Triathlon Homes LLP v Stratford Village Development Partnership (1) Get Living PLC (2) East Village Management Limited (3) [2024] UKFTT 26 (PC)
January 2024The First Tier Tribunal, Property Chamber has released a decision which considers the ‘just and equitable test’ under section 124 of the Building and Safety Act 2022 for the first time. The decision provides guidance on the relevant facts that determine when a remediation contribution order can be awarded and the relevant remediation costs that can be subject to the order.
Factual background
Stratford Village Development Partnership (“SVDP”) developed five residential buildings at Stratford, East London, to provide accommodation for 17,000 athletes and officials participating in the London 2012 Olympic Games. The former athletes’ village has become a large permanent residential estate, now known as East Village, which provides 2,818 new homes consisting of affordable homes and houses, most of which are contained in 66 blocks of between 8 and 12 storeys (the “Development”).
The five buildings concerned in these proceedings are Meller House (“Block A”), Chroma Mansions (“Block B”), Seasons House (“Block C”), Patina Mansions (“Block D”) and Kaleidoscope House (“Block E”) (together “the Blocks”). All five are in a part of the village referred to during its development as Plot N26.
Triathlon Homes LLP (“Triathlon Homes”) provides affordable housing at East Village and owns all the social affordable housing in the Blocks. Triathlon has a long lease of all of the flats and apartments in two blocks (45 units in Block A and 40 units in Block B), as well as a long lease of some units in Blocks C, D and E. Get Living plc (“Get Living”) is a property company that, through subsidiaries, specialises in the private rental market and owns all the private rented housing at East Village (Blocks C, D and E), which are not leased to Triathlon. East Village Management Ltd (“EVML”) is responsible for the repair and maintenance of the structure and common parts of East Village and is owned jointly by Get Living and Triathlon.
In December 2017, EVML established that aluminium composite material (“ACM”) had been used on other plots in the Development but not at Plot N26. In November 2020, further investigations into non-ACM cladding material identified the presence of potential fire safety defects in relation to both the design and construction of various non-ACM cladding systems adopted for the external façades. This included the presence of combustible insulation, issues with fire stopping and the use of combustible timber decking in external balconies and the absence or defective installation of cavity barriers and firestopping within the external wall systems. A waking watch was implemented in all Blocks in November 2020, which remained in place until additional alarm and heat detection systems were installed in the flats as temporary measures.
On 20 April 2023, remediation works commenced on the first of the Plot N26 Blocks with works on all five blocks due to have commenced by February 2024. The remedial works to the Blocks are expected to complete by August 2025 pursuant to the current timetable. The total cost of the work exceeds £24.5 million with remediation work currently funded by grants made available to EVML from the Building Safety Fund.
The applications
On 19 December 2022, Triathlon made five applications to the First Tier Tribunal, Property Chamber (the “FTT”) for a remediation contribution order (“RCO”) for each of the Blocks under section 124 of the Building and Safety Act 2022.
Triathlon’s application for RCOs sought reimbursement from SVDP and Get Living in relation to the £1.058 million incurred in services paid to EVML in terms of interim fire safety measure and investigative and preparatory works. Triathlon also sought imbursement of upcoming payments to EVML which included £153,538 of service charges already due and £613,899 soon to become due.
More significantly, Triathlon’s application sought orders that would require SVDP and Get Living to reimburse expenditure of £16.03 million to be incurred by EVML in remedying the defects. This represented Triathlon’s share of the total remediation costs.
Whilst Triathlon joined EVML as a respondent to the applications at the suggestion of the FTT in the event that EVML wished to participate in the proceedings, EVML was not actively involved in the proceedings.
The Building Safety Act (the “2022 Act”)
The 2022 Act comprises six parts. Part 5 of the 2022 Act, titled “Other provision about safety, standards etc” contains complex measures relating to remediation, building standards and redress. The scope of Part 5 is broad and encompasses the establishment of building industry schemes to fund remediation at the expense of developers, a new ombudsman and new warranties and construction product liability provisions.
Section 124 of the 2022 Act enables an interested person to apply for an RCO, by which developers, landlords, and their associates may be required to contribute towards the costs of remedying relevant defects. An interested person includes any person with a legal or equitable interest in the relevant building or any part of it, therefore, it includes the leaseholder of an individual flat, or a leaseholder of the whole building. The landlord or their associate against whom the order is sought must in each case be a company or partnership. If the relevant qualifying conditions are met, the FTT may then make such an order if it considers it “just and equitable” to do so (section 124(1)). The parties agreed that the 2022 Act’s requirements of an “interested person”, “relevant building” and “relevant defect” were met in this instance. The issue for the FTT to determine was whether it was “just and equitable” for an RCO to be ordered under the circumstances.
