The First Remediation Order under the Building Safety Act 2022

Waite v Kedai Ltd is the first case in which the First Tier Tribunal (Property Chamber) (FTT) has granted a remediation order under the Building Safety Act 2022 (BSA 2022) s 123. The government introduced this power to speed up the remediation of buildings by compelling landlords to remedy relevant defects within a specified period of time. Applications for remediation orders can be made by various public bodies (the local authority, the fire and rescue authority, the Homes and Communities Agency, and the Secretary of State) as well as persons with a ‘legal or equitable interest in the building or part of it’. In Waite v Kedai Ltd the application, brought by leaseholders, involved 30 of the 35 leaseholders in two connected blocks of flats against the freeholder, Kedai Ltd, a company associated with the now dissolved construction company. After outlining the key facts this post notes the ‘outcomes-focussed’ approach adopted by the FTT, the decision, and the cost implications of the case for ‘non-qualifying’ leaseholders.

The Factual Context

The blocks were developed during 2015 and 2016, with one of the blocks being converted from an office building, and the other a newly constructed building. Several fire safety reports were procured, and the first in October 2019 noted problems with cavity barriers and said that the aluminium cladding should be tested. As is common the true scale of the fire safety risk took some time to be confirmed by experts; the height was wrongly measured initially, and the presence of ACM cladding (Category 3, as on Grenfell Tower) was only identified almost 3 years after the first report. Not until March 2023 was an unacceptable level of compartmentation identified. The first application to the FTT was made in September 2022 in respect of one of the blocks, and an application was received for the second block in December 2022. At the case management hearing in November 2022, the final hearing was set for July 2023.

Shortly before the hearing date, in June 2023, the local authority also issued two improvement notices which Kedai intended to appeal. The FTT decided that these were not relevant to the application before it: the tests under the Housing Act 2004 being different to the statutory test under the BSA 2022.

Many of the conditions for making a remediation order were agreed between the parties: that the blocks were relevant buildings (BSA 2022 s 117(2)), Kedai is a ‘relevant landlord’ (s 120(5), interestingly not referring to the more specific test in s 123(3)), the lead applicants (leaseholders) had status to apply, and that the blocks were more than 18 metres (but note, by s 117, a relevant building is one that is at least 11 metres high or has at least 5 storeys.) Matters not agreed included the extent of the defects to be remedied, whether an appropriate remediation scheme has been identified, and whether an order should be made under s 20C of the Landlord and Tenant Act 1985.

A broad approach to the BSA

The FTT referred to the BSA 2022 explanatory notes that explain that the provisions of the BSA 2022 are designed to deal with the serious problems arising from historical fire safety defects, and that leaseholder applicants may well have limited financial resources as compared with landlords and other potential (public) enforcers.  It notes that s 123 is very broadly drafted and gives wide power to the FTT (although it noted that some of the remedies sought were outside its s 123 powers). Although the Tribunal might be informed by the approach to other statutory provisions, it is not bound or prescribed by them. The objective is simple: to remove a relevant defect and in considering whether this creates a building safety risk it is in the light of ‘today’s knowledge’, not whether the work complied with Building Regulations at the time of construction. The FTT repeatedly notes the drafting of the legislation being in deliberately broad terms, and the width of the Tribunal’s power.

The Terms of the Remediation Order

An argument made for counsel for Kedai was that the applicants had not provided sufficient information about the relevant defects or a detailed scheme of works. Conscious of the difficulty facing leaseholders the FTT took the view that provided that the applicants made out a prima facie case that there were relevant defects, including by relying on the fire reports obtained by Kedai, then it is for the Tribunal to make the order. It did not matter that the applicants had not provided a detailed suggested order, and it was not helpful to be constrained by formal burdens of proof. Nor did the order made have to be detailed and prescriptive; it is sufficient if the landlord knows what it must do in general terms to remedy the defects. Remembering that the legislation is designed to protect leaseholders, it will usually be the case that the cost of preparing a detailed specification of works will fall to the developer or landlord, and they will be able to sort out any necessary planning permission and apply to the Building Safety Fund. If the landlord thinks that changes need to be made, it can apply to the Tribunal for a variation of the remediation order.

There was discussion of what standard should be required for the relevant order. Counsel for Kedai had suggested the standard adopted in the Developer Remediation Contract, linking to PAS 9980. The FTT considered that as no standard is mentioned in s 123, the order itself should not refer to any particular standard, but did decide that the remedial work must comply with current Building Regulations and, at the least, a post-Works Fire Risk Appraisal of External Walls (FRAEW) pursuant to PAS 9980:2022 should not prevent a satisfactory Form EWS1: External Wall Fire Review from being issued.

The FTT decision sets out the particular defects at the development, including the ACM cladding, unacceptable compartmentation, Kingspan K15 insulation, and damaged fibre cement panels. On the particular facts it did not agree that the balcony soffits, or the occasional falling of ceramic tiles presented ‘building safety risks’ as defined in the BSA 2022 s 120.

In terms of the timing for completion of the works, the applicants had pressed for a period of 18 months, in part to reflect that Kedai had been slow to date. Nonetheless, the FTT agreed with Kedai’s request for a longer period of 26.5 months given the time it will take to design, approve, and carry out the works. The form of the order is available at the end of the decision (p 41 onwards).

Section 20C Costs

 A section 20C order prevents a landlord from recovering the costs of tribunal applications through the service charge (permissible under the terms of these particular leases) and can be made if ‘just and equitable’. In this particular case, as Kedai was associated with the original developer all leaseholders would be protected from paying for fixing relevant defects by the BSA 2022 Sch 8 para 2. In relation to legal and professional fees, however, only qualifying leaseholders would be protected (para 9(1)). The question then was whether it was just and equitable to grant a section 20C order to protect the non-qualifying leaseholders from having the landlord’s legal costs passed onto them through the service charge. The FTT took account of the fact that in relation to most of the relevant defects Kedai had not acted quickly, although this was not true of the late discovered ACM cladding. Although Kedai had been very co-operative in these proceedings, its association with the developer was a factor taken into account and the whole intention of the BSA 2022 is that relevant defects should be remedied by them largely at their own costs. On these facts, the FTT ordered that 80% of the landlord’s costs should not be passed through the service charge to non-qualifying leaseholders. Of course, in other cases, where the landlord is not associated with the developer, remediation costs will fall hard on non-qualifying leaseholders, and Tribunals may be less amenable to granting section 20C orders.

Other applications sought

The applicants had also asked for several other orders: that the detailed works be sent to them for comment before commencing, that a fresh independent report be obtained on completion of the works, a determination that they would not be liable for any of the costs of the works, their costs in bringing the FTT application, compensation for losses suffered due to the defects, confirmation that Kedai will pursue funding from third parties, and that the applicants have monthly updates. None were given, although the FTT noted that it is highly desirable that Kedai keep leaseholders informed of the progress. Of course, the fact that leaseholders cannot recover their own legal costs, even in a case where the landlord is associated with the developer, may act as a disincentive for future applications and does run against the spirit of their protected status.

Mission-focussed

It is clear that the FTT wanted to ensure that remediation would happen and showed sympathy to the leaseholders, for example, in not requiring them to produce their own expert report. Further, as noted in a post by instructing solicitors and counsel for the applicants, the leaseholders succeeded even though they acted in person until shortly before the final hearing. As the first such order, the decision should be read carefully by those considering making a FTT application.