The Building Safety Act 2022 (“the Act”) introduced a number of powerful enforcement mechanisms designed to ensure that the cost of remedying historic building safety defects falls on those responsible, rather than innocent leaseholders.
Whilst much of the attention has focused on the protections afforded to leaseholders, understanding the enforcement options available is equally important. Whether you are a landlord, developer, management company, RTM company or leaseholder, knowing which route to take (or defend) can make the difference between resolving a dispute quickly and avoiding lengthy litigation.
In this article, we take a look at two of the key enforcement mechanisms introduced by the Act, Remediation Orders (“ROs”) and Remediation Contribution Orders (“RCOs”).
What is a Relevant Defect?
Before looking at the remedies themselves, it is helpful to understand what the Act means by a relevant defect.
Broadly speaking, a relevant defect is a defect arising from works carried out during the previous 30 years which creates a building safety risk, namely a risk to the safety of people arising from the spread of fire or structural collapse.
Remediation Orders
A RO is an order made by the First-tier Tribunal requiring a relevant landlord to remedy specified relevant defects within a specified period.
Applications may be made by an interested person, a category which now includes, amongst others, leaseholders, local authorities, fire and rescue authorities.
Section 123 of the Act defines a relevant landlord as the landlord under a lease of the building (or part of it) who is responsible, under the lease or by statute, for repairing or maintaining anything relating to the relevant defect.
In practical terms, an RO is designed to force action where necessary remediation works are not being carried out. If a landlord has delayed commencing works, or there is uncertainty as to whether defects will be remedied, an RO can provide a clear timetable and compel the landlord to complete the necessary works.
It is important to remember, however, that a RO does not determine who ultimately bears the financial burden of the works. Its purpose is to ensure that the necessary remediation is carried out, leaving questions of financial responsibility to be dealt with separately where appropriate.
The Tribunal has a broad discretion when determining the terms of the order, making it an effective tool where progress has stalled.
A Note for RTM Companies
There is, however, an important point for RTM companies.
Following the acquisition of the right to manage, the RTM company assumes responsibility for many of the landlord’s management functions. Whilst the RTM company does not become the landlord in the traditional sense, there is a strong argument that, in certain circumstances, it may be the appropriate respondent to an application for a RO because it has assumed responsibility for repairing and maintaining the relevant parts of the building.
This remains an evolving area of law and the correct respondent will ultimately depend upon the particular structure of the building and the repairing obligations contained within the leases and imposed by statute.
The practical consequence is that leaseholders within an RTM building may find that an application is directed against the RTM company rather than the freeholder. In many cases this offers little practical benefit, as it effectively requires the RTM company, which is controlled by the leaseholders themselves, to procure the works without necessarily providing any funding to carry them out.
For this reason, ROs are not always the most effective enforcement mechanism in RTM buildings. Similar issues can also arise where there is a Resident Management Company, intermediate landlord or head lessee responsible for the relevant repairing obligations.
Remediation Contribution Orders
A RCO is another order that may be made by the First-tier Tribunal. Rather than compelling works to be carried out, an RCO requires specified parties to contribute towards costs that have been, or will be, incurred in remedying relevant defects or taking relevant steps under the Act.
Unlike a RO, the focus is financial rather than practical.
One of the significant advantages of an RCO is the range of parties against whom an application can be made. Again unlike a RO, liability is not confined to those with repairing obligations.
Depending upon the circumstances, applications may be brought against developers, landlords and their associated companies. Parliament deliberately extended these powers so that the Tribunal could require those who were responsible for, or associated with, the development to bear the financial burden of remediation where it is just and equitable to do so.
Recent amendments to the legislation have also ensured that RTM companies and RMCs may participate in these proceedings as interested persons, enabling them to pursue recovery from those who ought properly to bear the cost of remediation.
In practice, applicants have increasingly sought RCOs to secure funding that allows remediation works to proceed, particularly where there is uncertainty as to whether those responsible will undertake the works voluntarily. It should, however, be remembered that an RCO is not intended to deprive those responsible of the opportunity to carry out the works themselves where that remains appropriate.
RCOs may also be used to recover remediation costs that have already been incurred.
The Tribunal’s Approach
Perhaps the most interesting aspect of RCOs is the test applied by the Tribunal.
The legislation provides that the Tribunal may make an order where it considers it just and equitable to do so. That is an intentionally broad test, giving the Tribunal considerable flexibility. Rather than applying a rigid checklist, the Tribunal will consider all of the circumstances of the case, including the parties’ involvement in the development, their relationship to one another, the source of the defects and whether it is fair to require the respondent to contribute towards the remediation costs.
The leading authority remains Triathlon Homes LLP v Stratford Village Development Partnership, in which both the First-tier Tribunal and the Court of Appeal confirmed the breadth of the Tribunal’s discretion when applying the “just and equitable” test. The First-tier Tribunal’s decision can be read here.
Although the case is currently before the Supreme Court, the appeal is confined to the retrospective operation of section 124 rather than the scope of the Tribunal’s discretion on the application of just and equitable. Accordingly, the Court of Appeal’s guidance on the Tribunal’s approach remains good law.
Which Remedy Should You Choose?
The answer will depend entirely on the circumstances.
If the issue is that necessary remediation works simply are not being carried out, an RO may be the appropriate course, provided there is a relevant landlord against whom an application can properly be made.
If, however, the works have already been completed, are underway, or funding is the real issue, an RCO may provide a more effective remedy by requiring those responsible to meet the costs.
In many cases, careful consideration should be given at the outset to whether one or both remedies are appropriate before proceedings are commenced. Choosing the wrong route can result in unnecessary delay, additional cost and proceedings being brought against the wrong party.
Final Thoughts
The Building Safety Act 2022 has fundamentally changed the landscape for enforcing building safety obligations.
Remediation Orders are intended to ensure that necessary works are carried out. Remediation Contribution Orders are designed to ensure that the financial burden ultimately falls on those who ought to bear it.
The strategic question is no longer simply whether relevant defects exist.
Increasingly, it is identifying the most effective mechanism for compelling the works or recovering the costs. Understanding the distinction between these remedies at an early stage can often make the difference between a swift resolution and protracted litigation.
As with much of the Act, this remains a rapidly developing area of law. Whilst the emerging case law is providing greater clarity as to how the Tribunal will exercise its powers, each case will ultimately turn on its own facts.
If you require advice on pursuing or defending an application for a Remediation Order or Remediation Contribution Order, or simply wish to understand the options available under the Building Safety Act 2022, please feel free to get in touch.