In the case of Octagon Overseas Limited -v- Mr Sol Unsdorfer from December 2023, the First Tier Tribunal (“the FTT”) considered an application for a determination on the identity of an “accountable person” for the purposes of the Building Safety Act 2022 (“the Act”).  Their decision is important in helping landlords, RTM companies and management companies understand who is responsible for ensuring the safety of higher-risk buildings.

Legislation

The following definitions from the Act are of relevance to this decision :-

An “accountable person” for a higher-risk building is defined under s72(1) of the Act as either :-

• (a)    A person who holds a legal estate in possession in any part of the common parts (which, for this purpose includes the structure of the building) or

• (b)    A person who does not hold a legal estate in any part of the building but who is under a relevant repairing obligation in relation to any part of the common parts. 

A “higher-risk building” is defined under s65(1) of the Act as  :-

a building in England that-

• (a)    is at least 18 metres in height or has at least 7 storeys, and

• (b)    contains at least 2 residential units

Section 72(6) of the Act defines “common parts” as :-

• (a)    the structure and exterior of the building except so far as included in a demise of a single dwelling or of premises to be occupied for the purposes of a business, or

• (b)    any part of the building provided for the use, benefit and enjoyment of the residents of more than one residential unit (whether alone or with other persons); 

Section 72(6) of the Act further defines “relevant repairing obligation” as :-

a person is under a relevant repairing obligation in relation to anything if the person is required, under a lease or by virtue of an enactment, to repair or maintain that thing;

Section 73(1) of the Act defines a “principal accountable person” for a higher-risk building as

• (a)    in relation to a building with one accountable person, that person;

• (b)    in relation to a building with more than one accountable person, the accountable person who-

• (i)      holds a legal estate in possession in the relevant parts of the structure and exterior of the building, or

• (ii)   is within section 72(1)(b) because of a relevant repairing obligation (within the meaning of that section) in relation to the relevant parts of the structure and exterior of the building.

Section 74 of the Act states as follows :-

In this Part, any reference to the part of a higher-risk building for which an accountable person is responsible is to such part of the building (including all of it) as is determined by or in accordance with regulations

Facts of the case of Octagon Overseas Limited -v- Mr Sol Unsdorfer

In October 2016, the First Tier Tribunal (“the FTT”) made a Management Order appointing Mr Sol Unsdorfer as a Manager under section 24 of the Landlord and Tenant Act 1987 (“the LTA 1987”) in relation to five higher-risk buildings (“the Five Buildings”).  Under s24(1) of the LTA 1987 :- 

The court may, on an application for an order under this section, by order (whether interlocutory or final) appoint a manager to carry out in relation to any premises to which this Part applies-

• (a)    such functions in connection with the management of the premises, or

• (b)    such functions of a receiver,

or both, as the court thinks fit.

Mr Unsdorfer complied with the obligations imposed on him by the Management Order.  The Applicant in this matter, Octagon Overseas Limited (“Octagon”), was the freeholder of the Five Buildings but they granted long leases to Canary Riverside Estate Management Limited for buildings one to four and to Riverside CREM 3 Limited for building five.  The application sought to determine who the accountable persons for the Five Buildings were.

FTT’s decision

It was agreed that Mr Unsdorfer did not meet the requirement under s72(1)(a) as an accountable person, as he did not hold a legal estate in possession in any part of the common parts of the buildings.  Therefore, it was for the FTT to decide if Mr Unsdorfer met the requirements for s72(1)(b) of the Act. 

The FTT decided that, although Mr Unsdorfer was ordered to manage the buildings in accordance with the parties’ obligations in the lease, those powers  were bestowed upon him by the FTT as part of the Management Order. As those powers did not derive from the lease itself, then he did not meet the requirements for s72(1)(b) and so could not be an accountable person.

The FTT considered the words, “by virtue of an enactment” [s72(6) of the Act] to be where the obligations are imposed by legislation and not by an order of the court or tribunal.  The FTT, therefore, decided that a Manager appointed by a tribunal cannot be an accountable person under the Act, as the Manager’s repairing obligation did not arise by virtue of an enactment.

The FTT decided that the accountable persons for the Five Buildings were as follows :-

• Building One      Octagon and Canary Riverside Estate Management Limited;

• Building Two      Octagon and Canary Riverside Estate Management Limited;

• Building Three   Octagon and Canary Riverside Estate Management Limited;

• Building Four     Octagon and Canary Riverside Estate Management Limited;

• Building Five      Octagon and Riverside CREM 3 Limited (and also Circus Apartments Limited who own a 999 year underlease).

Octagon was an accountable person for all the Five Buildings on the basis that, even though its legal estate in the common parts is not “in possession”, it was under a relevant repairing obligation as the superior landlord under the head leases.

Then Canary Riverside Estate Management Limited, Riverside CREM 3 Limited and Circus Apartments Limited were held to be accountable persons for their respective buildings, by having legal estate in possession in the common parts of the relevant buildings.

Conclusion

The decision undoubtedly provides clarity for a FTT appointed Manager who has control over and manages a building by way of a Management Order, even if it causes some complications in the sense of the split responsibilities between the Manager and other parties with an interest in the building(s). However, unfortunately, the FTT is limited by the wording and powers set out in the legislation in reaching its decision. 

Further, the FTT did not confirm which party was responsible as accountable person for which parts of the Five  Buildings. Nor did the FTT give any indication of who the principal accountable person was for the Five Buildings. Instead, the FTT said that unless the parties could agree those issues between themselves, there may well be further applications to the FTT to resolve the remaining matters. This therefore very much remains a case of “watch this space”.

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