Fire safety defects and Remediation Contribution Orders

Harriet Muffett analyses a useful case clarifying some questions about Remediation Contribution Orders under the Building Safety Act 2022.

Who's who

SDVP developed the site.

Triathlon are long leaseholders of part of the estate.  

Get Living are also long leaseholders of part of the estate, but, crucially, also now owners of SDVP.

Both Triathlon and Get living are also joint owners of EVML, who act as the Management Company for the estate.  

Background

The proceedings in Triathlon Homes LLP ("Triathlon") – and – (1) Stratford Village Development Partnership ("SVDP") (2) Get Living plc ("Get Living") (3) East Village Management Limited ("EVML") were brought by Triathlon under Part 5 of the Building Safety Act 2022. The proceedings concern five residential buildings in Stratford, East London which were originally developed by the first respondent, SVDP. The development was initially created as accommodation for the London 2012 Olympic Games and has now become a large permanent residential estate with circa 2,818 new homes.

In 2020, serious fire safety defects were discovered, relating to both the design and the construction of the various non-ACM cladding systems adopted for the external facades of the buildings.

A programme of work to remedy the defects on site was devised and implemented by EVML. Remediation commenced at the first of the five blocks on 20 April 2023 and is due to have started at all five blocks by February 2024. 

The applications

In December 2022 Triathlon made five applications for remediation contribution orders ("RCOs") under s124 of the 2022 Act.

The orders sought by Triathlon would require SVDP and Get Living to reimburse expenditure of circa £1.058 million already incurred by Triathlon through service charges paid to EVML. They also required them to meet further liabilities of circa £153,500 for demanded but at that stage unpaid service charge and circa £613,000 for costs that were not yet the subject of service charge demands. The orders sought also required SVDP and Get Living to reimburse expenditure of circa £16 million incurred or to be incurred by EVML in remedying the defects. 

The judgment 

The Tribunal concluded that Triathlon was entitled to the RCOs sought. 

The Tribunal ordered SVDP and Get Living to pay:

(i) the total sum of £16,031,244.53 to EVML, being the forecast cost of the major works and professional fees, apportioned between the Blocks; 

(ii) the further total sum to EVML of £767,438.79 being costs of other remedial measures (including the forecast cost of servicing and decommissioning temporary fire alarms); and

(iii) the total sum of £1,158,358.18, by way of the additional costs to Triathlon.

The Tribunal rejected a submission made by SVDP and Get Living that it had no jurisdiction to make an RCO requiring repayment by Triathlon in the event of it successfully pursuing claims against third parties. It said that it did in fact have jurisdiction:

"Where statute confers a discretion on a tribunal, as section 124 does, unless precluded by clear words, the tribunal is likely to have been intended to have an incidental power to impose appropriate terms as a condition of exercising that discretion.… The Tribunal therefore has ample jurisdiction, as a condition of making a remediation contribution order to impose such terms as are required to make the contribution just and equitable."

Key takeaways

1. The granting of an RCO is a no-fault, standalone remedy. The party ordered to pay under an RCO may not necessarily be the party at fault.
2. One of the respondents in this case was the developer, SVDP, and according to the Building Safety Act 2022, there is a hierarchy of liability whereby the developer sits at the top (above freehold owners and any subsequent landlords), hence the tribunal's finding that the orders should be granted. Further, SVDP would have had to meet the costs from other landlords under the Building Safety (Leaseholder Protections) (Information etc.) (England) Regulations 2022 as the responsible landlord.
3. If ordering an RCO against SVDP, the tribunal found it would be 'just and equitable' to order it against their parent company Get Living as SVDP evidently depended on Get Living for financial support.
4. There was a risk of shortfall in the monies to be received from the BSF fund.
5. The respondents tried to argue the RCO was not necessary as the works were being funded. The Tribunal rejected this and essentially asked why the remediation works should be funded by the BSF fund and the public purse when Get Living has substantial assets. The legislative scheme created a hierarchy of liability in relation to a "relevant defect" and the taxpayer is not in that hierarchy. s124 was created to secure funding for remediation works without the applicant having to become involved in or wait for the outcome of claims against contractors and / or consultants which would be complex, multi-handed, expensive and involve lengthy litigation.
6. It appears that RCOs can be made for costs incurred before s124 came into force on 28 June 2022.
7. Importantly, we learn that "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, is capable of being the subject of a remediation contribution order."

Harriet Muffett is an Associate at Trowers & Hamlins.