In this instalment of our Real Estate Development Yule Blog we look at the impact that the Building Safety Act 2022 (BSA 2022) has in relation to residential buildings that are at least 11 metres (or five storeys) tall by way of Remediation Orders that can be made against landlords and Remediation Contribution Orders that can be made against landlords, developers and their associated companies.
Building Safety Act 2022 – Section 123 Remediation Orders and Section 124 Remediation Contribution Orders
Remediation Orders and Remediation Contribution Orders relate to building defects which cause a risk to the safety of people in and around a building arising from the spread of fire or the collapse of the building (referred to as "relevant defects" in the BSA 2022). This could include defective cladding or inadequate fire stopping measures, for example. These orders are potentially powerful tools that can mandate remediation of buildings by landlords or require contribution to the costs of doing so by landlords, developers and companies associated with them (but not by professional designers or contractors).
Both section 123 and 124 of the BSA 2022 came into force earlier this year and apply to self-contained buildings or parts of buildings which are at least 11 metres or 5 storeys tall and contain two or more dwellings (unless otherwise excluded by the BSA 2022).
The works that resulted in the relevant defects must have been completed between 28 June 1992 and 28 June 2022, or be remedial works undertaken after 28 June 2022 that were intended to correct the original defect. Landlords, developers and companies associated with them are therefore potentially exposed to significant liabilities under these orders for buildings constructed well beyond usual limitation periods. Our previous blog here looks at the impact of other extended limitation periods under the BSA 2022.
Section 123 BSA 2022 – Remediation Orders
Under section 123 the First-tier Tribunal (FTT) can issue Remediation Orders to "relevant landlords" requiring them to remedy relevant defects in a building by a specified time. A relevant landlord is a landlord who is required under the lease, or by virtue of an enactment, to repair or maintain anything in relation to a relevant defect. The Building Safety Regulator, local authorities, fire and rescue authorities and persons with a legal or equitable interest in the building can apply for the FTT to make such an order.
The government has already started to take advantage of the powers under section 123. On 9 October 2022, the Department for Levelling Up, Housing and Communities announced that it had given a freeholder 21 days to commit to remedying fire safety defects, failing which an application would be made to the courts for a Remediation Order. In tandem, the government also announced that Remediation Contribution Orders were being considered under section 124 against entities associated with the freeholder. The announcement concluded with an encouragement to leaseholders to apply for a remedial order if the owner of their building is failing in its responsibilities to remedy defects.
Section 124 BSA 2022 – Remediation Contribution Orders
Under section 124, the FTT also has the power to issue Remediation Contribution Orders against certain corporate entities on the application of an interested person, if it considers it just and equitable to do so. The order can require the entity to contribute to the costs of remedying the relevant defects in the building within a specified time. The BSA itself does not contain any guidance as to when it will be "just and equitable" to make such an order. The court will have broad discretion to take account of such matters it considers relevant – that might include the extent of the defects and the damages being sought, as well as the level of involvement of the parties in question.
Remediation Contribution Orders can be issued against:
- a landlord under the lease of a relevant building,
- a person who was such landlord on 14 February 2022,
- the developer of the building, or
- a person "associated" with any of the above.
The list of "associated" parties is very wide and includes not only group companies, but also companies that share (or have previously shared) a director. The court's power to extend liability for building safety defects is therefore very wide ranging, but landlords should also note that section 124 could allow a landlord that has funded the remediation of a building to claim a contribution from the original developer (or its associated companies). A developer, however, cannot then seek a contribution from the original contractor or consultants involved in the development under section 124, and will need to review how to otherwise recover its losses considering the terms of its contracts with the contractor and consultants and whether claims for contribution under the Defective Premises Act 1972 could apply.
Many landlords, developers and their associated entities could be caught within the net of sections 123 and 124 of the BSA 2022. Those with interests in residential properties over 11 metres or five storeys in height should consider their potential rights and liabilities in relation to building safety defects, to the extent they have not already done so.
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