Remediation Contribution Orders under section 124(1) of the Building Safety Act 2022

Triathlon Homes LLP -v- (1) Stratford Village Development Partnership (2) Get Living plc (3) East Village Management Limited [2024] UKFTT 26 (PC)

The First-tier Tribunal (FTT) has considered the first substantively contested remediation contribution order under the Building Safety Act 2022 (RCO). The FTT determined that the original developer and its parent company should contribute in the region of £16 million to the cost of remediation works to remedy relevant defects. The decision gives guidance on when the FTT will consider it "just and equitable" to make an RCO as well as what is meant by a "relevant defect". It also determined that an RCO can be made in respect of costs incurred before the Building Safety Act 2022 (BSA) came into force. It shows that the Tribunal will not be shy to make an RCO against associated and controlling companies within a group of companies. The decision means an RCO is an extremely versatile remedy. 

On 16 February 2024, the parent company of the developer, Get Living plc (Get Living) confirmed that it is appealing the FTT's decision on the basis that the decision is fundamentally flawed because it had nothing to do with either the design or construction of the scheme and the original contractor is currently fully able to fund the remediation. Get Living has stated it will be pursuing the original contractor. 
 

Remediation contribution orders and the test for granting one

Section 124(1) the BSA provides that the FTT may make an RCO on the application of an "interested person" if the FTT considers it "just and equitable" to do so. 

The meaning of "just and equitable" is not set out in the BSA and it was therefore necessary for the FTT to consider the test. In doing so, it considered reviewed the explanatory notes to the BSA, which, in summary refers to the "wider public interest in securing the safety of buildings". This was part of the legislative response to the Grenfell Tower tragedy. The practical effect of section 124, and the Government's intention in respect of RCOs, is that the entity with the most resources will be first in line to foot the bill. The meaning of RCO as set out in section 124(2) can be broken down as follows:- 

• an order in respect of a relevant building which requires "a specified body corporate or partnership" to contribute to costs;
• to be incurred or which have already been incurred;
• to remedy relevant defects in relation to the relevant building in question.

Such orders form part of leaseholder protections and applications can be made against landlords, developers and associated parties. It is a form of money judgment for a specific purpose. 
 

Significance and facts of the case

The significance of this decision is that the FTT put various key provisions of the BSA to the test which have not previously been examined in depth.  

The key facts of this case are as follows:- 

• This matter concerned the cost of remediating defects of fire safety in five blocks of flats in East Village, Stratford: Meller House (Block A), Chroma Mansions (Block B), Seasons House (Block C), Patina Mansions (Block D) and Kaleidoscope House (Block E), which were developed by the first respondent, Stratford Village Development Partnership (SVDP); 

• SVDP is owned by Get Living (although not at the time of development and it is relevant that Get Living plc was not incorporated until after practical completion of the development; it is understood that this is the main focus of the appeal), the second respondent, which owns all of the units in blocks C, D and E. SVDP is a limited partnership whose three partners are, through subsidiaries, owned by Get Living; 

• The applicant, Triathlon Homes LLP (Triathlon), has a leasehold interest in respect of all the flats in blocks A and B and has a leasehold interest in some of the flats in the other blocks;

• The third respondent, East Village Management Limited (EVML), which is owned by Get Living and Triathlon, and is responsible for the repair and maintenance of the structure and common parts of the blocks;

• In late 2020, various building safety defects were identified by EVML in respect of the blocks. A waking watch was implemented as a result and subsequently a programme of works was put together which is in the process of being implemented by EVML and which is currently being funded by the Government building safety fund.
   

The application

Triathlon successfully applied to the FTT for five RCOs which require SVDP and Get Living to:- 

1. Reimburse £1.058 million incurred by Triathlon through service charges paid to EVML in relation to interim fire safety measures and investigative and preparatory works; 
    
2. Pay £153,538 in service charges to EVML which had not yet been paid by Triathlon; 
    
3. Pay £613,899 in respect of costs and anticipated costs which have not yet been demanded via the service charge; and 
    
4. Reimburse £16.03 million incurred or to be incurred by EVML in remedying the defects which represented Triathlon's share of the remediation costs.
    

