Remediation Contribution Orders
Here’s a quick recap on the statutory provision at the centre of the case.
Under Section 124 of the BSA, an “interested person” – which can be anyone with a legal interest in a “relevant building” or part of it (so a leaseholder of a single flat, or the whole building), or more broadly, the regulator, local authority, or fire and rescue authority – can apply to the FTT for an RCO.
These orders can only be made in respect of “relevant buildings”, which are buildings containing at least 2 dwellings which are over 11 metres or 5 storeys high.
An RCO can be made against the current landlord, the landlord as at 14 February 2022, or the developer of the building – or anyone associated with those parties, who will then be required to pay towards the costs of remedying “relevant defects” (basically, anything which could cause a risk of fire or structural collapse) in that building, if the defect arises from works carried out between 29 June 1992 and 28 June 2022.
The power to grant an RCO is at the FTT’s discretion, and it will only make an RCO if it considers it is “just and equitable to do so”.
Facts of the case
This dispute related to a block of flats in the former athletes village in Stratford, London – now known as “East Village”.
Triathlon Homes (Triathlon) owns all the social and affordable housing in East Village, and Get Living Plc (Get Living) owns all the private rented housing.
Stratford Village Development Partner (which is now owned by Get Living) was the original developer of East Village, and East Village Management Limited (jointly owned by Triathlon and Get Living) (EVML) is responsible for repair and maintenance of the structure and common parts of the building.
After the Grenfell Tower fire, EVML carried out work to identify what materials had been used in the construction of the East Village, and whether they posed any safety risks.
Various fire safety defects were identified in the relevant block in November 2020, including combustible insulation and breather membranes, inadequate fire stopping, combustible timber decking on balconies, and no (or defective) cavity barriers and fire stopping within external wall systems.
EVML put a waking watch put in place in November 2020, which continued until additional alarm and heat detection systems were installed in flats as temporary measures.
EVML then started remedial works in April 2023, which should be completed by August 2025. The cost of those works is £24.5 million, and is being funded by grants paid to EVML from the Building Safety Fund.
Triathlon – who holds long leases of each building – brought an application for a RCO as an “interested person”.
As well as claiming for costs of interim safety measures which it had paid for via the service charge, Triathlon also sought an RCO in respect of the remediation costs themselves, arguing that the Get Living group should fund the works itself rather than via the Building Safety Fund.
RCOs can cover costs incurred before section 124 of the BSA came into force
Section 124 of the BSA came into force on 28 June 2022.
Get Living and the Developer argued that Triathlon couldn’t recover the over £1 million of costs incurred in or interim measures in November 2020, as this was before section 124 of the BSA came into force.
The FTT disagreed, and said “we are in no doubt that section 124 allows remediation contribution orders to be made in respect of costs incurred before 28 June 2022”.
The FTT noted that the Upper Tribunal has already confirmed that Schedule 8 of the Act – which allows certain tenants to avoid paying service charge for remedial works – applies to costs incurred before the Act came into force. Section 124 is the other side of the same coin – its purpose is to allow leaseholders them to claw back amounts already paid. It would be bizarre to protect tenants who haven’t yet been asked to pay, and not those who have already paid.
The FTT emphasised the importance of reading the BSA as a whole, and looking at Schedule 8 and Section 124 together as “different routes to the same destination”. On that basis, tenants can recover for amounts paid before the Act came into force.
The person seeking an RCO does not need to be the person who benefits.
The FTT also confirmed that the person seeking the order (the “interested person”) doesn’t need to be the person to whom costs are paid under the order (the “specified person”). In this case, any contribution from Get Living would go to EVML rather than Triathlon but that did not matter.
RCOs can cover “preventative” costs
Get Living and the Developer argued that RCOs do not cover preventative costs – such as waking watch, and installation of additional fire alarms – and only cover remedial works such as the removal of cladding. This was because, under section 124, an RCO orders payments to be made “for the purpose of meeting costs incurred or to be incurred in remedying relevant defects…relating to the relevant building” and only “in respect of the remediation of specified relevant defects (or in respect of specified things done or to be done for the purpose of remedying relevant defects”.
They argued that section 124 was worded differently to the leaseholder protections in Schedule 8, which apply to “relevant measures”, which includes measures taken for the purpose of preventing a relevant risk from materialising, or reducing the severity of any incident resulting from a relevant risk materialising.
