07 August 2023

The Society of Construction Law recently hosted a conference in Bristol to discuss the Building Safety Act 2022 (the “BSA”). The conference considered various aspects of the BSA and developing trends in building safety as the provisions of the BSA bed in and become more familiar to those with an interest in the Built Environment Sector. One particular topic, addressed by Fiona Parkin KC, was the application of the various new remedies created by the BSA that enable an interested party to pursue alternative means of redress for the rectification of building safety defects in a building. These remedies include:

  • Remediation Orders (s.123 BSA);
  • Remediation Contribution Orders (s.124 BSA); and
  • Building Liability Orders (s.130 BSA).

The scope and the potential consequences of these remedies are discussed below. 

Remediation Orders

Where a relevant defect is present in a relevant building, an interested person (including the Building Safety Regulator, local authorities, fire and rescue authorities and any other person or entity with a legal or equitable interest in the relevant building or any part of it) may apply to the First Tier Tribunal (“FTT”) for a Remediation Order (“RO”). If granted by the FFT, the effect of an RO is to require the landlord responsible for the repair and/or maintenance of the relevant building (or any part thereof) to remedy the relevant defect. For the purposes of an RO:

  • Relevant building means, subject to some limited exceptions, a detached building, or a self-contained part of a building, that contains at least two dwellings and is at least 5 storeys or 11 metres high.
  • Relevant defect means “a defect… that (a) arises as a result of anything done (or not done) or anything used (or not used), in connection with the relevant works, and (b) causes a building safety risk”. The reference to “anything done (or not done)” includes the provision of professional services.
  • Building safety risk means “a risk to the safety of people in or about the building arising from (a) the spread of fire, or (b) the collapse of the building or any part of it”.
  • Relevant works include (i) works relating to the construction or conversion of the building, if the construction or conversion was completed in the 30 years prior to 28 June 2022; (ii) works undertaken or commissioned by or on behalf of a relevant landlord or management company, if the works were completed in the 30 years prior to 28 June 2022; and (c) works undertaken after 28 June 2022 to remedy a relevant defect.

The provisions of the BSA grant the FFT broad powers to grant an RO in favour of an interested person requiring the landlord of a relevant building to remedy a defect where that defect gives rise to a building safety risk. The procedures of the FFT are less restrictive than the courts and it remains to be seen how enthusiastically the FFT will embrace its new powers and what level of evidence will be required to establish the presence of both a defect and a building safety risk. The first hearing for an RO in the FTT was listed for July 2023, so we should shortly have a better understanding as to how the FFT will approach the application of this remedy and the potential implications for leaseholders and landlords of relevant buildings.

It is also worthwhile noting that while the BSA was enacted in the wake of the Grenfell Tower tragedy, and much of the commentary with respect to the BSA has focused on fire safety, the concept of building safety risk is wider than simply the spread of fire and encompasses the risk of structural failure. As such, ROs are likely to be utilised to seek the rectification of a wide range of issues that may impact on structure of the building and will not be limited solely to the remediation of fire safety defects.

Remediation Contribution Orders

In addition to, or as an alternative to, an RO, an interested person may also apply to the FFT for a Remediation Contribution Order (“RCO”) in relation to any relevant defect in a relevant building and the FTT may, if it considers it just and equitable to do so, make an RCO directing a specified body corporate or partnership to make payments for the purpose of meeting costs that have been incurred, or are to be incurred, in remedying the relevant defect. For the purposes of an RCO, a body corporate or partnership is:

  • the landlord of the relevant building;
  • a person who was the landlord as at 14 February 2022;
  • the developer of the relevant building; and/or
  • a person associated with the parties above.

As with ROs, the provisions of the BSA grant the FFT broad powers to grant an RCO against a wide range of parties connected with a relevant building and, in respect of these powers, there are a number of issues worthy of consideration:

  • Firstly, the FFT is empowered to grant an RCO against a range of parties in addition to the current landlord of a relevant building, including the landlord of the relevant building as at 14 February 2022, the developer of the relevant building and persons associated with the current landlord, the historic landlord and the developer. As such, parties who have divested themselves of any interest in the relevant building may still be obliged to contribute towards the cost of remediating a relevant defect and further, these provisions empower the FFT to “pierce the corporate veil” and potentially make orders against the parent companies of, and/or other companies associated with, such parties. As such, an RCO is potentially an incredibly powerful tool to hold those who are arguably ultimately responsible for a relevant defect to account. However, it should be noted that the powers of the FFT do not appear to extend to granting an RCO against individuals to the extent that they are the landlord or developer of a relevant building.
  • Secondly, the FFT may grant an RCO where it is “just and equitable” to do so. Unfortunately, this is not a defined term and no guidance has been provided to date, setting out the circumstances where it may be just and equitable for the FFT to grant an RCO. As such, while the FFT may adopt the standards and burden of proof requirements adopted elsewhere in the judicial sphere (for example in relation to winding-up petitions under the Insolvency Act 1986), until such time as the first RCO is awarded by the FFT, there is no clarity as to the circumstances when an RCO will be granted or against whom.
  • Finally, while the majority of large-scale developers in England have now signed up to the Responsible Actors Scheme and have committed to remediate life-critical fire safety defects in buildings that they were responsible for developing, an RCO may be granted in respect of any relevant defect which results in a building safety risk. As outlined above, a building safety risk goes beyond life-critical fire safety defects and encompasses any defect that poses a risk to the safety of people in the building from the spread of fire and/or the collapse of the building. As such, an RCO may provide interested parties with an opportunity to seek further contributions from developers notwithstanding the provisions made by such developers under the Responsible Actors Scheme.

