a case update on LON/00BB/HYI/2022/0018-22 Triathlon Homes LLP (Triathlon) – and – (1) Stratford Village Development Partnership (SVDP) (2) Get Living plc (Get Living) (3) East Village Management Limited (EVML)
1. Who's Who;
SDVP developed the site.
Triathlon are long leaseholders of part of the estate.
Get Living are also long leaseholders of part of the estate, but, crucially, also now owners of SDVP.
Both Triathlon and Get living are also joint owners of EVML, who act as the Management Company for the estate.
2. Background:
In December 2022 Triathlon made five applications for remediation contribution orders ("RCOs") under s124 of the 2022 Act. RCOs were brought in by the 2022 Act as one of the additional remedies for pursing parties in respect of defects creating a 'building safety risk', which is a fire or structural safety risk. Applications for RCOs can be brought in the First Tier Tribunal (FTT) against developers, landlords and their 'associated' companies to contribute to the costs of remedying relevant defects in a relevant building (being a building with at least two dwellings and at least five storeys or at least 11 metres high), if the FTT considers it 'just and equitable'.
In 2020, serious fire safety defects were discovered, relating to both the design and the construction of the various non-ACM cladding systems adopted for the external facades of the buildings.
A programme of work to remedy the defects on site was devised and implemented by EVML. Remediation commenced at the first of the five blocks on 20 April 2023 and is due to have started at all five blocks by February 2024.
3. The applications:
In December 2022 Triathlon made five applications for remediation contribution orders ("RCOs") under s124 of the 2022 Act.
The orders sought by Triathlon would require SVDP and Get Living to reimburse expenditure of circa £1.058 million already incurred by Triathlon through service charges paid to EVML. They also required them to meet further liabilities of circa £153,500 for demanded but at that stage unpaid service charge and circa £613,000 for costs that were not yet the subject of service charge demands. The orders sought also required SVDP and Get Living to reimburse expenditure of circa £16 million incurred or to be incurred by EVML in remedying the defects.
4. The judgment:
The Tribunal concluded that Triathlon was entitled to the RCOs sought.
The Tribunal ordered SVDP and Get Living to pay:
(i) the total sum of £16,031,244.53 to EVML, being the forecast cost of the major works and professional fees, apportioned between the Blocks;
(ii) the further total sum to EVML of £767,438.79 being costs of other remedial measures (including the forecast cost of servicing and decommissioning temporary fire alarms); and
(iii) the total sum of £1,158,358.18, by way of the additional costs to Triathlon.
The Tribunal rejected a submission made by SVDP and Get Living that it had no jurisdiction to make an RCO requiring repayment by Triathlon in the event of it successfully pursuing claims against third parties. It said that it did in fact have jurisdiction:
"Where statute confers a discretion on a tribunal, as section 124 does, unless precluded by clear words, the tribunal is likely to have been intended to have an incidental power to impose appropriate terms as a condition of exercising that discretion. … The Tribunal therefore has ample jurisdiction, as a condition of making a remediation contribution order to impose such terms as are required to make the contribution just and equitable."
5. Key takeaways:
- S124 gives no guidance on how the tribunal should exercise its discretion as to whether granting the order would be 'just and equitable'. The discretion should be exercised with regard to the purpose of the BSA and all relevant factors and it is not possible to identify a particular approach.
- The granting of an RCO is a no-fault, standalone remedy. The party ordered to pay under an RCO may not necessarily be the party at fault. The tribunal commented that this is a route to securing funding of remedial works without the applicant having to become involved in potentially complex and expensive litigation in respect of the original contractual obligations.
- One of the respondents in this case was the developer, SVDP, and according to the Building Safety Act 2022, there is a hierarchy of liability whereby the developer sits at the top (above freehold owners and any subsequent landlords), hence the tribunal's finding that the orders should be granted. Further, SVDP would have had to meet the costs from other landlords under the Building Safety (Leaseholder Protections) (Information etc.) (England) Regulations 2022 (the "LPI Regulations") as the responsible landlord. The tribunal commented that the policy of the 2022 Act was that the burden of the remediation costs should fall on the developer.
- If ordering an RCO against SVDP, the tribunal found it would be 'just and equitable' to order it against their parent company Get Living as SVDP evidently depended on Get Living for financial support.
- The tribunal gave little weight to the fact that the beneficial ownership of the developer had changed significantly since the initial development of the site. The tribunal commented that the new beneficial owners could have instead taken a transfer of the land and buildings, rather than ownership of the developer.
- There was a risk of shortfall in the monies to be received from the BSF fund.
- The respondents tried to argue the RCO was not necessary as the works were being funded. The Tribunal rejected this and essentially asked why the remediation works should be funded by the BSF fund and the public purse when Get Living has substantial assets. The legislative scheme created a hierarchy of liability in relation to a "relevant defect" and the taxpayer is not in that hierarchy. s124 was created to secure funding for remediation works without the applicant having to become involved in or wait for the outcome of claims against contractors and / or consultants which would be complex, multi-handed, expensive and involve lengthy litigation.
- It appears that RCOs can be made for costs incurred before s124 came into force on 28 June 2022.
- Paragraph 107 of the judgment confirms that "any measure which causes a building defect to cease to be a relevant defect, or which is part of a larger programme of measures for that purpose, is capable of being the subject of a remediation contribution order."This means that applicants are entitled to claim a contribution not only to the costs of actually remedying the defects but also costs related to interim measures that may have to be taken such as a waking watch or temporary alarm systems.
- An order can only be sought from the FTT. Therefore the parties costs will not usually be recoverable from the other side.
