In January 2023, the First-tier Property Tribunal for England & Wales (the "FTT") made the first Remediation Contribution Order pursuant to s.124 of the Building Safety Act 2022 (the "Act"), requiring a developer to pay the costs of cladding replacement works because it was "just and equitable" to do so. The case is interesting for developers, landlords and tenants in multi-let dwellings, with some confirmations by the Tribunal on individual director liability and recovery of any sums already expended by tenants.
In Batish v Inspired Sutton (2023) LON/00BF/HY1/2022/0002, the applicant leaseholders of a residential block of flats in Sutton sought to recover costs they had paid several years ago towards the replacement of cladding from the developer, Inspired Sutton Limited, who remained the freeholder and the leaseholders' direct landlord.
A significant health warning should be attached to the judgment, as no party was legally represented and the only real respondent - Inspired Sutton - was debarred from defending the proceedings due to non-compliance with case management directions. It was fairly straightforward in that the original developer remained the freeholder and landlord responsible for carrying out the repair works under the terms of the leases. That said, there are still some takeaways from the case that will provide some guidance for practitioners in this area:
The FTT gave case management directions requiring comprehensive statements of case. The First Respondent (the developer and landlord) failed to do so and so was debarred from defending the proceedings.
The applicant leaseholders sought to join the individual directors of the developer as respondents. The applications against the directors were dismissed. A Remediation Contribution Order could only be made against a "specified body corporate or partnership".
The FTT held that in order for it to be "just and equitable" to order the developer to pay the remediation, they just had to be "satisfied that the lessees paid for the costs of works which ought to have been met by [the Developer]". That was on the basis that Schedule 8 of the Act provides that no service charge is payable in relation to fire safety defects where a landlord was responsible for the defect. The FTT's discussion on this issue amounts to no more than a few sentences. In more complex cases there are likely to be many more factors to consider. We are aware of such cases being listed for trial in the summer of this year and so can expect to see more decisions, which ought to provide more detailed guidance
What is clear, though, is that a Remediation Contribution Order can be used to give retrospective effect to Schedule 8 of the Act. It can therefore allow leaseholders to recover money that they have already paid in service charges to remedy fire safety defects.
If you are a freeholder, landlord or management company having to deal with issues caused by defective cladding or, you have any concerns or questions about the impact the Act may have on you or your business, please do not hesitate to get in touch with our Real Estate Disputes team or your usual Brodies contact.
For more of our industry insights on the impact of the BSA right across the built environment, please visit our Building and Fire Safety hub here.
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