Triathlon Homes v Get Living

TRIATHLON HOMES V STRATFORD VILLAGE DEVELOPMENT PARTNERSHIP (1) GET LIVING PLC (2) EAST VILLAGE MANAGEMENT LIMITED (3) [2024] UKFTT 26 (PC)

This decision marks 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 five 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 five 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 SVDP 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 five 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 five 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 £24.5m.

Triathlon’s Application

• Triathlon’s share of the remedial works cost to be incurred by EVML was estimated at around £16m (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 £1m (together the Additional Costs).
• Triathlon therefore applied for a RCO to be made against SVDP and 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 currently 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.

Judgement

• 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 prior to the Building Safety Act 2022 (BSA 2022) commencement date on 28 June 2022 would be giving the provisions retrospective effect.

Instead, relying on the Upper Tribunal decision in Hippersley Point (2023 UKUT 271 (LC) and para 1012 of the Explanatory Notes to the BSA 2022 the FTT said they were in no doubt that Section 124 allows RCOs to be made in respect of costs incurred before 28 June 2022. At para 75 of the judgment they stated that:

“In the context of Part 5 as a whole, we do not regard this construction of section 124 as either improbable or unfair. On the contrary, it is consistent with the purpose and structure of Part 5 that the radical protection it extends to leaseholders should not be restricted by precise distinctions of time. Service charges are already subject to extensive statutory intervention, which can certainly include unpicking payments already made. In this instance Parliament has decided that, irrespective of fault, it is fair for those with the broadest shoulders to bear unprecedented financial burdens. To that end the 2022 Act goes far beyond the limited leaseholder protections in section 18 to 30, Landlord and Tenant Act 1985 and provides for wholesale intervention in and beyond normal contractual relationships in order to transfer the potentially ruinous cost of remediation from individual leaseholders to landlords, and to distribute it between landlords and developers and their associates according to criteria which Parliament has decided are necessary and fair”

• As a result, both Get Living and SVDP were ordered to pay £16m as a contribution to the Works. The Additional 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 wording 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 SVDP and they had willingly assumed the risk when they bought SVDP.

Conclusions

• The FTT accepted Triathlon’s argument that (1) the BSA 2022 creates a “hierarchy of liability” and (2) the purpose of the BSA 2022 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 where the associated parties provisions was intended to cover and noted that it would not be “just and equitable” for Get Living to benefit, but not have to contribute towards the remediation when funds had started to have been expended via the Building Safety Fund and could be 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.
• As an aside, the application was initially started in the FTT but was “transferred up” to the Upper Tribunal (UT) with the consent of the parties and the UT. It was not until day one of the hearing that the UT Judges hearing the case confirmed that they had no jurisdiction as section 124 states that RCO applications must be made to the FTT. The applications were therefore immediately transferred back to the FTT with the UT judges hearing it as FTT judges. The relevance of this is that FTT decisions are not binding on tribunals at FTT level and so may not necessarily be followed in other FTT cases but it clearly helps future parties to understand the approach the UT might take on any appeal in cases of this nature.

Paul Henson is a partner at Irwin Mitchell