The Leasehold and Freehold Reform Act 2024 may spook unprepared landlords and developers this Halloween with amendments to the Building Safety Act 2022 coming into force on 31 October 2024.
Remediation orders (ROs) and remediation contribution orders (RCOs) have been a hot topic in 2024 since the year kicked off with the £18 million remediation contribution order made in the Triathlon case (read our previous article here: Triathlon Homes LLP v Stratford Village Development Partnership, Get Living Plc and East Village Management Limited (2024).)
The Leasehold and Freehold Reform Act 2024 (LFRA 2024) received Royal Assent on 24 May 2024 and key provisions will be coming into force this week under the Leasehold and Freehold Reform Act 2024 (Commencement No 1) Regulations 2024 (SI 2024/1018) to further broaden the scope of ROs and RCOs.
Taking "relevant steps"
ROs are enforcement mechanisms which require a landlord to undertake repairs to remedy relevant defects. RCOs are orders relating to the funding of remedial works in respect of relevant defects and can be made against various corporate entities, including original developers, to avoid costs being passed via the service charge to leaseholders.
A definition of "relevant steps" will be added to section 120 of the Building Safety Act (BSA 2022) by the coming into force of section 114 of the LFRA 2024, which will increase the scope of the new remedies. Relevant steps will be defined as steps with the purpose of:
- "preventing or reducing the likelihood of a fire or collapse of the building (or any part of it) occurring as a result of the relevant defect,
- reducing the severity of any such incident, or
- preventing or reducing harm to people in or about the building that could result from such an incident."
The scope of this amendment is wide, including steps which are mitigating, as well as preventative, in reducing the risk and/or severity of any incident caused by a relevant defect. This affirms the decision made in Triathlon Homes LLP that interim measures such as waking watches or temporary alarm systems can be included in an RO and/or RCO.
Costs, costs and more costs
Going hand-in-hand with section 114, section 116 of the LFRA 2024 will extend the costs that can be the subject of an RCO. A list of additional costs is included, which can be altered or added to by the Secretary of State. Alongside allowing for costs incurred in taking relevant steps, costs incurred in obtaining an expert report and temporary accommodation costs will fall within the scope of an RO/RCO. This amendment will apply to proceedings commenced before or pending on 31 October 2024 and will apply retrospectively to costs incurred in an RO/RCO application before section 116 comes into force.
Extending the First Tier Tribunal's powers
Section 123 of the BSA 2022, which deals with remediation orders, will be amended by section 115 of the LFRA 2024, and will expressly provide the Tribunal with the ability to:
- order a relevant landlord to "take specified relevant steps in relation to a specified relevant defect in a specified relevant building", in addition to the current power to order a relevant landlord to "remedy specified relevant defects in a specified relevant building"; and
- order a landlord to produce an expert report to identify steps required in relation to relevant defects or potential relevant defects, such as details of necessary works.
It is important to note that these amendments will take effect not just in applications for an RO/RCO which commence on or after 31 October 2024, but also on any applications pending on that day.
The Government's Explanatory Notes state that these amendments seek to remedy the lack of clarity for FtT Judges when making ROs and RCOs in order to "improve their functionality and improve take-up". Given that relatively few ROs and RCOs have been made by the FtT to date, it will be interesting to see whether the broadened scope of these remedies will encourage more applications, and we can expect to see the scope of ROs/RCOs being tested over the coming months.