Triathlon rejected that argument, and said that all their costs related to remedying relevant defects, so were covered under section 124.
The FTT agreed with Triathlon. The purpose of the legislation was to allow recovery of these costs, and it made no sense for leaseholders to be able to resist paying service charge for costs not yet paid under Schedule 8, but other leaseholders who have already paid to be unable to recover them under RCOs.
The FTT also noted that it would be very odd if, under section 123 – which allows the FTT to make remediation orders, requiring certain fire safety works to be carried out – a fire and rescue authority could get an order requiring removal of cladding, but not installation of smoke detectors if they would better address the fire safety risk.
It was just and equitable to impose a RCO on the developer and its parent company
The FTT decided it was just and equitable to impose a RCO on the Developer.
This is because one of the major principles of the BSA is that “primary responsibility for the cost of remediation should fall on the original developer, and that others who have a liability to contribute may pass on the cost they incur to the developer”.
The FTT pointed to The Building Safety (Leaseholder Protections) (Information etc) Regulations 2022 under which a landlord who has paid for remedial works may recoup them from the developer. As such it would be responsible to pay the costs if requested by other landlords.
While that wasn’t the relevant provision for this case, the availability of an alternative route to reach the same position was a “strong indicator that it is likely to be just and equitable” for the Developer to pay.
As for Get Living, the FTT decided that it was also just and equitable to order an RCO against them. The ability under the BSA to go after “associated” companies is aimed at just this situation: “it seems to us that the situation of [the developer] with its relatively precarious financial position and its dependence for financial support upon Get Living, its wealth parent, constitutes precisely the sort of circumstances at which the association provisions are targeted”.
There was also a fairness principle that, as the works had been paid for out of the public purse through the Building Safety Fund, they would better be paid for by the original developer and its associate.
Finally, there was no obligation on Triathlon to pursue other parties – such as the original contractors – rather than pursuing an RCO. The whole point of RCOs is to avoid going through complex, lengthy litigation. The FTT also noted it was not appropriate for the works to be publicly funded – which should be a last resort – while those claims made their way through the courts.
On that basis, it was just and equitable to order the RCO sought by triathlon.
Is this a binding decision?
The claim was issued in the FTT, and was then transferred to the Upper Tribunal. However, it emerged at the start of the hearing that the Upper Tribunal does not have jurisdiction to hear RCO cases – the legislation only allows the FTT to grant these orders.
The Tribunal had, itself, hoped that judgment would be given by the Upper Tribunal, as this would have been binding on the FTT in the future, and could even have been referred to the Court of Appeal to make binding precedent. However, as all UT judges are also FTT judges, the same judges were nonetheless able to hear the case.
As an FTT judgment, this is not binding on future decisions, however, it nonetheless provides helpful guidance on the FTT’s approach and will be influential given that all of the judges who heard the case are also UT judges.
Corporate tenants not entitled to leaseholder protections in Schedule 8
While the judgment was concerned with Section 124 of the BSA, rather than Schedule 8, the FTT used Schedule 8 as a reference point to frame their interpretation of Section 124.
In doing so, they made an interesting comment on corporate tenants’ ability to claim leaseholder protections under Schedule 8. It had been widely assumed that corporate tenants could access these protections. However, the FTT was clear that “a single lease comprising more than one dwelling, or held by a company, will not be a qualifying lease. Thus, a body such as Triathlon, which holds headleases comprising a number of flats in each of the Blocks, and which cannot occupy premises as a home, will not be the tenant under a qualifying lease and will not be entitled to most of the leaseholder protections in Schedule 8”.
Key takeaways
This judgment provides some welcome clarity on the FTT’s approach to RCOs, as well as the leaseholder protections under Schedule 8.
It shows that the Court is willing to look at the whole of the BSA, and be guided by its overarching purpose in interpreting its often unclear and inconsistent provisions and uphold the principle that the buck should stop with developers, and neither leaseholders – nor the public purse – should be required to fund works, or even pursue costly and time consuming litigation to get others to do so.
The case also presents RCOs as a more favourable option for building owners, than pursuing a potentially lengthy and complex contractual claim against a developer in respect of relevant defects.
