The First-tier Tribunal (FTT) has handed down its decision on the first substantively contested remediation contribution order (RCO) under section 124 of the Building Safety Act 2022 (BSA). Sarah Dyer and Sean Garbutt of Gowling WLG acted for the successful applicant, Triathlon Homes LLP (Triathlon), in Triathlon Homes LLP -v- (1) SVDP (2) Get Living plc (3) EVML[2024] UKFTT 26 (PC).

The FTT decision sheds valuable light on the interpretation of certain provisions of the BSA. Most notably, it confirms that:

  • A RCO is a standalone "no-fault" remedy introduced by Parliament in the BSA. It does not require that the payer under any order was factually the original "wrongdoer" i.e. the contractor undertaking poor workmanship or a designer producing an incorrect or negligent design. Rather, the BSA and related regulations create a "hierarchy" or cascade of liability with the developer sitting at the top ahead of freeholders and then subsequent landlords;
  • The FTT was in "no doubt" that section 124 allows RCOs to be made in respect of costs incurred before 28 June 2022 (i.e. the commencement date of section 124);
  • Any "measure which causes a building defect to cease to be a relevant defect, or which is part of a larger programme of measures for that purpose" – including waking watch and fire evacuation officers as well as servicing and decommissioning temporary fire alarms – is capable of being the subject of a remediation contribution order;
  • The FTT is well used to exercising its discretion on how to apply a test of "just and equitable" and, in the context of RCOs, that discretion should be exercised having regard to the purpose of the Building Safety Act 2022 and all relevant factors. However, given the breadth of this discretion there is no single approach that should be taken by the FTT and each application will be dependent on its own facts;
  • The existence and provision of funding from the Building Safety Fund was not considered, in this case, to be a reason by the Tribunal to not make an award (referred to as the "Public Purse" argument).

What are remediation contribution orders?

As we described in our previous article, RCOs (together with Remediation Orders) form part of what are collectively referred to as the "leaseholder protections" established by the BSA. These are aimed at protecting leaseholders in multi-occupied residential buildings from the costs associated with remediating historical building safety defects.

Under section 124 of the BSA, the FTT may, on the application of an interested person – and if it considers it "just and equitable" to do so – make a RCO in relation to a "relevant building", requiring a company to make payments in connection with the remediation of relevant defects. Read our earlier insight to learn more about the definition of "relevant building" and "relevant defects".

An RCO may be made against a landlord, a person who was a landlord at the qualifying time (i.e. the start of 14 February 2022), or the building's developer, as well as any person "associated" with any of these parties. "Associated" parties are broadly defined and encompass, for example, both parent companies, subsidiaries, and sister companies within a group structure, as well as companies that share or have shared a director in the five years leading up to 14 February 2022.

Schedule 8 of the BSA affords further protection to leaseholders by providing:

  • that certain service charge amounts relating to "relevant defects" in a "relevant building" are not payable; and
  • for the recovery of those amounts from persons who are landlords under leases of the building (or any part of it).

Background to the application to the FTT

The application before the FTT was made by Triathlon, a limited liability partnership established to provide affordable housing at East Village, which is the former Athletes Village for the London 2012 Olympic Games. This application was made in respect of five particular buildings (the Blocks ) in an area of the village known as N26.

The Athletes Village was owned and developed by a special purpose vehicle called Stratford Village Development Partnership (SVDP). At the time of development, SVDP was wholly owned by the Olympic Delivery Authority (ODA). Following completion of London 2012, SVDP was sold into the private sector and, at the time of the application, was ultimately owned by Get Living plc (Get Living). Triathlon is the long leaseholder of all or part of each of the Blocks.

The properties at N26 were subsequently leased to individuals by both Triathlon and Get Living, with approximately 60% of the units leased by Triathlon, and the balance leased by Get Living.

Following the Grenfell Tragedy, inspections were undertaken across the village by the management company East Village Management Limited (EVML), which identified a number of building safety defects. Thereafter a waking watch was put in place and a remedial scheme designed and tendered.

Triathlon's share of the remedial works and professional fees were estimated at some £16 million (referred to in the judgment as the "Major Works"). In addition, future costs of fire evacuation officers and fire alarm decommissioning to the conclusion of the works were estimated in the region of £760,000 as well as Triathlon's costs incurred in respect of the waking watch, fire evacuation officer and tender of the remedial works at just over £1 million (referred to in the judgment as the Triathlon Additional Costs).

Triathlon applied for RCOs to be made against SVDP (in its role as developer) and against Get Living plc (in its role as the parent company of SVDP as well as the freehold landlord entities SVPH-1 Limited and SVPH-2 Limited). Triathlon sought its share of the Major Works costs and future costs to be paid by SVDP/Get Living (together the respondents) to EVML (as the entity that will be incurring the Major Work and future costs), with the historic Triathlon Additional Costs being sought to be paid to Triathlon.

FTT decision

The FTT agreed with Triathlon and made five RCOs against the respondents (one in respect of each of the Blocks), ordering them to pay in total:

  • over £16 million to EVML in respect of the Major Works;
  • a further £767,438 to EVML in respect of the costs of other remedial measures including the forecast cost of servicing and decommissioning temporary fire alarms; and
  • over £1 million to Triathlon in respect of the Triathlon Additional Costs.

In reaching this decision, the FTT addressed a number of key points which we describe further below.

Can a Remediation Contribution Order be made in relation to costs incurred before the commencement of section 124?

The respondents argued that a RCO could not be made under section 124 in relation to costs incurred before the section came into force on 28 June 2022. It contended that to do so would be to give the provision retrospective effect.

