On the Twelfth Day of Christmas...The First Significant First Tier Tribunal Decision on a Remedial Contribution Order Case
The case of Triathlon Homes v Stratford Village Development Partnership (1) Get Living Plc (2) East Village Management Limited (3) [2024] UKFTT 26 (PC) was the first significant First Tier Tribunal (FTT) decision on a contentious Remediation Contribution Order (RCO) case under section 124 of the Building Safety Act 2022 (Section 124) and which concerned the cost of rectifying fire safety defects.
Section 124 enables an interested person to apply for an RCO, by which developers, landlords, and their associates may be required to contribute towards the costs of remedying relevant defects.
Background
The Applicant, Triathlon Homes LLP (Triathlon), is the long leaseholder of 5 tower blocks in the East Village (formerly the Athletes Village used at the 2012 London Olympic Games).
Triathlon is a limited liability partnership that owns all the social and affordable housing in East Village.
The 5 blocks were originally developed by the Stratford Village Development Partnership (SVDP) during the time it was owned by the Olympic Delivery Authority.
SVDP is a limited partnership and, after the 2012 Olympic Games, the three partners in SDVP were sold to the private sector and ultimately came into the ownership of Get Living Plc (Get Living). Get Living is a property company specialising in the private rented sector and owns all the private rented properties in the 5 blocks.
The management company responsible for the repair and maintenance of the structure and common parts of East Village is East Village Management Limited (EVML), jointly owned by Get Living and Triathlon.
Following the Grenfell disaster in 2017, EVML arranged for inspections of the blocks and found numerous safety defects. As a result, a waking watch was implemented in November 2020 until additional alarm and heat detection systems were installed in flats as a temporary measure. A plan to carry out remedial works was implemented in April 2023 and is due to complete on all 5 blocks in August 2025. The funding of those remedial works is via monies provided to EVML from the Building Safety Fund and is estimated to exceed £24.5million.
Triathlon’s Application
Triathlon’s share of the remedial works cost to be incurred by EVML was estimated at around £16 million (the Works).
Triathlon’s share of the cost it would incur in service charges from EVML in their investigation of the safety defects and cost of the required fire evacuation officers and fire alarm decommissioning was estimated at £760,000; and their already incurred costs for the waking watch were estimated at £1 million (together the Additional Costs).
Triathlon therefore applied for a RCO to be made against SVDP and also Get Living as the parent company of SVDP for the Works and Additional Costs.
The parties agreed that the required jurisdictional hurdles in Section 124 were met in that there were: “relevant defects”; in a “relevant building”; that Triathlon was an “interested person”; and SVDP and Get Living were a “specified body corporate or partnership”.
SVDP and Get Living, as the Respondents to the applications, argued that as the Works were being funded by the Building Safety Fund, an RCO was not needed and did not meet the ‘just and equitable’ test in Section 124. They also argued that costs that had been incurred before the BSA 2022 came into force could not be claimed as the Act was not retrospective.
Judgment
The FTT decided it was ‘just and equitable’ to grant the RCO against both SVDP and Get Living. They decided that, in circumstances where SVDP as the original developer would be unable to comply with an RCO to any significant degree without the financial support of Get Living (its parent), it would be just and equitable to make an order against that party too.
The FTT also disagreed with the Respondents argument that applying Section 124 to costs incurred its commencement date on 28 June 2022 would be giving the provisions retrospective effect.
As a result, both Get Living and SVDP were ordered to pay £16 million as a contribution to the Works. The further costs of the waking watch and fire evacuation officers and the temporary fire measures were also covered by the RCO.
In terms of a methodology to analyse what is “just and equitable” per the test used in Section 124, the FTT stated that it was not possible to identify a specific methodology and all arguments/facts would be considered in each specific case.
Ultimately, as SVDP was the developer and given the hierarchy of the parties and the wording of the BSA 2022, it was “just and equitable” for them to receive the RCO. Regarding Get Living, it was “just an equitable” for an RCO to be made against them, as they were providing the financial support to SDVP and they had willingly assumed the risk when they bought SVDP.
Conclusions
The FTT accepted Triathlon’s argument that the BSA 2022 creates a “hierarchy of liability” and that the purpose of the Act was to protect leaseholders. The original developer and associated companies are at the top of that liability ladder.
Get Living, despite only becoming involved (in the ownership of SVDP) after the development had been built were still liable to make the contribution as the party with the broadest financial shoulders. The FTT felt this was the type of circumstance which the associated parties provisions was intended to cover and noted that it would not be just and equitable for Get Living to benefit in not having to contribute towards the remediation when funds had started to have been expended via the Building Safety Fund and could have been used elsewhere to remediate other buildings.
The FTT noted that Section 124 is a separate non-fault based discretionary remedy that did not require contractual and common law remedies to be decided (and which would involve lengthy litigation.) Triathlon were entitled to a contribution and the availability or otherwise of other claims were irrelevant.
Finally, associated costs which are part of a measure to remedy a defect, i.e., the waking watch in this matter and the fire officer and fire alarm decommissioning were capable of being the subject of an RCO. In short, the FTT felt that any measure that eliminates a defect, or reduces the risk to the safety of people in the building from fire or building collapse could, in principle, be the subject of an RCO.
Given the significant implications of the decision on Get Living and its pension fund investors it is no surprise that the decision has been appealed by Get Living/SVDP and is due to be heard by the Court of Appeal on 19 to 21 March 2025.
