On 31 October, the Leasehold and Freehold Reform Act 2024 (LFRA) brought further significant changes to the Building Safety legislation into force, particularly affecting applications for Remediation Orders (ROs) and Remediation Contribution Orders (RCOs). The changes have helped leaseholders in some respects, but still leave hurdles for those seeking to force developers or others to fund the remediation of their building.
Tweaks and amendments to the Building Safety Act 2022 (the BSA) have become regular occurrences, as the government seeks to fill holes and smooth bumps in the sprawling and notoriously knotty legislation. Mostly these have helped clarify ambiguities; but often they cause issues of their own. The changes brought in by the LFRA are no exception.
What has changed?
The immediate changes, which came in with the LFRA in May 2024, were to:
- modify paragraph 9 of Schedule 8, to allow RTM or leaseholder-owned management companies to claim legal costs via the service charge (otherwise prohibited for any leaseholder with a qualifying lease).
- Abolish section 125, which related to insolvency powers and was widely seen as unhelpful.
Both were sensible changes that have been widely welcomed.
The remaining changes came into force on 31 October. They extend the definition of what counts as remediation, as well as the costs that can be claimed under an RCO.
Section 114 of the LFRA introduced a new notion of "relevant steps" to both section 120 of the BSA and to the definition of "relevant measures" in Schedule 8.
The amendment confirms that remediation works ("relevant measures") do include interim and temporary measures such as a waking watch or temporary fire alarms. In effect, the legislation has put beyond doubt the interpretation of the Tribunal in Triathlon Homes v Stratford Village Partnership [2024] (see our previous article A useful case clarifying some questions about Remediation Contribution Orders under the Building Safety Act 2022). The Tribunal in that case held that such interim measures were covered by the original definition of "relevant measures", which already included two of the three limbs that make up the new category of "relevant steps".
Section 116 extends the scope of an RCO to cover the cost of these relevant steps – and then adds two new categories of costs.
The FTT will be able to add to an RCO the cost of obtaining an expert report in relation to the building, and the costs of temporary accommodation needed where residents have to be moved out for their own safety or because of the disruption of the ongoing works.
Finally, section 115 builds on the extension of the definition of relevant steps to give the FTT enhanced powers to order a landlord or management company via an RO to take those relevant steps – as well as to provide or produce an expert report or survey relating either to relevant defects or the need for relevant steps.
What are the implications?
The new definition of "relevant steps", in seeking to put one argument beyond doubt, may have created a whole new area for uncertainty. The new third limb added to this definition, that was not previously included in the definition of "relevant measures", is "steps taken with the purpose of preventing or reducing harm to people in or about the building" that could result from any incident of fire or collapse of any part of the building caused by a relevant defect.
The amendment is wide, including steps which are mitigating, as well as preventative. This means "relevant steps" could extend to encompass not just temporary measures such as waking watch but arguably improvements to AOV systems which would "reduce the severity of any such incident" or "prevent or reduce harm to people ... that could result", even such improvements are not themselves needed to rectify a relevant defect. In the recent FTT judgment ion Vista Tower (Grey GR Limited Partnership v Edgewater (Stevenage) Limited and others [2024]), the RCO granted included a number of costs for works that were not strictly remediation but included wider costs to make the building safe, and whether such works are 'relevant steps' or not is likely to be an ongoing area of dispute.
On costs, properly funded expert reports clearly add value to the process of trying to determine what needs to be ordered under an RO or funded via an RCO. Ensuring that the cost of such reports will form part of the costs that can be sought under an RCO or allowing leaseholders to insist that a landlord commission such a report, are helpful changes.
It is also helpful and sensible that leaseholder-owned management companies can now claim the costs of litigation back from all leaseholders via the service charge, although this still leaves the costs for qualifying leaseholders to be covered by commercial landlords, who may not have significant resources to pursue a claim against a former landlord, developer, or associated company.
However, a slightly curious anomaly which remains untouched by these changes is that under the self-remediation scheme (SRC), a number of developers are carrying out works to buildings, or have promised to, at the same time as leaseholders are pursuing claims against the current landlord, which is not the entity with the responsibility under the SRC. This has led to come confusion and disconnected parallel processes.
More significantly, none of these changes confront a major hurdle that means that many claims are not making it further than initial legal advice. This is the FTT's 'no costs' jurisdiction. This means leaseholders, RTM companies and landlords who are seeking ROs and/or RCOs may have to be prepared to pay significant sums to bring the claim, and it remains the case that those costs are unlikely to be recoverable even if they win. As recent Reuters research has noted, this means developers outside the SRC are not currently being held to account in any great numbers, with leaseholders preferring the Building Safety Fund route (see link to article here: https://www.reuters.com/world/uk/ghosts-grenfell-no-penalties-uk-firms-that-used-deadly-building-material-2025-01-06/)
Wide though the definition of "relevant steps" is, it may not stretch far enough to cover taking the necessary legal action to ensure remediation is ordered or paid for. Had this been made explicit, it would have unlocked a number of potential claims and significantly speeded up the process of getting fire safety defects remediated.
