Owners of flats in Manchester that are covered in combustible cladding are celebrating after the success of a campaign to force the building’s owner or developer to pay the estimated £5m bill to replace them.

Leaseholders of apartments at Vallea Court and Cypress Place in the city centre have been told by their freeholder, Pemberstone, that the recladding bill, plus their legal costs and the cost of a 24-hour walking watch, will be met by a new fund. They were each facing a bill of about £20,000.

“We absolutely can’t believe it,” said Fran Reddington, one of the residents. “It has been a huge burden. We know we still live in a dangerous building but now we have the funds they can start work. This should give hope to other people in the same situation. It should put pressure on other developers.”

The residents have been battling for 20 months to make their homes safe following the Grenfell Tower disaster after it emerged that the buildings they lived in used similar aluminium composite panels and combustible insulation. Some of the flats were sold by Lendlease, a developer that bought the building after its construction.

They are just two of the 197 private residential buildings in England more than 18m tall still wrapped in ACM cladding, which has been banned by ministers for safety reasons on new high-rise homes. Only seven tall private blocks have been fully repaired as legal disputes rumble on between freeholders, who are often large investment funds, and leaseholders about who has the moral and legal responsibility to pay bills that on some blocks are estimated at £40m.

Many freeholders appear to have ignored warnings from the housing secretary, James Brokenshire, that they should “take action now, or face enforcement action from their council”. He announced in November that councils would be able to step in, carry out works and recoup the costs, but councils have complained that he has not made any money available.

Leaseholders at the Northpoint building in Bromley in south London are still each facing £70,000 bills to replace combustible cladding in a situation they describe as “absolutely desperate”. The freeholder is Citistead, a company owned by the family trust of the property mogul Vincent Tchenguiz and it is declining to pay.

Brokenshire last month told leaseholders that he had warned Citistead and the builder Taylor Wimpey that he expected them to fund the work. But Colin Smith, the Conservative leader of Bromley council, has told Brokenshire that is not enough and said his announcement of council powers had raised expectations “without solutions being in place to deliver them”.

The 342 leaseholders of the two blocks in Manchester had been defeated at a property tribunal where the terms of the contract were interpreted as leaving them responsible not only for the recladding bill, but the walking watch and the legal costs of the freeholder.

“We never gave up,” said Reddington. “Every other day we have been public with this. We went down all sorts of different avenues and were getting nowhere. What if we did nothing? We would have been stuck.”

In a letter to leaseholders, Pemberstone acknowledged that the cladding had been “a source of worry and financial concern” and said works are likely to start in the summer and conclude in early 2020.

The cladding panels, which are filled with combustible material, will be replaced with solid aluminium panels.