Building Safety Act 2022 – Remediation Orders and Remediation Contribution OrdersMay 2023
Prior to the Building Safety Act 2022, it was commonplace for landlords of multi-occupied residential buildings to be responsible for the building’s upkeep and maintenance, and to pass these costs on to the long leaseholders via the service charge. The landlord generally had the power to determine whether a building should be remediated, when this remediation should happen and the extent (and costs) of works required.
However, the Building Safety Act 2022 (“BSA”) changes this historic power balance between long leaseholders and landlords by introducing enforcement methods to compel landlords / developers to carry out and contribute towards remediation works. The key enforcement routes introduced by the BSA are as follows:
- Remediation Orders (s.123 BSA); and
- Remediation Contribution Orders (s.124 BSA).
In this article, we explore how these orders may work in practice and the impact that they could have on the construction industry moving forward.
This article follows our review of Building Liability Orders which were also introduced by the Building Safety Act – link here.
What is a Remediation Order?
A Remediation Order (“RO”) can be made by the First Tier Tribunal (“FTT”) and, if granted, can require a landlord to remedy specified relevant defects in a specified time on a building. It is therefore a useful enforcement mechanism if landlords are not fulfilling their obligations in relation to the safety of a building.
The key criteria for a RO to be granted are as follows:
i) The property needs to be a ‘relevant building’, i.e. one which is either 11m or 5 storeys or more in height and which contains two or more dwellings. Leaseholder-owned buildings are excluded.
ii) The RO needs to remedy a ‘relevant defect’, which is defined as a building defect that arises “as a result of anything done (or not done), or anything used (or not used), in connection with relevant works” and that causes a building safety risk (s.120 of the BSA). A “building safety risk” is widely defined as a risk to the safety of people in or about the building arising from the spread of fire, or the collapse of the building or any part thereof.
iii) The RO is made against a ‘relevant landlord’, which is defined as a landlord who has an obligation to repair or maintain the building. The definition has been drafted to capture management companies, freeholders, and superior landlords if they have repairing / maintenance obligations.
Remediation Orders can be applied for by an ‘interested person’, which is defined widely to include the following persons:
i) Building Safety Regulator (a role introduced by the BSA to assist and encourage duty holders with realising competence within the industry – see our article here for more information);
ii) Relevant Local Authority;
iii) Relevant fire and rescue authority; and
iv) Any person with a legal or equitable interest in the building or any part of it (e.g. leaseholders, freeholders).
The Department for Levelling up, Housing and Communities (“DLUHC”) has shown that it is prepared to use Remediation Orders if it considers that freeholders are failing to fix building safety defects within suitable timeframes. Notably, in October 2022, the DLUHC issued a notice on Grey GR Limited Partnership, the freeholder of Vista Towers, requiring it to commit to remediating the tower’s fire safety defects within 21 days, failing which it threatened to issue an application to the court.
What is a Remediation Contribution Order?
The FTT can also make Remediation Contribution Orders (“RCO”) if it considers it just and equitable to do so, and if applied for by an ‘interested person’ (as defined above but with the express inclusion of the Secretary of State).
If granted, these Orders require a specified body corporate (or partnership) to make payments to a specified person in connection with the remediation of relevant defects, as opposed to all of the costs being passed to leaseholders via the service charge.
The introduction of RCO seeks to support Schedule 8 of the BSA which limits the costs that can be passed through the service charge to leaseholders in respect of relevant defects. Further, by imposing a potential liability on freeholders to part-fund remediation works, RCOs seek to reduce instances where landlords take a risk-averse approach to remediation and commission unnecessary work on the basis that they will not be required to fund the works themselves.
RCOs can be made against the following type of persons:
i) A current landlord (or the landlord at the start of 14 February 2022);
ii) The developer (defined as a person who built or commissioned the construction of the building (or part of the building) with a view to granting or disposing of interests in the building or parts of it); or
iii) Any person ‘associated’ with any of the above parties. Associated is defined at section 121 of the BSA. However, in summary, the provision aims to provide a means for leaseholders to obtain contribution for remediation works from a developer’s well-capitalised wider group structures in circumstances where the original developer company involved in the works is wound up and/or has limited financial means.
RCO’s therefore also provide a means for landlords, who have forward funded remedial works, to seek contribution from the original developers of the building. This aligns with the BSA’s general aim to hold those responsible for fire safety defects to account.
The FTT used its power to order a RCO in January 2023 following an application made on behalf of 18 long-leaseholders of Sutton Court. The leaseholders were seeking re-payment for service charges which they had paid out to fund remediation works to the building. The leaseholders maintained that re-payment was just and equitable on the basis that the remediation costs fell within the limits of Schedule 8 and so should not have been payable via the service charge. Following an uncontested application hearing, the FTT issued an order for the freeholder and developer company, Inspired Sutton Limited, to pay c.£195k to the leaseholders.
Freeholders of multi-occupied residential buildings are likely to face greater pressure to part-fund remediation works and implement remedial schemes as soon as possible. If part-funded, RCOs may also lead to a rise in freeholders seeking contribution from the original developers of the building.
However, as it stands, RCOs do not provide a means for developers to seek contribution for remediation works from consultants and/or contractors who were involved in the original works. Any trickle-down claims against contractors and/or consultants are most likely be pursued by developers in the usual manner via the Technology and Construction Court (“TCC”).
However, the liability and quantum assessment of these TCC claims may be impacted by any prior RCO / RO determination made by the FTT against the developer. FTT decisions could therefore have a much wider impact on claims further down the construction chain. Thus, it remains to be seen how the FTT will grapple with technically complex, and heavily contested, applications.
Contractors and/or consultants may also find that they are increasingly asked to assist with designing and implementing remedial schemes under tight timescales pursuant to ROs. However, there is limited information regarding how the FTT and/or the applicant will monitor and check that the remedial scheme is appropriate to remedy the relevant defects, and that the conditions of the RO have been fully discharged.
It is therefore clear that there are a number of uncertainties regarding how ROs / RCOs will be applied by the FTT (and subsequently the TCC), and how these orders will work in practice. We therefore anticipate that this will be a developing area of law, particularly given the increasing scrutiny being placed on unsafe buildings following the Grenfell Tower tragedy. The BSA has also reserved the right for the Secretary of State to make regulations relating to Remediation Orders and/or Remediation Contribution Orders in the future. We would therefore not be surprised if the Secretary of State introduced further regulations, particularly if the Government feel life-critical safety defects are not being remediated within a suitable timeframe.Download PDF