The Court of Appeal has recently handed down the first major appellate rulings on remediation contribution orders (RCO) under the Building Safety Act 2022 (BSA), providing much-needed clarity on the ‘just and equitable’ discretion to be exercised when making such orders and the retrospective effect of the BSA. 

Factual background

The BSA emerged from disputes concerning liability for building safety and remediation costs in the aftermath of the Grenfell Tower tragedy and was enacted to address systemic failings in building safety regulation. Amongst its wide-ranging provisions, the BSA introduces a liability mechanism and hierarchy for historic building safety defects and extends limitation periods for claims under made the Defective Premises Act 1972. Section 124 of the BSA introduces the concept of RCOs, to order specified parties to contribute towards the cost of works to remedy building safety defects to “relevant buildings” (defined in the BSA as buildings at least 11 metres in height or with at least five storeys, and containing at least two residential units). 

Triathlon Homes LLP v Stratford Village Development Partnership and Get Living Plc [2024] concerned the cost of rectifying wide-ranging fire safety defects identified in five residential blocks in the former London 2012 Olympic Village in Stratford, London. The development of the blocks was undertaken by Stratford Village Development Partnership (SVDP), a limited partnership which at the time of construction had been owned by the Olympic Delivery Authority but had subsequently been acquired by Get Living Plc. Triathlon Homes LLP (Triathlon), a long leaseholder of all the social and affordable housing in the five blocks, applied to the First-tier Tribunal (FTT) for RCOs under section 124 of the BSA, seeking to compel SVDP and Get Living to pay for remediation costs of the fire safety defects. At first instance, the FTT agreed it was ‘just and equitable’ to order RCOs against SVDP and Get Living pursuant to section 124. 

Issues on appeal

In Triathlon, the ‘leapfrog’ appeal to the Court of Appeal raised two main grounds: (1) whether the FTT had erred in exercising its ‘just and equitable’ discretion to make the RCOs under section 124 and (2) whether RCOs could be granted for costs incurred before section 124 came into force in June 2022. 

In rejecting the ‘just and equitable’ discretion ground of appeal, the Court of Appeal affirmed that:

1. One of the central purposes of the Act was to hold accountable those responsible for building safety defects, with primary responsibility placed on the developer, which sits at the top of the hierarchy; 
2. Public funding under the Building Safety Fund (BSF) was a matter of last resort, even where works had already commenced and were being paid for by the BSF. It was not to be considered an out-an-out grant but the provision of temporary funding pending recovery from those who may be found legally liable. Accordingly, the BSF does not displace the provisions of the BSA or the potential liability of developers, landlords and other associated entities who may be the subject of RCO applications.
3. It was not unfair for Triathlon, as a long leaseholder of the residential blocks, to take advantage of its legal right to apply for an RCO instead of pursuing other potential claims available to it and Triathlon did not have to explain its intentions to enforce its rights pursuant to the BSA rather than through alternative means. 

In relation to the second ground of appeal whether section 124 BSA should have retrospective effect, the Court of Appeal conclusively determined that the entirety of Part 5 of the BSA (of which section 124 forms part) was clearly intended by Parliament to have retrospective effect in order to achieve an important policy goal of enabling claims against those responsible for defects, even when works were completed many years ago. In particular, the BSA’s purpose is to protect leaseholders from financial risk and ensure those responsible for defects are held accountable. Denying retrospectivity would, in the circumstances, create serious inconsistences and haphazard patterns of protection for those leaseholders where remedial works had already been carried out and paid for under service charge provisions, as they would be left without statutory remedy. Any perceived unfairness to potential defendants not having a retrospective time-bar is considered a necessary price of achieving this policy goal and is mitigated by the safety valve under section 124 that the FTT must exercise its ‘just and equitable’ discretion, which allows the FTT to tailor RCOs to specific circumstances. 

Key takeaways

The judgment in Triathlon provides clear reinforcement of the core principles underpinning the BSA and offers important clarification regarding its practical application. In terms of liability, the decision emphasises developer and associate responsibility, while also confirming that RCOs may apply to works and costs already incurred prior to June 2022. Additionally, the decision clarifies the supplementary nature of the publicly-funded Building Safety Fund. Though the “just and equitable” discretion remains an essential safeguard, its future exercise will be guided by Parliament’s express objective to protect leaseholders and ensure that responsible parties bear the associated costs.

Further example of retrospective effect of the BSA

Further to the Triathlon appeal, the Court of Appeal sat sequentially to consider the appeal of a second BSA-related case, Adriatic Land 5 Limited v Long Leaseholders [2024], which concerned the distinct issue of whether certain professional costs associated with interim safety measures could be recovered through the service charge under long leasehold agreements.

Schedule 8 of the BSA limits or excludes service charge recoverability for costs related to defects falling within the scope of the BSA. Paragraph 9 of Schedule 8 specifically prohibits landlords and management agents from recovering service charges for legal or other professional services relating to liability incurred due to relevant defects.

Adriatic Land 5 Limited (Adriatic), the freehold owner of the relevant residential building, had applied to the FTT for special dispensation to avoid the usual section 20 leaseholder consultation requirements in order that it could carry out urgent safety works to the building. The FTT granted dispensation to Adriatic conditional upon it being unable to recover costs from the leaseholders of the building. On appeal to the Upper Tribunal, it was held the FTT was wrong to impose such a costs condition but that paragraph 9 of Schedule 8 of the BSA, which had recently come into force in June 2022, meant that Adriatic could not recover their costs of the original FTT application from qualifying leaseholders. Adriatic appealed the Upper Tribunal’s decision to preclude the recovery of its FTT application costs under paragraph 9 of Schedule 8 BSA. 

Following a similar line of reasoning to that expressed in Triathlon, the Court of Appeal has determined that paragraph 9 of Schedule 8 had retrospective effect to preclude recovery through service charge of any professional costs where such costs had not been paid by leaseholders before June 2022. Even then however, leaseholders who have paid service charges in respect of costs incurred to remedy relevant defects can apply for RCOs under section 124 of the BSA, and such an order could be made against the landlord to whom the service charges had been paid if that were considered “just and equitable”.