Basic Guide to Different Types of Liabilities and Claims Under the Building Safety Act 2022

As a consequence of the Grenfell Tower disaster and the recommendations made in Dame Judith Hackitt’s report, the Building Safety Act 2022 (BSA) was passed on 28 April 2022, with a staggered roll out of its provisions thereafter.

It has introduced a new regime with a particular emphasis on “higher-risk buildings”. We are still in the early stages of its roll out.

Dame Hackitt reported that the regulatory system covering high-rise and complex buildings was not fit for purpose, highlighting key issues underpinning the system failure:

• Ignorance: regulations and guidance are not always read by those who need to, and when they do the guidance is misunderstood and misinterpreted.
• Indifference: the primary motivation is to do things as quickly and cheaply as possible rather than to deliver quality homes which are safe for people to live in.
• Lack of clarity on roles and responsibilities: there is ambiguity over where responsibility lies, exacerbated by the level of fragmentation within the industry, precluding robust ownership of accountability.
• Inadequate regulatory oversight and enforcement tools: the size or complexity of a project does not seem to inform the way in which it is overseen by the regulator. Where enforcement is necessary, it is often not pursued. Where it is pursued, the penalties are so small as to be an ineffective deterrent.

In addition to the more rigorous regulatory regime being introduced for ‘higher risk buildings’i, the BSA also tackles the issue of lack of accountability, to bring about a change in the industry. At the heart of this regime are ways to avoid innocent leaseholders from ultimately footing the bill for the industry’s failures, providing recourse against those involved in the construction of a defective building or, potentially, their ‘associates’, by way of Building Liability Orders, Remediation Orders and Remediation Contribution Orders, as well as liability for defective construction products.

The BSA is split into 6 parts, with 11 schedules, including:

• the regulator and its functions (Part 2);
• Building Act 1984 (Part 3): building control during the design and construction of a higher risk buildingii;
• Higher Risk Buildingsiii (Part 4): the in-occupation regime; and
• other provisions about safety, standards etc (Part 5).

In this guide we are looking at some of the liabilities and claims which can arise as a result of the BSA, predominantly coming out of Part 5 of the BSA.

Remediation orders & remediation contribution orders

The BSA introduced Remediation Orders (s.123) and Remediation Contribution Orders (s.124). Both section 123 and 124 apply to a “relevant building”.

A “relevant building” is a self-contained building or part of a building which contains at least two dwellings and is at least 11 metres high or has at least five storeys (unless otherwise excluded by the BSA)x. There is no definition of “dwelling” within the BSA and as such whether or not a particular property constitutes a “dwelling” will need to be considered on a case-by-case basis.

Both Remediation Orders and Remediation Contribution Orders are at least partly retrospective in effect, applying to defects arising from works undertaken in the 30 years prior to 28 June 2022. There is a grace period to 28 June 2023 if limitation will run out for the relevant claim between 28 June 2022 and 28 June 2023, but this grace period is nearly at an end.

Remediation Orders (s123 of the BSA)

A “remediation order” is issued by the First-tier Tribunal (FTT) and orders the relevant landlord to remedy a defect in relevant works causing a building safety risk (being the risk to the safety of people in or about the building due to the spread of fire or the collapse of the building or a part of it). A “relevant landlord” is a landlord under a lease of the building or any part of it who is required, under the lease or by virtue of an enactment, to repair or maintain anything relating to the relevant defect.

The Building Safety Regulator, the relevant local authority, the relevant fire and rescue authority, persons with a legal or equitable interest in the building or any part of it or any other person described by the regulations can apply for the FTT (as an “interested person”xi) to make such an order.

A “relevant landlord” is a landlord under a lease of the building who is required “under the lease, or by virtue of an enactment, to repair or maintain anything in relation to a relevant defect”xii.

It is important therefore to check the terms of any existing lease to ascertain which party is responsible for repairing and/or maintaining the part of the property which relates to the “relevant defect”.

Remediation Contribution Orders (s 124 of the BSA)

A Remediation Contribution Order determines who is required to contribute to the cost of remedying a defect in relevant works which causes a building safety risk. The FTT may make the Remediation Contribution Order on the application of an interested person if it considers it just and equitable to do so. The BSA itself does not contain any guidance as to when it will be 'just and equitable' to make such an order.

Here, interested persons include all those who can apply for a Remediation Order and also a special measures manager (as defined in Schedule 7 to the BSA) where one has been appointed for a building above 18 metres in height.

Remediation Contribution Orders can be issued against a “specified body corporate or partnership”, which is limited to:

• 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.

‘Associated’ parties are those that meet the criteria set out in s.121 of the BSA and are broadly defined, referring to companies who have a common director, voting rights, nominees and trusts and corporate control.

This is potentially a lifeline for relevant landlords (as well as relevant leaseholders):

A relevant landlord who is the subject of a Remediation Order could therefore consider applying to the FTT for a Remediation Contribution Orders for a contribution towards the cost of remedying a relevant defect from the developer or a person ‘associated’ with the developer.

Insolvency practitioners who are appointed to wind up an insolvent landlord may also apply to the court (with jurisdiction to wind up the insolvent landlord) for a contribution from such specified body corporate or partnership.

How may this work in practice? By way of example, under s.124, a landlord that has funded the remediation of defects causing a building safety risk could seek a contribution from the original developer (or its associated companies). However, that developer could not then seek a contribution from the original contractor involved in the development under this route. The developer would then need to consider alternative routes to recover its losses from the other parties involved in the construction of the property (for example contractors and/or consultants).

As explained in the Government guidance published in July 2022, the expectation is that:

“Remediation contribution orders can be used to:

• require a developer or building owner for the building, or their associated companies, to make payments in connection with remedying relevant defects
• allow recovery of costs from the building’s developer by applying to the Tribunal for an order against the developer
• require that leaseholders are reimbursed for costs already paid out for remediation works”

Remediation Contribution Orders in Action

On 9 October 2022, the Department for Levelling Up, Housing and Communities (DLUHC) issued a press release announcing that it had written to the freeholder of a tower block, identified over two years ago as having unsafe cladding, in the first step to taking legal action. The freeholder was given 21 days to commit to remediation of fire safety defects, otherwise DLUHC said that it would apply for a court order.

The Secretary of State also said that he would consider applying for a Remediation Contribution Order against other entities associated with the freeholder, requiring them to financially contribute to the remediation costs.

On 13 January 2023, the first application for a Remediation Contribution Order was granted by the FTT in favour of 18 leaseholders of properties within a high-rise self-contained block of flatsxiii. The application was made against the freeholder and developer of the building (and originally others), pursuing just over £192k.