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Remediation Orders (ROs) and Remediation Contribution Orders (RCOs)
Sections 123 and 124 of the Building Safety Act 2022 (“BSA“) provide interested persons the ability to apply to the first-tier tribunal (“FTT“) (a tribunal that handles applications, appeals and references relating to disputes over property and land) for a RO or RCO, as the case may require. But what exactly are these remedies?
An RO is an order requiring a relevant landlord to do either or both of the following:
- Remedy the defects specified in the order within a set timeframe; and/or
- Take specified relevant steps in relation to a relevant defect in the building.
A relevant landlord is defined as a landlord under a lease of the building or any part of it who is required under the lease or by virtue of enactment, to repair or maintain anything relating to the defect. The relevant landlord could therefore include a freeholder, superior landlord (e.g. head lessee) or management company that is party to the lease. ROs ensure that essential remediation work to correct defects take place where the relevant landlord is not fulfilling their legal obligation to make their building safe.
An RCO in contrast is broadly an order requiring a company to pay the costs incurred (or to be incurred) in remedying defects to a relevant building. Should a relevant landlord or building owner refuse to meet their cost liabilities under the BSA, an RCO can be made with the intention of the interested person recovering their costs.
The interested persons that could seek such an order could for example include the Building Safety Regulator (being the Health and Safety Executive), a local authority, a fire and rescue authority or a person with a legal or equitable interest in the building.
Amendments to the RO and RCO process
The Leasehold and Freehold Reform Act 2024 (“LFRA”), which came partially into effect in May 2024, aims to improve the rights of residential long leaseholders of houses and flats in England and Wales. Of particular relevance to ROs and RCOs, the Leasehold and Freehold Reform Act 2024 (Commencement No 1) Regulations 2024 (SI 2024/1018) brought sections 114 (steps relating to remediation of defects), 115 (remediation orders), 116 (remediation contribution orders) into force as of 31 October 2024, which amended the RO and RCO process.
The changes made by the LFRA are summarised as follows:
- Section 114: Adds a definition of “relevant steps” in relation to the remediation of defects. These are steps that should be taken to mitigate the effects of the defect. The steps taken should prevent or reduce the likelihood of a fire or collapse of the relevant building, or reduce the severity of any such incident or harm to people in the building (e.g. through the use of waking watches or new fire alarm systems).
- Section 115: Remediation orders may require the relevant landlord to take steps to mitigate a relevant defect in addition to the power to order the remediation of a defect.
- Section 116: Extends the costs that can be recovered under an RCO to include the costs of relevant steps, expert reports and temporary accommodation.
Other points of interest include the repeal of section 125 (meeting the remediation costs of an insolvent landlord) as it was considered this section conflicted with insolvency law and created a risk of any sums recovered being used to pay down debts rather than being put towards the cost of remediating defects. Additional obligations have also been inserted to the BSA requiring insolvency practitioners to provide certain information to the local authority, the fire and rescue authority and the Building Safety Regulatory within 14 days of the insolvency practitioner being appointed in relation to an accountable person for a higher-risk building.
Resident Management Companies (RMC) and Right to Manage (RTM)
RTMs and RMCs are typically leaseholder-run entities that are responsible for the management of their building. RMCs are often a party to the lease whereas RTMs are acquired by the exercise of statutory powers enabling them to take over management of a building. Dependent on the terms of the lease, repairing obligations may lie with an RMC. Enforcement action, including applications for ROs, could therefore possibly be taken against RMCs.
Section 117 of the LFRA updates Schedule 8 of the BSA so that RMCs and RTMs can recover as service charges the legal or other professional service costs (e.g. the cost of legal advice, proceedings before a court, tribunal or arbitration, or mediation) it incurs because of a relevant defect. This is provided the costs are incurred after 24 July 2024 and are in connection with an application or possible application by the RMC or RMT for or relating to an RCO. The LFRA therefore provides a limited exemption to leaseholder protections under the BSA which otherwise prevent qualifying leaseholders from being passed on the costs of litigation. This will likely provide RMCs and RTMs a source of funding with which to make applications for RCOs.
Michelmores’ comments
The LFRA provides some certainty as to the remit of the RO and RCO regime and seeks to deal with several gaps and points of conflict in the legislation. While the LFRA states its purpose is to ensure leaseholder protections function the way they were originally intended, we expect the additions strengthening the rights available to leaseholders and residents in relevant buildings represent a more interventionist approach being taken by the government and the regulator to drive the prompt remediation of defective buildings.
It is evident there are still lots of buildings that require investigation and potentially remediation, and that the work is being carried out, albeit slowly. The length of time being taken is likely in part attributable to size of this exercise and the complex nature of the legislation which many resident leaseholders and landlords are trying to grapple with.
It appears the regulator and landlords are in the circumstance being tasked with a more proactive role in the management and rectification of defective buildings at the risk of the FTT awarding interested persons with an RO or RCO.
The addition of the ability to claim the cost of expert reports will also likely place an emphasis on landlords to properly and robustly investigate defective buildings so that any remediation scheme is effective.
Relevant landlords and developers should therefore be mindful of the additional obligations that could be imposed upon them. We will no doubt continue to see this relatively new area of law develop as cases continue to progress through the FTT and as decisions are made as to the interpretation and reach of the RO and RCO regime.
Should you wish to discuss any of the issues raised in this article, please contact Ashley Pigott, Andrew Baines or Andrew Pratten.
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