This article is adapted from a talk given by Timothy Polli KC and Katie Gray on 7 February 2024 

Introduction 

Remediation Contribution Orders (“RCOs”) were introduced by the Building Safety Act 2022 (“the BSA”). This article explores how the jurisdiction to make an RCO is likely to be exercised following the recent decision of the Upper Tribunal in Triathlon Homes LLP v Stratford Village Development Partnership [2024] UKFTT 26 (PC). 

Powers 

An RCO is an order to pay money. It gives leaseholders a practical remedy which may allow them to recover costs that they have incurred or will incur in remediating safety defects in their building. The power to make an RCO is found in section 124 of the BSA and is a wide one – the Tribunal is empowered to make an order requiring a “specified body corporate or partnership to make payments to a specified person, for the purpose of meeting costs incurred or to be incurred in remedying relevant defects (or specified relevant defects) relating to the relevant building.” 

Who may apply? 

Applications may be made by interested persons. There is a long list of such persons in section 124(5) of the BSA, which includes a person with a legal or equitable interest in the relevant building or any part of it (e.g. a leaseholder of the flat, or a head lessee of the whole) but also certain public authorities such as the Secretary of State, the Regulator, the Local Authority and the Fire and Rescue authority. The involvement of these bodies may assist in cases where the lessees do not have funds to make their own application, if they are willing to act.  

Against whom is the RCO made? 

Orders may be made against a specified body corporate or partnership. This includes landlords and developers, or “associated” persons. There are detailed provisions in section 121 of the 2022 Act about the entities that might be an “associated person”, but broadly there is association between beneficiaries and trustees, current and former partners and partnerships, directors, and companies, and between companies with common directors or controlling interests. 

What costs can be recovered? 

The BSA provides that an RCO may be made in respect of “… costs incurred or to be incurred in remedying relevant defects (or specified relevant defects) relating to the relevant building…“ 

This includes the cost of the remedial works themselves, such as replacing external cladding, but we now know from the decision in Triathlon Homes that the costs of mitigating building safety risks, such as a waking watch, evacuation officers, or the installation of temporary fire and heat alarms are also included, because these measures have the effect of removing or reducing the safety risk, as are costs incurred before 28 June 2022, when the power to make a RCO came into force. 

What test will the First-tier Tribunal apply? 

An order may be made when it is “just and equitable” to do so. The power is therefore wide and discretionary. A broad, fact dependent approach is to be taken, having regard to the policy behind the BSA that lessees should not generally be held financially responsible for remediating defects that were not their fault.  

Until the recent decision in Triathlon Homes, it was not entirely clear how the test is to be applied. For example: 

• What if the beneficial owners of the developer had changed since the development of the property, such that they are not strictly speaking “responsible” for the defect? 

• What if the beneficial ownership has changed such that there is no prospect of the Respondent even having any knowledge of the development and how it was constructed? Is that fair? 

• What if works are already being funded or likely to be funded by the Building Safety Fund – should the Respondent still be liable to pay? 

Triathlon Homes LLP v Stratford Village Development Partnership [2024] UKFTT 26 (PC) 

The Tribunal grappled with these issues in Triathlon Homes.  

This case concerned the former athletes’ village at the Olympic Park, which was built by a limited partnership comprising three companies – one general partner and two “silent” companies. The general partner owned two property holding companies, who were the freeholders of the development. After the Olympic games, the site was sold. Triathlon Homes purchased long leases of the parts of the development to be used as social housing. The rest was sold to a joint venture. The investor ownership of the joint venture company changed several times over the years. Moreover, the parent company of the developer was not incorporated until 2018, after the site had been developed and sold off. 

Fire safety defects were discovered, including cladding problems. A successful application was made to the Building Safety Fund for funding to discharge the costs of remediation. In the meantime, Triathlon Homes applied for RCOs, asking the Tribunal to order the developer and its parent company to pay Triathlon’s share of the remediation costs because the developer, it was said, depended on the parent company for its funding and was also an associated company.  

It was argued by the developer and the parent company that the policy of the BSA is to ensure that remedial works are done. In this case, the works were being done – the contract had been signed and most of the funding had been granted by the Building Safety Fund. Further, the parent company had had nothing to do with the development – it had not been incorporated until long after the cladding had been installed.  

The Tribunal emphasised the broad discretionary nature of the jurisdiction. It stated that the purpose of the BSA is the transmission of primary responsibility for remediation costs away from the leaseholder and on to the developer of the block. It was held that it was not usually likely to be relevant that the works are likely to be funded by the Building Safety Fund if the developer is able to pay. The fund is a funder of last resort. Further, though it was argued that Triathlon was making the application to advance its own commercial interests by making sure that it did not have to pay towards the remediation costs, the motivation of the applicant in making an RCO is not relevant; absent malice, it was open to Triathlon to seek a remedy to which it was entitled. Neither did it matter that the ownership of the companies had changed over time nor that the parent company was not incorporated until after the event. 

Comment 

The development of the law in this area shows that RCOs are likely to be a powerful, versatile, and readily available remedy in the lessee’s armoury. The primary policy is that the developer and its associates should pay, not the leaseholder, and where a leaseholder is trapped in an unsaleable flat because of outstanding fire safety issues, this is likely to be an extremely powerful factor in favour of granting an RCO. But even if works are funded and the freeholder is poised to carry them out, that is unlikely to lean against the making of the order – the remedy should not generally be found in the public purse.