DLUHC secures landmark Remediation Order under Building Safety Act 2022

May 2024

Michael Salau and Emily Hunt

The Department for Levelling Up, Housing and Communities has won a landmark legal challenge against the freeholder, Grey GR, by obtaining its first Remediation Order under the Building Safety Act 2022.

A Remediation Order (“RO”) requires a freeholder to remedy specific relevant defects in a specified time on a building. For more information on ROs, please refer to this article: Building Safety Act 2022 – Remediation Orders and Remediation Contribution Orders | Beale & Co (beale-law.com)

The Department for Levelling Up, Housing and Communities (“DLUHC”) launched legal action in the First-Tier Tribunal (“FTT”) seeking a RO against the freeholder, Grey GR (“Grey”), as it considered there had been a two-year delay in fixing fire safety issues at Vista Tower.

Background

Grey is the freeholder of a 16-storey block of flats in Stevenage known as Vista Towers.

Fire safety defects, including combustible core panels, were communicated to Grey in 2019. In June 2020, Grey applied to the Building Safety Fund (“BSF”) seeking funding for remedial works based on the Government’s Consolidated Advice Note (“CAN”). Importantly, the CAN required the removal of all combustible material to comply with the relevant building regulations.

However, in January 2022, the British Standard Institution published building safety standard PAS 9980:2022 (“PAS Assessment”) as a new code of practice for appraising the fire risk of external wall construction/cladding on blocks of flats. In October 2022, Grey withdrew its previous BSF application and re-submitted it by reference to a PAS Assessment.

Following numerous iterations of the PAS Assessment, the scope of works was eventually agreed with the BSF in January 2023, leading to the BSF agreeing in September 2023 to fund a c.£12.4m contribution to the remedial works. The works commenced in January 2024.

Grey sought to have the RO application withdrawn as it had already committed to completing the works by a fixed date. This was rejected by DLUHC, and the matter went to a hearing in March 2024.

Question for the FTT

DLUHC was seeking a RO pursuant to section 123 of the Building Safety Act 2022 (“BSA”) and regulation 2(1) of The Building Safety Regulations 2022 (“2022 Regulations”), which added DLUHC as an “interested person” who could apply to the FTT for a RO.

There was no dispute in relation to whether the criteria under section 123 had been met, i.e. it was not disputed that: (i) Vista Tower was a “relevant building”; (ii) DLUHC was an “interested person”; and (iii) Grey was a “relevant landlord”. The scope of the “relevant defects” was also not in dispute.

Against this background, the question for the FTT was whether it had discretion to make a RO, and if it did, whether a RO ought to be made and on what terms.

DLUHC’s Submissions

To support its position that the FTT should grant a RO, DLUHC made the following key submissions:

There had been a lack of pace caused by Grey’s insistence on obtaining funding from the BSF first before carrying out the works. Grey should have “forward funded” the works as public funding should be a claim of last resort (noting that Grey was ultimately owned by Railpen Pension Fund, which was well-resourced, with over £32bn in assets).
Unlike Remediation Contribution Orders or Building Liability Orders, there is no requirement for the FTT to be satisfied that an RO is just and equitable.
There was still a need for a RO, despite the commencement of the works, as it would provide reassurance to the leaseholders that the works will be completed by the date specified in the RO.

Grey’s Response

In its defence, Grey submitted:

It was fully committed to carrying out the works. The delays to securing funding and ascertaining the scope of works were mainly caused by the confusion and inaction of DLUHC and Homes England.
No suggestion was made in the BSF guidance that the works should be done first and funding claimed later. If Grey had proceeded with this, it is likely that funding would have been refused, as due to a new requirement introduced by the BSF in the Grant Funding Agreement (“GFA”), Grey had to replace its original contractor.
Grey took every step to progress the works under the CAN approach until it was withdrawn. The decision to move to the PAS approach was entirely reasonable as there was a possibility it would reduce remedial costs, which was beneficial for all parties. There was also an obligation in the GFA for Grey to take reasonable endeavours to recover costs from third parties. Failure to mitigate losses is a frequent argument raised in cases for damages.
The works are already subject to a JCT contract with its own mechanisms for extensions and disputes, risking overlap and confusion if a RO is made.

FTT’s Decision

The FTT held that:

The 2022 Regulations gave it both the power and discretion to make a RO.
It was appropriate to make a RO on this matter to give reassurance to the leaseholders, as Grey would be legally bound to fix the building safety defects by the date specified in the RO, or risk facing sanctions by the court.

In making its decision, the FTT made the following interesting comments:

The RO was not a fault-based order. It was also not a case where a RO should get short deadlines and expect active interventions by the FTT. Instead, the RO must be in terms which make it clear that the works are subject to the JCT Contract and GFA already in place, and with a clear grace period for any extensions of time agreed via these contracts.
There had been delay on both sides, but this had to be seen in the context of the Grenfell Tragedy and the sea change brought to the regulation of the construction industry.
The suggestion that Grey should have “forward funded” the works is unreasonable, bearing in mind the scope of Grey’s portfolio, the cost of the works, the risk it would not have received funding if claimed from the BSF later, and the fact that Grey was not the “polluter”, i.e. not responsible for causing the defects.
The criticism on Grey for changing to the PAS approach is misplaced. It was sensible for Grey to check whether the works could be reduced, and it was unclear why the DLUHC would object to a freeholder following its most recent advice.

Comment

The decision is significant as it is the first reported case where DLUHC has used its powers under the BSA 2022 and 2022 Regulations to obtain a RO. It is unlikely to be the last – DLUHC has confirmed it is closely examining at least 23 other buildings registered with the BSF experiencing unnecessary delays.

It also serves as a warning to other freehold owners to avoid delaying remedial works. Michael Gove emphasised: “…this court case should serve as a warning to all building owners. If you fail to fix your unsafe buildings and ensure the safety of residents, we will see you in court.”

Whilst the outcome of each RO application will be fact specific, this decision demonstrates how the FTT may utilise its discretion under section 123 of the BSA. Despite remedial works having commenced, it did not prejudice the applicant’s chance of obtaining a RO. We have also learned that the FTT are not treating ROs as a fault-based remedy. If the criteria set out in section 123 of the BSA is met, it may be difficult to argue against a RO being made.

The decision also provides some useful guidance on the approach that should be taken by freeholders when applying to the BSF. Notably, the FTT did not consider that the freeholder should be forward funding the cost of remedial works, and it encouraged the freeholder’s decision to change to the PAS approach and assess whether the scope and costs of the works could be reduced.

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