Residents of a private housing complex in Croydon clad in similar flammable panels to Grenfell Tower have been told they will not have to pay £2m to make their home safe, after the company that built the block said it would meet the costs instead.

Barratt Homes has indicated it will pay to have the panels of the Citiscape block removed and fund the cost of 24-hour fire wardens, saving residents £31,300 per flat.

The decision is a surprise because Barratt no longer has a relationship with the block, which is managed by an agent for a separate freeholder, and comes after a housing tribunal in March ruled resident leaseholders were liable for the costs.

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It follows a sustained public campaign by concerned residents highlighted by the Guardian and which was supported by their local MP, Steve Reed. One resident had feared the financial ruin of his family, saying his father was ill because of the worry and they could not sell the flat because no buyer would want to take on the risk.

The block’s freehold is owned by the family trust of the multimillionaire property mogul Vincent Tchenguiz, but the building is managed by FirstPort Property Services. Residents were told in a meeting on Thursday night by FirstPort that the threat of ruinous costs had been averted.

More than 130 private apartment complexes in England have failed cladding tests implemented after the Grenfell fire, which spread rapidly up the highrise in west London because the cladding had a flammable polyethylene plastic core.

One of residents in the Citiscape block said the offer to pay to remove the cladding was “a huge relief.” Anuj Vats said residents had resigned themselves to having to pay the bill if necessary. “We are very pleased, more than I can express in words. We had no idea this was coming, given the result of the tribunal.”

But he said that a one-off gesture from Barratt did not address the issues faced by other leaseholders in private blocks. “My personal opinion is that everybody should be safe in their homes,” he said.

Reed said: “This is fantastic news for residents in Citiscape who were facing unaffordable debt to make their homes safe.” But he also highlighted the fact that the decision was a one-off , and said the government should be prepared to pay for the removal of flammable cladding in private blocks.

“Instead of relying on the goodwill of builders the government must accept responsibility for the failure of their safety regulations and take all flammable cladding down,” he said.

Sajid Javid, the secretary of state for housing, said: “I applaud Barratt Developments’ decision to cover the costs of fire safety works. They have listened to the concerns of Citiscape residents, engaged with government and have done the right thing.

“Other building owners and housebuilders in the private sector should follow the example set by Barratt Developments to protect leaseholders from costs and begin essential fire safety works. I want to see all leaseholders in this position get the peace of mind they deserve and I am keeping this under review.”