UK Government expanding remedies under the Building Safety Act 2022 – but it could go further

The Government’s Leasehold and Freehold Reform Bill has made its way through the House of Commons and has had its first reading in the House of Lords.

The UK Government has amended its own bill since it was first introduced late last year in ways which significantly beef up the remedies available to parties applying to the First-Tier Tribunal (FTT) to resolve building safety defects under the Building Safety Act 2022 (BSA 2022).

This article considers the implications of key clauses in the draft bill and where we think the bill could go further.

The BSA 2022 remedies

The BSA 2022 introduced two powerful tools available in in the FTT to remedy certain defects in certain buildings.

They both only apply to residential buildings at least 11m or 5 storeys in height which suffers from a defect in construction works carried out between 1992 and 2022, and which causes a risk to people in or about the building arising from the spread of fire or structural collapse.

• Remediation orders (ROs) require a landlord to remediate such defects present in their own building.
• Remediation contribution orders (RCOs) require a specified person to make a contribution towards “meeting costs incurred or to be incurred in remedying relevant defects”. A person may only be specified as a target of an RCO if they are a current or former landlord, the developer of the building, or a party ‘associated’ with one of those classes. The definition of ‘associated’ is wide, including group companies and companies that share a common director.

ROs and RCOs may be sought by anyone with a legal or equitable interest in the building, including leaseholders, but they may also be sought by the Secretary of State, the Building Safety Regulator, the local authority and the local fire and rescue authority. As an example, in October 2022, DLUHC announced that it was taking legal action against the freeholder of Vista Tower in Stevenage. Whilst no RO has been made, the freeholder has reportedly started work to remediate the building as of January 2024.

How is the Government proposing to change ROs and RCOs?

In a debate introducing these changes, the Minister for Local Government explained that these amendments were intended “to clarify and extend protections in specific areas to further prevent freeholders and developers from escaping their liabilities to fund building remediation work” and to put an end to unfortunate cases where the landlord failed to carry out certain steps before and during the remediation process, causing leaseholders to bear a financial burden or requiring a local authority to step in.

1. The bill defines a new category of action called “relevant steps”. The FTT will be able to order a landlord to take ‘relevant steps’ under an RO; similarly, the costs of ‘relevant steps’ will be recoverable under an RCOs. Relevant steps are very widely defined as follows, and should be distinguished from the current focus of the actual work to remedy defects and the cost of that actual remediation:

steps which have as their purpose –
(a) preventing or reducing the likelihood of a fire or collapse of the building (or any part of it) occurring as a result of the relevant defect,
(b) reducing the severity of any such incident, or
(c) preventing or reducing harm to people in or about the building that could result from such an incident.

2. During RO proceedings, the FTT will be able to require a landlord, by direction, to produce an expert report or survey relating to (i) defects or potential defects – presumably this is aimed primarily at the identification and also remediation of such defects; and (ii) any ‘relevant steps’ which may be taken in relation to a relevant defects – again, bearing in mind the definition, this presumably means steps other than remediation. The language of “direction” suggests this may be exercised as an interim power (albeit enforceable as if it were a court order) before the FTT has decided whether an RO should be made.

3. In RCO proceedings, in addition to payments relating directly to the costs of remediation, the FTT will have the power to require the subject of an RCO to make payments in respect of:-

(a) Costs incurred or to be incurred in taking ‘relevant steps’ described at point 1 above;

(b) Costs incurred or to be incurred in obtaining expert reports in respect of the building; and

(c) Temporary accommodation costs, including the costs of that accommodation itself as well as removal, storage and travel costs. The Government’s explanatory notes explicitly refer to this as being of use to local authorities seeking to recover the cost of temporarily rehousing vulnerable residents whose building has to be decanted, where no financial support has been received from responsible relevant landlords.

The bill includes a power for the Secretary of State to expand this list by secondary legislation without the full, detailed parliamentary scrutiny reserved for full Acts of Parliament.

4. In RCO proceedings, the FTT will also be able to determine that a party is liable for the “reasonable costs of specified things done or being done” where the FTT does not require making payments of a specified amount – in other words, the FTT can decide the principle of liability without determining quantum or requiring payment.

Importantly, these changes are proposed to apply to any currently pending or future applications for ROs or RCOs. On the wording of the bill, they are retrospective and prospective in effect, and the explanatory notes confirm that was the Government’s intention.

Implications

While the Government has couched these amendments in terms that they are in part just clarifying costs that responsible parties ought to have been paying anyway, from the legal perspective this is a significant expansion of the scope of the FTT’s jurisdiction to require the carrying out of non-remedial ‘relevant steps’ and to address the cost of those steps.

The specific focus on the obtaining of expert reports, and inclusion of the costs of future expert reports, could lead to an increase in satellite litigation at a preliminary stage on whether an expert report (and the costs of the same) are justified.

The expert cost recovery proposal cuts across the costs neutrality of the FTT jurisdiction. It is a common feature of tribunals such as the Property Chamber of the FTT, along with the Employment Tribunal and the FTT’s Social Entitlement Chamber, that parties bear their own legal costs (save for very exceptional cases). This enables parties without significant resources to participate without the risk of being ordered to pay the other party’s legal costs which they almost always would in the civil courts. Requiring the subjects of ROs to obtain expert reports at their own cost, and enabling RCO applicants to recover the costs of expert reports, pushes the process further from a cost-neutral problem-resolving forum. It pushes the process towards one where landlords and developer parties or those associated with them – who may not be responsible for defects in any meaningful way – are expected to shoulder a wider category of costs, without, crucially, any way to summarily pass these on to the parties.

The Government could do two things to offset the problems posed by these expansions of RO and RCO regimes:-

1. Provide by secondary legislation or in this bill that a party who has been named as a respondent to an RO or RCO application has standing under sections 123(5) and 124(5) BSA 2022 respectively to seek an RO or RCO. Such an application could be procedurally joined with the original application and the two applications heard together. That will enable the FTT to be a forum to adjudicate between competing claims to responsibility for remediation. At the moment, (i) with respect to ROs, a relevant landlord (such as a management company) may not have the right to seek an RO against another relevant landlord, and (ii) a developer without any legal or equitable interest in the building, and any ‘associated’ party against whom an RCO is sought, may not seek an RCO against any other potentially responsible party.

2. Amend section 124 BSA 2022 to enable developers and landlords to seek contributions from contractors who took on design responsibility for the construction work that gave rise to the ‘relevant defect’. Whilst we do not have the benefit of a detailed consultation process on the reasoning behind many key parts of the BSA 2022 (because none was carried out before the BSA 2022 was passed), we infer from the explanatory notes that the FTT was chosen in order to resolve defects, and resolve paying for defects, timeously and faster than the civil courts may have done. The Government may not consider it appropriate to turn the FTT into a forum for adjudicating claims within the construction supply chain, but where an employer has contracted with a construction company that is prepared to accept responsibility for both designing a building and implementing that design and carrying out the work to completion, the simple fact is that the parties invariably truly responsible for the defects are entirely excluded from the process.

Ultimately, whether or not the Government adopts these further changes, these amendments to the RO and RCO regimes indicate that the Government does not consider these regimes are working as intended to achieve timeous remediation of buildings and recovery of associated costs. Those affected by these changes should keep informed and stay ahead of them.

For more information, please contact Mark London, Lee Russell, Mark Foxcroft or William O'Brien.