. It gives you a control score, the portfolio's breach exposure, and a board-ready briefing you can send to a colleague to answer.

Herman's verdict

A leaseholder can challenge a service charge demand for cladding remediation costs, and the challenge is easier to win when the director cannot produce the cost evidence on the day it is asked for. The remediation itself is a compliance obligation. Defending the charge is a governance one, and it is the one that ends up with your name on it.

— Herman