This week’s legal update looks at the very first decision of the First-Tier Tribunal (“the FTT”) in respect of their newly granted powers to award a Remediation Contribution Order (“RCO”) under the Building Safety Act 2022 (“the BSA”). 

The case concerned is Arjun Batish and other leaseholders v Inspired Sutton Limited and two others.

The statutory position    

The BSA was largely brought into effect following the tragic events at the Grenfell Tower in 2017. Since then, many leaseholders have found themselves being subjected to exorbitantly high and in some cases, unmanageable levels of service charge contributions to pay towards building safety and fire remediation works required to their buildings.

Despite it being almost six years since the Grenfell Tower fire, many buildings remain in an unsafe state due to legal argument as to which party (or parties) are required to fund the remediation works. 

The BSA has introduced a number of measures that, in theory, can force parties responsible for buildings affected by fire safety defects to remediate those issues, limit the amount payable by leaseholders toward the cost of any remediation or enable the FTT to make an RCO an award in relation to monies paid or to be paid by leaseholders for such works thereby requiring the responsible party (ie landlord or developer in most cases) to contribute to the cost of that remedial work.

Section 124 of the BSA states that an RCO is an order that requires a corporate body to make payment towards remediation costs that have been incurred, or are expected to be incurred, and are necessary to cure what are defined as “relevant defects” in a “relevant building”.

A “relevant building” is defined under the BSA as a self-contained building or part of a building that contains at least two dwellings which is at least 11 metres or five stories in height.

A “relevant defect” is anything done or not done, or used or not used in connection with relevant works which causes a building safety risk such as the spread of fire or the collapse of part or all of the building.

Part of the RCO powers can include ordering a developer or landlord (or those associated with them) to either pay to remediate defects or, where leaseholders have already paid a contribution towards such costs, reimburse them.    

Application for an RCO may be made to the FTT by an “interested person” which includes a number of bodies but are most likely to be persons with a legal or equitable interest in the building, such as leaseholders.

The background

In Batish and other leaseholders v Inspired Sutton Limited and two others, the Leaseholders of 9 Sutton Court Road, Sutton, SM1 4FQ (“the Building”) applied to the FTT for an RCO against Inspired Sutton Limited (“the Landlord”) who was the freeholder and developer of the Building. They also pursued the parent company of the Landlord, Inspired Asset Management Limited (“Parent Company”), and the Landlord’s Directors, Tommy Lyons and James Friis (“the Directors”).

The Leaseholders sought a sum of £192,635.64 (“the Remediation Costs”) to be reimbursed to them under the RCO in respect of the global contributions made by them to remedy relevant defects at the Building. The relevant defects here related to external defects concerning the balconies at the Building that presented a building safety risk (“the Defects”)

The FTT dealt with a number of procedural matters during the course of the application and which resulted in the Parent Company being removed from the proceedings due to the statutory protections afforded to it by virtue of it being in liquidation. The FTT also determined that the Directors were not caught within the meaning of an RCO under Section 124(2) of the BSA as neither of them was a “body corporate or partnership”.

In terms of the Landlord, it did not engage in the proceedings and thus, upon application by the Applicant leaseholders, was barred from taking part in them. Accordingly, the RCO was made without having heard from the Landlord and the FTT determined the application based on the position that the Applicant’s case had met the statutory criteria set out under the BSA. The FTT said:

• The Building was a relevant one as it was structurally detached and was at least five stories;

• The Landlord was a relevant specified corporate body;

• The Defects were deemed “relevant defects” as they constituted a risk to the safety of people in and about the Building arising from the spread of fire; and

• The Remediation Costs claimed were incurred as a result of the Defects.

The FTT, in considering whether it was just and equitable to make the RCO, determined that it was. Accordingly, an RCO was made against the Landlord requiring them to reimburse the Leaseholders the total sum of £194,680.62 divisible amongst them according to their service charge proportion under their respective leases.   

Conclusion

This decision is an encouraging one for “interested persons” and, in particular, leaseholders within buildings containing relevant defects. However, whilst the FTT will be pleased to have flexed their muscles in exercising their new powers to grant an RCO for the first time, it is important to note that this was not a contested application, the landlord having been barred from taking part and so offering no response whatsoever.  Future applications are unlikely to be quite so straight forward as most Respondents will be developers and landlords and so many will be well-resourced and thus more capable and motivated to fight such claims.  Applicants should expect such oponents to seek to take issue with the finer (and some would argue less clear) detail of the BSA and the requirements needed to obtain an RCO such as will put the FTT’s decision making process to the test.

The tag line is "watch this space" as the development of the case law arising out of the BSA is going to be very interesting.

For the Leaseholders, whilst this is a win for them, it may well prove to be a pyrrhic victory in terms of the fact that they have an order for reimbursement of £194,680.62, but how they enforce that order and whether they will receive (any part of) the money due thereunder from the landlord, a company that appears to be of limited means, remains to be seen.  This latter point is, in itself, an important point of note highlighting that any party seeking to bring an application for an RCO should first consider the viability of their oponent before expending too much on the application process.

For more information, please feel free to contact a member of the team on 01435 897297 or info@kdllaw.com.

Disclaimer

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