The Building Safety Act: what social landlords with higher-risk buildings need to know

Recourse under the Building Safety Act: how does it work for housing associations and local authorities?

The Building Safety Act has introduced two specific powers on which social landlords can rely when seeking to recover the costs of remediating higher-risk buildings: a building liability order and a remediation contribution order.

The act allows the High Court to make a building liability order, but it’s important to note that these orders don’t create a liability, rather they are a means of distributing liability from one corporate entity to another. A ‘relevant liability’ needs to be established, which is a liability incurred:

a) under the Defective Premises Act 1972 (DPA);

b) under Section 38 of the Building Act 1984; or

c) as a result of a building safety risk.

By extending building safety liability beyond original parties to their associates, Building Liability Orders prevent wrongdoers from hiding behind complex corporate structures or collapsing special purpose vehicles to escape liability.

To obtain a building liability order, you must be able to answer ‘yes’ to the following four questions:

1. Is there an associated company? Broadly speaking, a corporate body will be ‘associated’ if it is controlled by the original wrongdoer or if a third body controls them both.

2. Is it just and equitable to distribute the liability to the associated corporate body? The following non-exhaustive factors may be relevant:

• the relationship between the original body and the associate;
• the nature and extent of building safety risk for which the original body was responsible;
• the prejudice to the associate if a building liability order is made;
• the extent to which a building liability order will unlock the funds necessary to remediate.

3. Can a relevant liability be established? See above.

4. Does the housing association or local authority claimant have legal standing to commence the claim? That should be easy for landlords to establish in the majority of cases because they will have an interest in the higher-risk building.

Alternatively, the Building Safety Act enables ‘interested persons’, which includes local authorities and housing associations with an interest in the higher-risk building, to apply to the first-tier tribunal for a remediation contribution order to recover the costs incurred, or to be incurred, to fix the higher-risk building. 

To obtain a remediation contribution order, you must be able to answer ‘yes’ to the following questions:

1. Is there a relevant defect such that there is a risk to the safety of people from the spread of fire or collapse of the building following the construction or conversion of the building in the 30 years leading up to 14 February 2022?

2. Has a cost been incurred, or will a cost be incurred, to remedy the relevant defect?

3. Is there a specified body corporate? That is, is there: a landlord under a lease of the relevant building or any part of it; a person who was such a landlord at the qualifying time; a developer in relation to the relevant building, or a person associated with any of those?

4. Is it just and equitable that the specified body corporate makes a contribution to the remediation costs?

Building Safety Act options to fund building safety: tactical insights

When a housing association or local authority is on notice that defects require remediation in respect of any higher-risk building, it should determine whether it meets the criteria for obtaining a building liability order and/or a remediation contribution order.

That will involve identifying the original owner, developer, design and construction team and any previous or intermediate owners/landlords, together with their associates. Once identified, the financial worth of those targets ought to be assessed.

Housing associations and local authorities should be aware that, as well as needing to evidence the relevant defect and how the remediation cost has been calculated, it will need to consider why it is ‘just and equitable’ to order the third party to pay some or all of the remediation costs.

Some of the factors to be considered are identified above and, while there is limited guidance available at present as to how this test will be applied, the expectation is that the legislation will be applied in such a way to ensure that the funds are made available to make buildings safe.

Lewis Couth and Asia Munir, specialists in real estate litigation and housing management and litigation, Walker Morris