SVDP and Get Living (the “Respondents”) contended that an RCO was not required under the circumstances given that that funding for the remedial works had been obtained and that the remedial works had commenced. The Respondents submitted to the FTT that as a lack of funding was not impacting the progress of remedial works, Triathlon should instead pursue contractual and common law remedies against SVDP and Get Living in order for the Court to apportion the issue of liability via established legal principles.
The Respondents argued that an RCO could not be made for costs incurred before the commencement of the 2022 Act on 28 June 2022. Anticipating the FTT’s response, the Respondents submitted that the fact alone that costs were incurred prior to the date of commencement of the 2022 Act signified that it would not be just and equitable for an RCO to be awarded against them.
The decision
The FTT determined that it was just and equitable to issue an order for payment of nearly £18 million in respect of both incurred and estimated costs against the Respondents.
In reaching its decision, the FTT dismissed the argument that costs incurred before the commencement of the 2022 Act on 28 June 2022 could not be subject to an RCO. The FTT considered it inconceivable that Parliament might have intended that individual leaseholders of flats in a building due to be remediated on 28 June 2022 were to benefit from the protections afforded by the 2022 Act, but leaseholders of an identical building on the same estate, had already been remediated at their expense should bear the full costs themselves and be prevented from seeking a contribution order under section 124. The FTT emphasised that it is important to read the 2022 Act as a whole to give effect to its different provisions as parts of a complicated scheme with a consistent objective. The objective under section 124 is “the transmission of responsibility for remediation away from individual leaseholders and towards the original developer and its associates”, as opposed to the applicant waiting for the determination of complex litigation prior to obtaining the relevant funding.
Further, the FTT rejected the argument that an RCO could only be made in relation to costs incurred specifically for remedying a relevant defect. Instead, the FTT found that any measure that is implemented for the purpose of rectifying a relevant defect, or which forms part of a larger programme of remedial measures, is capable of being the subject of an RCO. Therefore, the costs of interim fire safety measures such as waking watches and/or heat and alarm detection systems that are implemented to prevent a building safety risk from materialising can be included in an RCO.
While the advanced status of the remedial works programme and available funding were deemed irrelevant factors in Triathlon’s case, the FTT stressed that where a lack of funding prevented the progress of remedial works in another case, these factors would be crucial when determining the just and equitable test. Additionally, SVDP’s argument that a change in beneficial ownership in 2014 since completion of the initial development was not accepted by the FTT in determining the just and equitable test. The FTT held that as new beneficial owners ‘each willingly assumed the risks associated with their investment.’
The FTT took this opportunity to stress to the parties that the ability to apply for an RCO under section 124 is an independent remedy which is non-fault based. Therefore, the availability of contractual and common law remedies had no bearing on Triathlon’s contribution order application, as the purpose of section 124 is to create an independent remedy that is entirely separate from complex and lengthy litigation. Therefore, Parliament did not intend that such fault-based claims should impact a party’s ability to obtain an RCO.
Comment
The FTT’s decision provides some clarity on the applicability of Part 5 of the 2022 Act which will be useful for those parties awaiting decision of an RCO application or contemplating whether to apply. In this instance, the FTT have interpreted the 2022 Act in alignment with Parliament’s understood intentions, which will shed light on how section 124 is intended to operate.
In particular, the decision highlights that the power to award an RCO under section 124 of the 2022 Act is discretionary, which the FTT exercised when determining the material facts of the case. The fact that remedial works may have commenced or even completed before the 28 June 2022 does not appear to prejudice an applicant’s chance of obtaining an RCO. This decision also demonstrates that the same position will be adopted in instances where remedial works have already obtained funding, although the FTT has highlighted that the remedial works position is likely to be relevant where lack of funding is impeding remedial works progress. The FTT’s ruling on these factors will provide helpful guidance to those applicants hoping to satisfy the just and equitable test in the future.
Whilst the outcome of each RCO application will be fact specific, this decision is the first of many that will demonstrate how the FTT utilise their discretion under section 124 of the 2022 Act to determine whether an order is just and equitable. The Respondents have 28 days from the date of the decision to appeal, so we shall wait to see if an appeal is lodged to challenge the FTT’s decision.
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