In the wake of the Grenfell Tower fire, which occurred on 14 June 2017, the independent review into the tragedy, led by Dame Judith Hackitt, culminated in a final report, produced in May 2018.
This report formed the foundational crux of the legislation, the Building Safety Act, which was subsequently introduced to Parliament as a Bill on 5 July 2021, and given Royal Assent on 28 April 2022. Central to Ms Hackitt’s report, and the resultant legislation, was the need for a cultural shift in the construction industry, to embed ‘systemic change’.
The legislation is therefore, fundamentally, radical. Unlike significant property legislation before it, it is not fault based. It is not pre-occupied with balancing the interests and responsibilities of various stakeholders; rather, the central premise of the legislation is that those with the broadest shoulders, and greater means, should be responsible for carrying out remediation works.
To What Buildings Does the Act Apply?
The Building Safety Act applies to all ‘relevant buildings’. These are defined under section 117(2) of the Act as:-
A self-contained building, or self-contained part of a building, in England that contains at least two dwellings and:
- is at least 11 metres high, or
- has at least 5 storeys.
In order to apply the building must have a ‘relevant defect’ (section 120). This, in relation to a building, means a defect that—
- arises as a result of anything done (or not done), or anything used (or not used), in connection with relevant works, and
- causes a building safety risk.
‘Relevant works’ are those completed in the 30 year period ending June 2022, or works undertaken after this date to remedy a relevant defect. A ‘building safety risk’, in relation to a building, means 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 of it.
If these factors apply, you may be able to seek remediation under the Act, if you are an ‘interested person’. This includes the local authority, a fire and rescue authority, or any person with a legal or equitable interest in the relevant building, or part of it (section 123 (5)).
Remediation Orders and Remediation Contribution Orders
A significant talking point in relation to the BSA 2022, is the introduction of remediation orders and remediation contribution orders. If you are an interested person, you can make an application to the Court or Tribunal, requesting an order, requiring remediation of relevant defects.
‘Remediation orders’, require all defects causing a risk of fire or building collapse to be remedied by the landlord (section 123(1)), and ‘remediation contribution orders’ require landlords, developers, or associated persons to contribute to these works, as long as it is ‘just and equitable’ to do so (section 123(2)).
‘Just and equitable’ is not defined in the Act. Nevertheless, in the case of Triathlon Homes LLP v Stratford Village Development Partnership, Get Living Plc and East Village Management Limited [2024] UKFTT 26 (PC), the Tribunal provided an indication as to the way in which the ‘just and equitable test’ might manifest itself, in relation to Remediation Contribution Orders.
This case concerned 5 residential buildings in East London, in which fire defects were discovered in November 2022, with anticipated remediation costs of £24.5 million.
The Respondents were as follows:-
- SDVP, the original developer;
- Get Living, the owner of various units (through subsidiary companies);
- EVML, who were responsible for the maintenance and structure of the common parts.
In applying the ‘just and equitable’ test, the Tribunal gave a clear statement that the application of this legislation is not ‘fault based’. At paragraph 261 of the judgement it is stated: ‘the ability to make a claim for a remediation contribution order under section 124 is a new and independent remedy, which is essentially non-fault based. The remedy has been created by Parliament as an alternative to other fault-based claims.’ This point is further underlined at paragraph 75 of the judgment: ‘Parliament has decided that, irrespective of fault, it is fair for those with the broadest shoulders to bear unprecedented financial burdens.’
Accordingly, in making a contribution order, the Tribunal gave ‘no weight to the changing identity of of the ultimate beneficial owners of SVDP and Get Living.’ Additionally, they did not give any weight to the fact that the owners of SDVP only acquired the entity in 2014, and had no role in its initial development, noting that ‘each [investor] willingly assumed the risks associated with their investment.’
This judgement, which indicated a clear willingness from the FTT to order contributions, and apply the ‘just and equitable’ test, on an approach which is not fault based, is therefore, inherently, radical.
Associated Companies
Crucial to the application of remediation contribution orders, is the definition of ‘associated persons’ under the Act, who can be liable for remediation costs.
Under Section 121 of the Act, a partnership or body corporate is associated with another person in the circumstances mentioned in subsections (2) to (5).
- Where a person’s interest in a relevant building was held on trust at the qualifying time, any partnership or body corporate which was a beneficiary of the trust at that time is to be regarded, for the purposes of the provisions mentioned in subsection (1) as they apply in relation to the relevant building, as associated with the person.
- A partnership is associated with any person who was a partner in the partnership, other than a limited partner, at any time in the period of 5 years ending at the qualifying time (“the relevant period”).
- A body corporate is associated with any person who was a director of the body corporate at any time in the relevant period.
- A body corporate is associated with another body corporate if—
- at any time in the relevant period a person was a director of both of them, or
- at the qualifying time, one of them controlled the other or a third body corporate controlled both of them.
These wide-spanning definitions are deliberately designed to pierce the corporate veil. In the past, many developers have sought to mitigate liability and risk, through the utilisation of Special Purpose Vehicles (“SPV”) when constructing new developments, relying on the concept of limited liability for shareholders and investors.
At paragraph 252 of the Triathlon judgement, it is acknowledged that ‘the Act erodes and elides corporate identity and deprives it of some of its main advantages, but it does so for specific purposes and within specific limits’. In seeking to ensure that those with the broadest shoulders bear unprecedented financial burdens, on a non-fault basis, the Act has sought to target this practice and, in doing so, pierce the corporate veil.
Likely Progression of the Act
Throughout 2024, the tribunals and courts have been, and will be, kept busy by the BSA. Further contentious areas, are likely to include:
- Liability for building safety defects,
- Special measures orders
- Claims under the Defective Premises Act 1972.
There are also likely to be many further episodes of leaseholders seeking to resist current service charge demands, endeavouring to recover monies already paid and seeking remediation orders on their properties.
In a reported case in the First-tier tribunal, 2-4 Leigham Court Road (LON/00AY/HYI/2022/005&0016), the tribunal made a remediation order in respect of Block A and Block B, 2-4 Leigham Court Road, London, SW16).
The outcome, and judgment on this matter, indicated the desire of the Tribunal to focus on the crux of the legislation in their application; namely, ensuring that buildings are made safer, thereby protecting leaseholders, whilst removing costly burdens associated with remediation. The Tribunal was clear to point out that ‘the Act must work and be made to work for leaseholders in a straightforward way’. This, and other associated judgments, have indicated a willingness from the Tribunal to favour leaseholders in their application of the legislation.
If you consider that you may have the basis for a claim under the BSA, or require any further guidance regarding the application of the Act, or, you are a landlord or developer, seeking to reduce their liability under the Act, do not hesitate to contact the team at Naylor.