FTT provides further clarity on the making of Remediation Contribution Orders
26th January 2024
26th January 2024
Almost a year ago now, we reported on what was expected to be the first of many Remediation Contribution Orders (“RCOs”) made by the First-Tier Tribunal (“FTT”) under Section 124 of the Building Safety Act 2022 (“BSA”), in the case of Arjun Batish and other leaseholders -v- Inspired Sutton Limited and two others. In that case, the respondent landlord did not engage in the proceedings and therefore to some extent a full scrutiny of the relevant legislative provisions was limited.
Now, hot off the press last week, we have a decision of the FTT in a contested application for a RCO in Triathlon Homes LLP -v- (1) Stratford Village Development Partnership (2) Get Living PLC (3) East Village Management Limited  UKFTT 26 (PC), which considered some of the finer detail of the legislative provisions and will no doubt provide clarity and assistance for future applications.
Our Legal Update here explains the circumstances in which an application to the FTT can be made for a RCO, which will essentially require the responsible party (i.e. the landlord or developer in most cases) to contribute towards the cost of the remedial work for relevant defects as defined by the BSA.
The applications concerned five residential buildings at East Village in Stratford, originally developed by Stratford Village Development Partnership (“SVDP”) to provide accommodation for the 17,000 athletes and officials participating in the 2012 London Olympic Games. The former athletes’ village is now known as East Village and has become a large permanent residential estate providing 2,818 new homes including 1,379 affordable homes and houses, most of which are contained in 66 blocks of between 8 and 12 storeys.
The five buildings concerned contained three storey “town houses” or maisonettes and retail units on the lower levels and flats or apartments on the upper levels (“the Blocks”). Some of the units in the Blocks were owned (through subsidiaries) by Get Living PLC, a company which, through its subsidiaries, specialises in the private rental market and owns all of the private rented housing at East Village. Get Living had also since acquired and owned the original developer, SVDP. Other units in the Block were owned by Triathlon Homes LLP (the applicant), which was established to provide affordable housing at East Village and owns all the social and affordable housing.
The repair and maintenance of the structure and common parts of East Village is the responsibility of East Village Management Limited (“EVM”), a company owned jointly by Get Living and Triathlon Homes.
Investigations revealed that non-ACM cladding was used on the Blocks and other serious fire safety defects were discovered relating to the design and construction of the various cladding systems adopted for the external facades, as well as inadequate fire-stopping and the use of combustible timber decking in the external balconies. A programme of works was put in place by EVM and is due to complete by August 2025. The works had, for the time being, been funded by grants made available to EVM using public money provided from the Building Safety Fund. The total cost of the work exceeds £24.5 million.
In December 2022, Triathlon Homes made applications for RCOs in respect of the Blocks, requiring SVDP and Get Living (as SVDP’s parent company) to reimburse over £1m in expenditure already incurred by Triathlon Homes in service charges paid to EVM in respect of interim fire safety measures, and investigative and preparatory works, plus further liabilities of over £150k which Triathlon had not yet paid and some £600k of further anticipated costs not yet demanded. The orders sought would also require SVDP and Get Living to reimburse expenditure of over £16m incurred or to be incurred by EVM in remedying the defects, representing Triathlon’s share of the total remediation costs.
In considering the RCO applications, the FTT had to consider many different and complex issues, including the corporate structures of the entities. However, for the purposes of this Legal Update, the FTT considered the following important issues :-
Who has jurisdiction to make a RCO?
Can a RCO be made in relation to costs incurred prior to the commencement of the BSA?
When is it just and equitable to make a RCO?
1. Who has jurisdiction to make a RCO?
Initially, due to the complexity of the applications, the matter was referred from the FTT to the Upper Tribunal (“UT”). However, at the commencement of the hearing, the UT noted that in fact Section 124 of the BSA only enables the FTT to make a RCO, and the BSA contained no other provisions to confer a concurrent jurisdiction on the UT to make a RCO.
Therefore, the UT made an order transferring the applications back to the FTT under its general case management powers, given that the UT did not have jurisdiction to make a RCO. As all judges of the UT are also judges of the FTT by Section 4 of the Tribunals, Courts and Enforcement Act 2007, the same judges could continue to hear the applications.
2. Can a RCO be made in relation to costs incurred prior to the commencement of the BSA?
On this issue, the FTT empathetically said that “We are in no doubt that section 124 allows remediation contribution orders to be made in respect of costs incurred before 28 June 2022.” The FTT looked at the specific language of Section 124 of the BSA and said that, “In relation to time, the choice of language is unlimited, extending to costs which have already been incurred and those which are yet to be incurred.”
The FTT considered that this interpretation “is consistent with the purpose and structure of Part 5 that the radical protection it extends to leaseholders should not be restricted by precise distinctions of time”.
3. When is it just and equitable to make a RCO?
This was a consideration for the FTT given that, under Section 124 of the BSA, for a RCO to be made the FTT must be satisfied that it is “just and equitable to do so”.
In the absence of any guidance in the BSA as to what should be considered “just and equitable” in any given case, the FTT confirmed that the power to make a RCO is discretionary and should be exercised by the FTT having regard to the purpose of the BSA as well as all relevant factors. It that respect, it is not possible to identify a particular approach to be taken. That said, it was recognised that the FTT is well used to exercising its discretion as to what is just and equitable in other contexts (an example being a costs order under Section 20C of the Landlord and Tenant Act 1985). The motivations of Triathlon Homes in bringing the applications were said not to be relevant to the exercise of that discretion.
Nor was it relevant that the parties may have had other claims against other third parties. The FTT recognised that Section 124 was introduced as an alternative to other fault-based claims which a party may be entitled to make in relation to relevant defects. It was clear that Parliament did not intend that the availability of other claims or potential claims should either disqualify an applicant from making a claim for a RCO order or delay the making of that claim.
The FTT’s decision
The FTT decided that it was just and reasonable to make RCOs against SVDP (as the original developer) and Get Living (as its parent company), even though Get Living had only acquired SVDP many years after the original construction of East Village. The orders were to be made irrespective of the fact that some of the costs for the remediation works were being met by the Building Safety Fund. There was no good reason why SVDP/Get Living should not fund the remediation costs, and the FTT said that recourse to public funds is to be seen as a means of last resort.
Therefore, over £16m sought by Triathlon was ordered to be paid to EVM as Triathlon’s total share of cost for the remediation works, plus a further £700k for other remediation measures, and over £1m to be reimbursed to Triathlon. The parties were invited to agree the precise terms of the RCO to be made by the FTT (e.g. precisely who would pay and by when), to include provision for future contingencies, and additional payments or funds being recovered by EVM from other third parties.
This is obviously a hugely significant decision from the FTT not just in terms of the sums involved, but also as an example of RCOs being made in the context of different corporate structures (e.g. against the parent company as well as the original developer) and where funding was otherwise available from the Building Safety Fund. The case also demonstrates that the FTT will apply its discretion in any given case when deciding whether it is “just and equitable” to make a RCO, having regard to the purpose of the BSA as well as all relevant factors of the case.
We’re sure this is another example of many RCOs yet to come.
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This Legal Update describes the position in law as at the date of this article and care should be taken to note any subsequent amendments to the position as set out above. The Legal Update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.
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