10 September 202310 September 2023 derek

First Remediation Order Granted Under the Building Safety Act

Politics

First remediation order granted under the Building Safety Act

In August, a remediation order was granted by the First-tier Tribunal (FTT) under the Building Safety Act in the case of Waite & others v Kedai Limited. As the first case of its kind to reach a final hearing, it will be looked at closely by anyone considering potential litigation under the Building Safety Act.

Six years after Grenfell and one year after the Building Safety Act came into force, more than 90% of fire-risk flats are still awaiting remediation, therefore the likelihood of litigation being needed to break the deadlock remains high, unfortunately. 

Remediation orders and remediation contribution orders are, in the Government’s own words, two of the “anti-avoidance and enforcement provisions” that were included in the Building Safety Act to ensure that essential work is done to make homes safe, and that those who are liable to pay fulfil their legal responsibilities. 

To date, one remediation contribution order has also been handed down, although the developer wasn’t legally represented therefore it wasn’t a fully argued case so it is less easy to draw conclusions from it and despite the result, there is no guarantee the developer will be able to meet the sum it was ordered to pay.

Remediation orders are only available for ‘relevant buildings’ under the Building Safety Act and do not apply to buildings under 11 metres in height or enfranchised or leaseholder-owned buildings (however enfranchised or leaseholder-owned buildings are able to apply for remediation contribution orders).

Various ‘interested persons’ can apply for a remediation order or remediation contribution order, including the Secretary of State, the Building Safety Regulator, Homes England, a local authority, a fire and rescue authority, or any person with a ‘legal or equitable interest’ in the building, including leaseholders. 

In this case, a group of 30 leaseholders from 2-4 Leigham Court Road successfully applied for a remediation order against the property’s freeholder/landlord, compelling them to remediate cladding and a variety of other building safety defects. The instructing solicitors and counsel for the applicants have written about the case here.

Financial consequences for leaseholders

While this case was successful and a remediation order was granted, it highlights the unfair financial repercussions that some leaseholders face when litigation becomes necessary in order to make homes safe. 

We remain concerned to see that leaseholders are the party having to take on the burden of enforcing the legislation that was meant to make their homes safe. This case also highlights that leaseholders, especially non-qualifying leaseholders, face legal costs even if they are successful – adding one more item to the long list of financial injustices that leaseholders have faced because of our national building safety scandal.

There is an inherent conflict of interest in expecting leaseholders to take responsibility for pursuing a remediation order as a form of enforcement action to make homes safe, because they must pay their own legal costs, even if they are successful – plus non-qualifying leaseholders face the risk of paying the landlord’s legal costs. 

Landlords and developers may have access to expensive expert witnesses and legal counsel, knowing that the Building Safety Act allows these costs to be passed onto the non-qualifying leaseholders; while leaseholders who cannot afford legal counsel may be unrepresented or may have fewer resources to fight their case on an uneven playing field. In Waite & others v Kedai Limited, the leaseholders had no legal representation until shortly before the final hearing; whereas the freeholder was represented by David Sawtell, an experienced construction barrister, and had Brian Martin as their expert, which would be unaffordable to most leaseholders. 

Non-qualifying leaseholders are not protected from their landlord’s litigation costs

The Government has deemed anyone who owns (or jointly owns an interest in) more than three UK properties to be ‘non-qualifying’ for protection from the costs of fixing building safety defects, despite the fact that all leaseholders are equally blameless.

Non-qualifying leaseholders can also be held liable for paying the landlord’s legal expenses through their service charge, including the cost of obtaining legal advice, any proceedings before a court or tribunal, arbitration, and mediation.

In the case of Waite & others v Kedai Limited, the leaseholders applied for an order under section 20C of the Landlord and Tenant Act 1985 to prevent the freeholder from passing any of its legal costs onto the non-qualifying leaseholders. The freeholder’s counsel argued, of course, that it would not be “appropriate or proportionate” to grant the order. However, the FTT showed sympathy to the leaseholders during the process in various ways, for example in not requiring them to provide their own expert report. It noted that the freeholder had not acted as quickly as it could or should have done, given the implications and risk to life safety, and therefore ruled that 80% of the freeholder’s costs could not be passed on to leaseholders. 

This could be a useful precedent and demonstrates that the FTT is able to vary the amount of legal charges that can be passed on to non-qualifying leaseholders, based on the respondent’s conduct in the specific case. However, it remains desperately unfair that the Government has chosen to protect only some leaseholders from their landlord’s costs for building safety litigation, while leaving non-qualifying leaseholders to face potentially uncapped costs. 

The Government must protect all leaseholders from the costs to make homes safe

In the case of Waite & others v Kedai Limited, it was fortunate that the freeholder was associated with the developer because, as the tribunal noted, no leaseholder – whether qualifying or non-qualifying – is required to pay remediation costs if the landlord is associated with a person responsible for the defect. 

However, other cases could arise where the freeholder is not associated with the developer responsible for the defect; there is a risk that future remediation orders could therefore have more significant financial consequences for leaseholders. A remediation order could enforce remedial work for which non-qualifying leaseholders are liable for uncapped costs and qualifying leaseholders are liable up to a cap. Many of them will not be able to pay. 

There are approximately 400,000 dwellings in mid or high-rise residential buildings in England owned by leaseholders with more than three UK properties, affecting an estimated 60,000 leaseholders, so this could have an impact on a significant number of buildings across the country.

Sue Bright, Professor of Land Law at Oxford University, has written about the case in a blogpost, and told us: 

“In the sorry tale of the building safety crisis, leaseholders are the innocent victims. The Secretary of State for Levelling up, Housing and Communities has admitted that flawed government guidance contributed to the cladding crisis. The Grenfell Tower Inquiry has exposed shocking failures in building regulation, corporate wrongdoing, and greed that enabled the construction of buildings not safe to live in. The government acknowledges this and yet has provided only partial protection from the costs of remediation, and from the legal costs of pursuing action. 

“There is still no help for leaseholder-owned blocks, notwithstanding the government’s long-standing commitment to develop such a scheme. And leaseholders with more than three UK properties have been left out in the cold. Apart from the injustice of the situation, this will also make it much harder to fix many unsafe blocks.”

Maggie Brodie, Co-founder of the Non-Qualifying Leaseholders campaign group, said:

“The building safety crisis is a scandal on an epic scale, caused by a decades-long failure of construction standards, government regulation and enforcement. To avoid countless, prolonged legal battles and unfair financial burdens on leaseholders, the Government should fund all remediation work up front and then they should take action to recover costs from any responsible parties.

“If enforcement action is needed, it is the Government and other public authorities that should pursue this using their resources. It should not be left to small groups of leaseholders to fend for themselves against the legal might of large freeholders and developers, or for non-qualifying leaseholders to face the risk of uncapped costs for their opponent’s legal expenses, even if their case is successful. Non-qualifying leaseholders are as blameless as qualifying leaseholders, and this cannot be anyone’s definition of justice.

“The Government must provide equal protection for every leaseholder from the costs of remediating unsafe buildings, and that includes equal protection from litigation costs. Ultimately, no innocent leaseholder should have to pay a penny to fix a national building safety scandal.”

 Based on multiple DLUHC datasets:

https://www.gov.uk/government/publications/building-safety-programme-monthly-data-release-july-2023;

https://www.gov.uk/government/collections/english-housing-survey; https://www.gov.uk/government/collections/leasehold-dwellings; https://www.gov.uk/government/collections/english-private-landlord-survey.

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