Triathlon submitted that applying section 124 to costs incurred before it came into effect would not involve giving it retrospective effect. Indeed, the provisions of Part 5 of the BSA were all "backward looking" in the sense that they were all about defects that had occurred in the past. It would be absurd to limit the scope of section 124 by reference to the date remedial works were done or paid for, rather applying it generally to the defects which caused the legislation to be enacted.

Moreover, the Explanatory Notes to the BSA confirmed Parliament's intention that section 124 should apply to costs incurred before commencement, stating that: "if leaseholders have already paid costs towards remediation before the coming into force of the leaseholder protections, they may wish to seek to recover these costs using a remediation contribution order."

The FTT agreed with Triathlon and confirmed that:

  • it was in "no doubt that section 124 allows remediation contribution orders to be made in respect of costs incurred before 28 June 2022";
  • this was plain from the "clear and explicit" language of section 124(2) and the "the absence of any temporal limitation or transitional provision";
  • the clear effect of the language is confirmed by paragraph 1012 of the Explanatory Notes to the BSA;
  • it did not regard this interpretation of section 124 as "either improbable or unfair": Parliament has decided, in passing the BSA that "irrespective of fault, it is fair for those with the broadest shoulders to bear unprecedented financial burdens";
  • the BSA "provides for wholesale intervention in and beyond normal contractual relationships in order to transfer the potentially ruinous cost of remediation from individual leaseholders to landlords, and to distribute it between landlords and developers and their associates according to criteria which Parliament has decided are necessary and fair."

The FTT further explained that given the protections provided under paragraph 2 of Schedule 8 of the BSA means that leaseholders are "fully protected" against the costs of relevant measures if the landlord or superior landlord was responsible for the defect. That was a key factor in this case, as it was accepted by the respondents that those protections were engaged. Moreover, the FTT considered that it would be "inconceivable" that Parliament could have intended that those leaseholders who benefited from that protection but had not yet paid for remedial works by 22 June 2022 would be protected, but those who had paid before 22 June 2022 would not be.

Meaning of "just and equitable"

Until this decision, the meaning of "just and equitable" in section 124 of the BSA has not been subject to any substantial judicial scrutiny.

The FTT observed that section 124 gives no guidance on how the FTT is to decide whether it is "just and equitable" in any particular case to make an order. It further noted that whilst it is "obvious" that the power is discretionary and should be exercised "having regard to the purpose of the 2022 Act and all relevant factors", it is not possible to identify a particular approach which should be taken.

In reaching its decision that, in this case, it was just and equitable to make a RCO against the respondents, the FTT considered all arguments put to it by the Parties. Ultimately it was persuaded that, whilst a number of matters were of little or no weight, the principal reasons pointing in favour of the FTT exercising its discretion to make an award in this case were as follows.

  • It was accepted that SVDP was the developer of East Village and, given the hierarchy of liability created under the BSA and associated regulations described above, it was a strong indicator that it would likely be just and equitable for SVDP to be ordered to pay;
  • It would also be just and equitable for an order to be made against Get Living, given that SVDP was dependant on Get Living for financial support. Indeed it was established in evidence that SVDP was balance sheet insolvent and was only being maintained as a going concern due to the continued support of its parent company.

The FTT ultimately rejected the respondents' argument that, given the remedial works were currently being funded by the Building Safety Fund, there was no need for a RCO to be made. The FTT was not persuaded that there was any clear and convincing reason why the remedial works should not be funded by SVDP/Get Living in place of the Building Safety Fund. Indeed, it was held that the public funding provided by the Building Safety Fund was a matter of last resort.

Jurisdictional issues

In February 2023, the application had been transferred to the Upper Tribunal, by reason of its complexity and significance. The transfer was made pursuant to rule 25 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 (the "Tribunal Procedure Rules") which governs the selection of the appropriate forum and allows for transfer of individual cases to the Upper Tribunal when justified by complexity or value. However, at the commencement of the hearing, the Tribunal noted that "[w]hether by inadvertence or design" section 124 of the BSA allows RCOs to be made by the FTT alone, and does not confer a concurrent jurisdiction on the Upper Tribunal.

Accordingly, the case was transferred back to the FTT and heard by the Chamber President and Deputy Chamber President of the Upper Tribunal (Lands Chamber) in their capacity as FTT judges.

Commentary

As noted in our previous insight, until now the only RCO made by the FTT was an uncontested order, in which a number of matters concerning interpretation – particularly the meaning of "just and equitable" – were not subject to any legal argument before the Tribunal.

The FTT's decision in Triathlon therefore sheds welcome light on some of the key statutory definitions, in particular the meaning of "just and equitable", and assists in understanding how the BSA will be applied in practice. In particular, the FTT agreed with Triathlon's submission that the BSA and related regulations create a "hierarchy of liability, with the original developer and its associates at the top".

It further noted that to reach an "interpretation of the Act which resulted in some leaseholders bearing the cost of remediation, and some developers, landlords and their associates avoiding responsibility, would not give effect to the obvious purpose of the Act to protect leaseholders to the fullest extent possible. Moreover, such an interpretation would create serious inconsistencies in the operation of the legislation."

This is one of the clearest indications to date that the courts will seek to give effect to the policy and intention of the BSA, where it is just and equitable to do so. In the circumstances of this case, it was plain to the courts that the protections afforded by the BSA were engaged and accordingly it was just and equitable to make an order against the original developer and its well capitalised parent.

If you have any questions about this article, please get in touch with Sarah Dyer or Sean Garbutt.