The FTT finds that legal costs of Remediation Order and Remediation Contribution Order applications can be recovered via a RCO

The First-tier Tribunal (“FTT”) recently arrived at its decision in respect of a Remediation Order (RO) pursuant to section 123 of the Building Safety Act 2022 (“BSA 2022”) and a Remediation Contribution Order (“RCO”) under section 124 in respect of Empire Square. 

This case is significant for two reasons. Firstly, that the FTT has unequivocally confirmed that RCOs may be used to recoup various costs, including the legal costs incurred in applying for ROs and RCOs. The second that the FTT determines its discretion extends to making and then suspending ROs and RCOs. 

Background

The lessees of Empire Square (represented by Mr Zampetti and others) sought a RO against the landlord (Fairhold Athena Limited), in relation to, a number of relevant defects in the building including defective cladding. 

The landlord, consequently, sought a RCO against the developer (The Berkeley Group Holdings Plc) which included ongoing waking watch costs. Berkeley had committed to the developer pledge and the self-remediation terms with central government, agreeing to take responsibility for the building’s defects. This marked the first instance where the FTT had to determine whether to issue a RO while a developer was actively asserting its intention to carry out the remediation to the building. 

Remediation Order

Pursuant to the RO the landlord is ordered to remedy the relevant defects at Empire Square set out in the Schedule of Relevant Defects by undertaking the Works by 5 March 2030.

Interestingly the RO is then suspended on terms, essentially to provide Berkeley the opportunity to finish the remedial works by specific deadlines, failing which Fairhold would be required to remediate. Where Fairhold was required to step in and remediate the RCO required that Berkley handed over circa £9.5 million to Fairhold to remediate. 

Remediation Contribution Order

On 31 October 2024, section 116 of the Leasehold and Freehold Reform Act 2024 came into force – inserting section 124(2A) into the Building Safety Act 2022. This makes it clear that the costs incurred in taking “relevant steps” towards remediation can be recovered under RCOs. Further, costs relating to obtaining expert reports and associated costs of temporary accommodation can form part of such a claim.

As a result of this change, the FTT ordered the respondent to the proceedings (Berkley) to pay not only the cost of remediating the relevant defects but also costs incurred by the applicant (the landlord - Fairhold Athena Limited) in the provision of a waking watch, costs relating to obtaining expert reports and the “reasonable costs incurred and to be incurred by the Applicant in respect of the provision of legal services of and incidental to” the RO and RCO applications.  

The court stated at paragraph 192 of the judgment: 

“We are satisfied that it is within our jurisdiction under section 124(2) to therefore include legal costs within the very broad ambit of costs described per that section. There is nothing in the Act that we find prohibits us from doing so. … To interpret section 124 otherwise would result in absurdity.”

Key Takeaways

1. The FTT has confirmed that RCOs may be used to recoup legal costs of both ROs and RCO applications.  This removes any doubt that RCOs may cover legal costs, as well as the costs of expert reports as explicitly provided by the amended section 124 of the Building Safety Act 2022. In our opinion, this transforms the nature of the FTT as a generally costs-neutral jurisdiction.
2. In a departure from the previous ruling in The Chocolate Box, the FTT has an unfettered discretion as to whether to make an RO where the pre-qualification criteria set out in section 123 BSA apply rather than importing a “fair and just” test. 
3. The FTT has jurisdiction to take a “novel approach” and impose an order that both the RO and RCO be suspended on terms. 

The judgment, the Remediation Order, and the Remediation Contribution Order can be found below:

Judgment

Remediation Order

Remediation Contribution Order

The decision found in The Chocolate Box can also be found here: The Chocolate Box - FTT Decision  

If you would like any further information, please contact William O’Brien or Zoe McLean-Wells.