Developers won't escape remediation contribution orders under the Building Safety Act 2022

Background

Central to this case is the East Village residential estate at Stratford, formerly the London 2012 Olympic athletes' village. The accommodation was converted after the games to provide near 3,000 residential housing units, mostly contained in 66 tower blocks of between 8 and 12 storeys.

Social housing association Triathlon Homes LLP ("Triathlon") as long lessee successfully obtained remediation contribution orders ("RCOs") in relation to five blocks under Part 5 of the Building Safety Act 2022 ("the BSA") at the First -tier Tribunal ("FTT") against the developer Stratford Village Development Partnership ("SVDP"). Our Insights article published on 1 February 2024 summarised the FTT findings.

SVDP and the associated effective superior Landlord, Get Living Plc ("Get Living"), appealed the FTT decision. East Village Management Limited ("EVML"), as estate manager and Landlord to Triathlon, was joined to proceedings as a respondent, and the Secretary of State for Housing, Communities and Local Government ("Secretary of state") was represented as an intervener.

The Court of Appeal ("CoA") has this week rejected both grounds of appeal.

Decision

SVDP and Get Living brought the appeal on two Grounds. First that the FTT were wrong in concluding that it was just and equitable to make an RCO against them for the cost of remediation works, or that the RCO should have been made following the outcome of litigation against the original contractor. Second that the FTT were wrong in concluding that an RCO could be made in respect of costs incurred prior to section 124 of the BSA coming into force on 28 June 2022.

Arguments for Ground 1 were heard as ten sub-grounds:

Ground 1.1

The appellants submitted that the FTT had been wrong to presume it was always just and equitable to make an RCO against the developer. The CoA agreed with the FTT that this was the essential purpose of section 124 of the BSA and the public Building Safety Fund ("Public Fund") should not step in when there was a developer or associated company able to fund remedial works, nor should the Public Fund provide interim support in anticipation of future litigation against the contractor.

Nugee LJ commented that it may not always be just an equitable to make an RCO against an associated company that had nothing to do with the development, e.g. a "charitable company to which the director had given his time voluntarily", leaving remediation costs to be borne by the Public Fund.

Ground 1.2

It was submitted that the FTT were wrong to allow Triathlon's claim against the developer under regulation 3 of the Building Safety (Leaseholder Protections) (Information etc) (England) Regulations 2022 as neither SVDP nor Get Living were the Landlord. Nugee LJ agreed with the FTT that this did not matter as the primary purpose of the 'associated company' provisions of section 124 of the BSA was to allow an RCO to be made against the original developer.

Ground 1.3

The appellants argued Triathlon's motive in obtaining the RCO was so it would not have to pay for the works itself and either EVML or the Secretary of State should have made the application. The CoA agreed with the FTT that in the absence of malice, the identity nor motive of an RCO applicant was not important provided that they were eligible (which they were).

Grounds 1.4 and 1.10 (argued together)

It was submitted that the RCO was not needed as the remediation works were being funded by the Public Fund, or could be awarded once the outcome of any litigation against the original contractor was known. Again, the CoA agreed with the FTT that the Public Fund is not listed in the hierarchy of potential funders in the BSA and should be a measure of last resort, asking "Why should the public continue to fund remediation works when the developer and associated companies are available and able to pay?".

Ground 1.5

The appellants argued that Triathlon ought to have pursued other claims before applying for the RCO, and that had a claim against SVDP or Get Living been initiated, it would then have been able to join the original contractor and others. This ground was also dismissed since the BSA makes no obligation on eligible applicants to exhaust other claims first.

Ground 1.6

The CoA heard argument that since Triathlon had caused EVML to make an application for public funding of the remediation works with the support of SVDP and Get Living, and that the scope of the works was formed with a view to obtaining successful public funding, its subsequent application for an RCO was inconsistent with that intent. The CoA dismissed this argument stating "It is not as if it is suggested that Triathlon ever promised not to apply for an RCO, or had estopped itself from doing so.", finding that Triathlon had not precluded itself from applying for an RCO by previously advocating for public funding.

Ground 1.7

It was submitted that the public funding was granted for remediation works without expectation of recovery from SVDP or Get Living. Nugee LJ disagreed, quoting the standard form grant funding agreement that "the Applicant shall use all reasonable endeavours to pursue reasonable remedies available to it …" which would include applying for an RCO and handing any monies recovered back to the Public Fund.

Ground 1.8

The appellants argued that the changing identity of SVDP and, in particular, Get Living, were such that they were different entities to the original developer. SVDP had originally been in public ownership, was sold to an investment entity, and the chain of subsequent transactions was such that Get Living was in no sense a developer and had no connection with the development. Both the FTT and CoA highlighted that Get Living had the option to instead purchase land and buildings but chose to acquire the company and with it, its liabilities, and dismissed the argument.

Ground 1.9

Finally, it was submitted that Get Living was protected from an RCO being made against it as since its subsidiaries held qualifying leases in the blocks, it fell within the definition of "Leaseholder" under the grant funding agreement and EVML was prohibited from recovering from leaseholders any expenditure covered by the Public Fund. Since the RCO applicant was Triathlon, this did not matter, however, Nugee LJ considered EVML's position in applying for the RCO in its own name and found that the prohibition only protected the actual leaseholder from a contribution claim against it.

Under the second Ground of appeal, the appellants submitted that the FTT were wrong to find that an RCO could be made in respect of costs incurred by Triathlon prior to enforcement of section 124 of the BSA on 28 June 2022. This was largely answered by URS Corporation Ltd v BDW Trading Ltd [2025] UKSC 21 and Nugee LJ considered the Supreme Court judgment that Part 5 of the BSA was clearly intended to have retrospective effect. Whilst not following the same analysis, Nugee LJ concluded that "It is far more consonant with the purposes of the [BSA] to interpret section 124 as providing the statutory mechanism for leaseholders who have paid to seek to pass on the costs they have already incurred – whether before or after the Act came into force.". Newey LJ added that the aims of the BSA "…are furthered by construing section 124 in such a way that RCOs can be made in favour of leaseholders, and against developers and persons associated with them, in respect of costs pre-dating the BSA".

Commentary

Unpicking the relationships between the parties in this case and the dispute that arose between them sheds light on how the matter found its way before the CoA. EVML as the party ultimately responsible for the remediation works, has a board comprised of directors on both sides of the dispute. SVDP was originally formed from a public body, a point raised in argument with a suggestion that this meant there was no loss in remediation works being publicly funded. SVDP has since been sold into private ownership and that argument was dismissed.

As one of the first RCOs granted and appealed against, it is clear that the courts will give little weight to arguments that it is not just and equitable to award an RCO under section 124 of the BSA when there is a developer or associated company available and able to pay. On the back of the Supreme Court's judgment in URS v BDW, this decision by the CoA reaffirms that the main purpose of the BSA is to place primary responsibility for building safety remediation costs on the developer.

With thanks to co-author, Solicitor Natasha Leo.