The key points determined by the FTT

The key points in respect of the operation of section 124 which the FTT have determined in this case are as follows.

1. Just and equitable
   The FTT highlighted that there is no guidance provided in the BSA in respect of how it is to determine whether it is "just and equitable" to grant an RCO. It was noted that the power to make such orders is discretionary and the purpose and wider intention of the BSA are to be considered when determining whether an RCO should be granted.
   
   It was highlighted that an application for an RCO is a new and independent remedy which is non-fault based. Indeed, paragraph 261 of the judgment emphasised that Parliament's intention behind RCOs was based on creating a route by which funding could be secured in respect of remediation works without the need to engage in lengthy and costly litigation. 
   
   The FTT determined that it was just and equitable to grant an RCO against SVDP as the original developer in line with the policy of the BSA. It therefore followed that it was also just and equitable to grant an order against Get Living on which SVDP relied on for financial support. Paragraph 266 of the judgment highlights that: “[…] section 124 permits applications for remediation contribution orders to be made against developers and those associated with developers. The obvious purpose behind the association provisions is to ensure that where a development has been carried out by a thinly capitalized or insolvent development company, a wealthy parent company or other wealthy entity which is caught by the association provisions cannot evade responsibility for meeting the cost of remedying the relevant defects by hiding behind the separate personality of the development company.”
   
   Reference was made to a hierarchy of liability. This is often referred to as the statutory waterfall. The developer who is responsible for the relevant defect or anyone associated to it should be first in line. If they cannot be found, then interested persons can look to the next available landlord in the chain. 
    
2. Costs incurred before 28 June 2022
   As set out in paragraph 73 of the judgment, the FTT is "in no doubt" that costs incurred before the relevant provisions of the BSA came into force (namely 28 June 2022), are capable of being subject to RCOs. The language of this section does not include any explicit limitation on when these costs must have been incurred to be capable of being subject to an RCO. 
   
   An interpretation to the contrary would be inconsistent with the purpose of Part 5 of the BSA and would also be inconsistent with the operation of Schedule 8 of the BSA, which, by way of reminder, places a restriction on costs being charged to leaseholders via the service charge. As per paragraph 79 of the judgment:
   "Section 124 and Schedule 8 are different routes towards the same destination: the transmission of responsibility for remediation away from individual leaseholders and towards the original developer and its associates. The Upper Tribunal having decided in Adriatic Land 5 that the Schedule 8 leaseholder protections apply to costs incurred before the commencement of the Act, in the absence of some clear direction in the language of section 124 , consistency requires that it be interpreted in the same way."
    
3. Costs incurred in preventing risks from materialising or reducing the severity of building safety incidents
   SVDP and Get Living advanced the argument that costs relating to interim measures, such as a waking watch, cannot be subject to an RCO because the BSA distinguishes between costs in respect of remedying relevant defects and costs in respect of measures preventing a building safety risk from materialising or reducing the severity of any incident resulting from a building safety risk which does materialise. 
   
   The FTT rejected this argument on the basis that RCOs are capable of covering costs of taking measures and remedying relevant defects are interconnected.

Conclusion 

Whilst the FTT's decision is not binding, it is noteworthy that section 124 of the BSA does not make provision for such matters to be referred to the Upper Tribunal, and this decision will certainly play a crucial role in paving the way in respect of how RCOs are treated in practice. It appears that the FTT will not be shy in considering the overall policy of the BSA of protecting leaseholders from paying for remediation and further, the key message that if you were the developer responsible for the defects(or an associated party), you will be first in line to pick up the costs of any works to remedy a relevant defect or relevant measure. We wait to see whether the Judiciary is prepared to move away from the clear guidance of the Tribunal that the developer should big up the tab for remediation costs. 

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