Building Safety Act: Remediation Order imposed on pension fund landlord

Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, has secured a remediation order requiring a pension fund landlord to carry out fire safety remediation works totalling £15 million under Section 123 of the Building Safety Act 2022, even though the landlord had already started carrying out those works.

The First Tier Tribunal’s decision in the Vista Tower case provides helpful guidance on when remediation orders will be made – especially in circumstances where the landlord did not cause the defects and is already taking steps to remedy them – and the extent of the Tribunal’s discretion, as well as whether landlords are required to “forward fund” works, or are justified in waiting to secure funding through the Building Safety Fund.

Background

Vista Tower is a 16 storey block of 73 residential flats. It was originally built as offices in the late 1950s and converted into flats from 2015, with each flat on a long lease of around 250 years and the freeholder at that time receiving over £15 million for those leases.

Under the leases, the landlord agreed to repair and maintain the exterior structure and windows of the building, with a corresponding service charge obligation on tenants.

Grey GR Limited Partnership - on behalf of the Railpen pension fund -  bought the freehold in 2018 for £587,650 as part of a portfolio of residential buildings.

Defects

In 2019, Grey GR became aware of defects with the external cladding, glazing system and a lack of firestops and cavity barriers.

They sought funding for the works under the Building Safety Fund (BSF), and were eventually granted £12.5 million of funding (out of total costs of c. £14.5 million).

Grey GR entered into a Grant Funding Agreement (GFA) under the building safety fund had already started the remediation works, which were due to be completed by September 2025, when the Secretary of State nonetheless pursued an application for a remediation order.

Grey GR argued that there was no justification for making a remediation order given that the works were already proceeding. Instead, suggesting the application be stayed so that it could be renewed if Grey GR failed to progress the works.

The Tribunal has discretion over whether to make a remediation order

The Secretary of State argued that the First Tier Tribunal (FTT) had no discretion over whether to grant a remediation order. Section 123 of the BSA (unlike section 124, dealing with remediation contribution orders) does not require the applicant to demonstrate that it would be just and equitable for the FTT to make a remediation order, which suggests that if the FTT is satisfied there were relevant defects, then it must make an order.

Grey GR, on the other hand, argued that the FTT did have discretion under the BSA – which provided that it “may” make a remediation order, not that it “shall” make such an order.

The FTT agreed with the freeholder, and said that the BSA and the Building Safety (Leaseholder Protections) Information etc.) (England) Regulations 2022 are deliberately broadly drafted and gave them “both the power to and a discretion as to whether to make a remediation order”. However, if the criteria set out in section 123 of the BSA apply and there are relevant defects, the FTT said it was “likely that the tribunal will make an order subject to the facts of each case”.

Grey GR had argued the application was politically motivated, and the Secretary of State had suggested Grey GR had unreasonably delayed starting the works. The FTT said neither of these factors were relevant in the exercise of their discretion. Instead, their focus was on the practicalities of making sure the defects were fixed.

Landlord not required to forward fund the works

The Secretary of State also argued that the freeholder was wrong to wait until it had secured funding under the BSF to start works.

While the BSA introduced protection for 57 of the tenants of Vista Tower (who were qualifying leaseholders), the remaining leaseholders could still be responsible for service charge for those works.

On that basis, the FTT supported Grey GR’s approach in seeking BSF funding before commencing the works, and noted that the new section 20D of the Landlord and Tenant Act 1985, which requires a landlord to “take reasonable steps to ascertain whether any grant is payable in respect of the remediation works and, if so, to obtain the grant” actually required the freeholder to do so before trying to recover the costs from non-qualifying leaseholders.

This is in contrast to the FTT’s approach to remediation contribution orders under section 124 of the BSA, where public funding is seen as a last resort and landlords are required to forward fund remedial works, rather than awaiting the outcome of claims against the original developer.

Terms of the remediation order

The FTT acknowledged that the Grant Funding Agreement under the building safety fund already provided for remediation works to be completed by September 2025 so it was difficult to see what more a remediation order would add.

However, as there was still some time to go until completion of the works, they considered it was appropriate to make a remediation order “but as a backstop to give reassurance”, and reiterated that this was not fault-based. The purpose of the order was not to impose tight deadlines and undercut the detailed provisions of the agreements already in place.

Reflecting this, the FTT’s order provided that an application to enforce the order could only be made after the anticipated practical completion date, which they said “underlines the novel nature of this remedy and the practical approach of the tribunal”.

What is future of remediation orders?

While the decision has been trumpeted as imposing an order compelling a recalcitrant landlord to carry out fire safety remedial works, the FTT was at pains to make it clear that the landlord had done – and was continuing to do – the right thing in progressing the works.

The purpose of the order was not to force the landlord to carry out the works – it was already doing so – but to give leaseholders direct recourse should those works be unreasonably delayed or go awry.

It remains to be seen whether similar “protective” orders will be sought in other cases, although in cases where the landlord is progressing diligently with the necessary works, there must be a question mark over whether this is the best use of the FTT’s time.

 

 

Authored by Paul Tonkin, Katie Dunn and Lucy Redman.

 

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