Building Liability Order

Separately from the powers of the FFT to grant an RO and/or RCO, the BSA empowers the High Court to, where it considers that it is "just and equitable” to do so, make a Building Liability Order (“BLO”) directing that the relevant liability of one body corporate relating to a specified building is also the liability of a separate body corporate (or the joint and several liability of two or more separate bodies corporate) where the separate body corporate is associated with the original body corporate. For the purposes of a BLO:

  • A relevant liability means a liability on the original body corporate that is incurred under the Defective Premises Act 1972 (“DPA”) or section 38 of the Building Act 1984 (“BA”) or as a result of a building safety risk.
  • A body corporate is associated with the original body corporate if at the date of the BLO, or at any time since the date of the works giving rise to the relevant liability, it either controls or is controlled by the original body corporate, or a third body corporate controls both of them.

In respect of the High Court’s power to grant a BLO there are a number of issues to be aware of:

  • Firstly, the High Court is empowered to grant a BLO against bodies corporate that are associated with the original body corporate. This is an extremely wide power and is intended to largely circumvent the mechanisms that many companies have traditionally used to insulate themselves from risk (i.e. the use of SPVs etc.) and it should be noted that a BLO may be made in respect of a liability of company that has been dissolved and continues to have effect even if the company is dissolved after the making of a BLO. However, a BLO can only be made against a body corporate and, as such, it does not appear that a BLO can be made against a partnership and/or an individual.
  • Secondly, the High Court may make a BLO where it considers that it is “just and equitable” to do so. As with RCOs, this is not a defined term and no guidance has been provided to clarify what this means. Accordingly, it is not clear how the High Court will apply this test and until such time as the first BLO is made by the High Court, there is no clarity as to the circumstances when a BLO will be granted or against whom.
  • Thirdly, a BLO may be granted in circumstances where a relevant liability has accrued under the DPA or the BA or as a result of a building safety risk. It is important to note that a relevant liability is not limited to building safety risks in higher-risk buildings and that there is no restriction on the types of buildings which may be the subject of a BLO.
  • Finally, the BSA significantly extends the limitation period for liabilities arising under the DPA and the BA, with limitation for prospective claims under the DPA and s.38 of the BA extended to 15 years and, in relation to retrospective claims under the DPA, limitation is extended to 30 years from the date that the BSA came into force. Accordingly, BLOs may be made in respect of liabilities where previously limitation would have provided a defendant with a complete defence to any claim and potential defendants may now be obliged to revisit any provisions that they may have made in respect of historic claims.

Burges Salmon Comment

The ability to apply to the FFT for an RO and/or RCO, or to seek a BLO in a claim before the High Court, provides an injured party with new, and potentially very powerful, alternative routes to seek financial redress and/or to secure the remediation of building safety defects, and any other defects, in their properties.

The full significance of these new powers will only become apparent over time and will depend on how the FFT and the High Court exercise their discretion to determine when to make an RO, RCO and/or BLO and will largely depend on the judicial interpretation of the when it is “just and equitable” to make an order. In applying the “just and equitable” test the FFT and the High Court will need to carefully balance the commercial interests of developers and the wider construction industry against the interests of homeowners and the wider public interest in ensuring building safety.

However, given the significant breadth of these new powers, including the ability of the FFT and the High Court to pierce the corporate veil and make orders against associated commercial entities and the extended limitation periods within which claims may be brought, these new remedies are likely to be of significant concern for those who own and/or are involved in the development of residential buildings where building safety defects are identified. Indeed, the Royal Institute of British Architects has expressed“serious concern” about these new remedies and has warned of the potential adverse impact that they may have on the professional indemnity insurance market affecting the construction industry’s output and future risk appetite.

If you’d like to discuss the above in further detail, please contact Tom Weld tom.weld@burges-salmon.com.

This article was written by Tom Weld, Rebecca Lee and Genevieve Vaughan.

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