For the first time, the Building Safety Act has been tested in the Courts. Kate McLauchlan looks at the impacts for developers and commercial landowners.
Origin of the Building Safety Act 2022
The Building Safety Act (“the Act”) was introduced following the Grenfell Tower fire in June 2017 and the Government’s subsequent review into the safety of high-rise residential buildings in particular.
The Act provides clarity as to how buildings should be constructed, maintained and made safe and applies to all buildings with additional requirements for ‘Higher Risk Buildings’ i.e. residential buildings at least 18 meters in height or with at least 7 storeys.
In particular, the Act entitles an ‘interested person’ to apply to the Courts for a Remediation Contribution Order (“RCO”) to require a former or current landlord, or the original developer, to contribute to the cost of remedying ‘relevant defects’ in a ‘relevant building’.
Triathlon Homes LLP v Stratford Village Development Partnership, Get Living Plc and East Village Management Limited
On 19 January 2024, the Courts handed down the first judgment clarifying when the Courts may grant an RCO.
In this case, Triathlon Homes (TH) owned affordable and social housing in the blocks of flats in question. The remaining privately rented units were owned by subsidiary companies of Get Living Plc (GLP) which was a real estate investment trust which also owned Stratford Village Development Partnership (SVDP), the company which originally developed the properties. The flats were managed by East Village Management Limited (EVML) which was jointly owned by GLP and TH.
In November 2020, EVML discovered serious fire safety defects on the external cladding of the building. A remediation programme began very quickly with works funded by grants from the government’s Building Safety Fund (BSF). The total cost was expected to be over £24.5 million, of which TH was liable for £16.03 million. TH therefore applied to the Courts for an RCO against SVDP (the developer) and GLP (its parent company) for that amount.
The case turned on whether it was ‘just and equitable’ for an RCO to be made. The Court did not agree with SVDP/GLP’s arguments that an RCO was unnecessary because the remedial works, which had already commenced, were due to be fully funded by the Building Safety Fund. Alternatively, SVDP/GLP argued that TH should pursue the contractor or consultants involved in the designing and construction phases for damages under normal contract rules. The Court was not persuaded by this argument either.
The Court decided that RCOs are intended to be a ‘no-fault’ remedy and therefore the Court did not consider it relevant that TH had the possibility of succeeding in a claim against another contractor when deciding whether it was ‘just and equitable’ to make an RCO. The Court held that the purpose of the legislation is to allow applicants to source alternate funding without needing to be involved in lengthy, expensive litigation. It considered that it was just and equitable for remediation costs to fall to the original developer, especially as it had been readily supported by its wealthy parent company.
Although funding was made available by the BSF, the Court found that there was strong public interest in reimbursing those funds where possible as the Fund would be put at risk without further support.
The Explanatory Notes to the Act place the original developers at the top of the hierarchy for liability wherever possible, ahead of freeholders and subsequent landlords.
What does this all mean?
The important message from this recent case is that not only does this legislation impose liability on developers and landlords alike, but also the Courts are very willing to uphold Parliament’s intention to make those entities accountable for the enormous, but necessary, remediation costs involved in improving building safety.
This case demonstrates that parent companies are not exempt simply because they are separate entities. The Courts will always consider all of the facts before deciding whether it is fair to make an RCO.
Developers will most likely be placed with the burden of meeting remediation costs. However, where a developer does not have the financial resources to do so, those corporate entities with the deepest pockets are likely to be pursued first in practice, wherever they fall on the hierarchy of liability. Therefore, this case should put all entities on notice of how they may be implicated if remediation works are needed, irrespective of whether or not they are at fault. This may include management companies and landlords.
If faced with an application for an RCO, the entity in question should consider the hierarchy of liability and submit their own RCO application if necessary.If you need assistance with the Building Safety Act or any property litigation or construction matter, please contact Blaser Mills Law on 020 3814 2020 and ask for Sara Davies for Property Litigation or Tess Turner for Construction.
This article is for general information only and does not constitute legal or professional advice.