DLUHC v Grey GR Limited Partnership: Remediation Order granted under s.123 BSA

Another important case concerning fire safety defects has been heard in the First-Tier Tribunal Property Chamber (Residential Property), which has ruled in favour of the Department for Levelling Up, Homes and Communities (the DLUHC) against Grey GR Limited Partnership (the Respondent), ordering them to rectify safety issues concerning fire risks at Vista Tower, Stevenage.

Background

The Secretary of State for Levelling Up, Housing and Communities (the Applicant) applied for a Remediation Order pursuant to section 123 of the Building Safety Act 2022 (the BSA) to the Tribunal following concerns that were raised about the building in 2019. These issues related to the cladding that had been installed which, following an inspection of the site by the local council, did not meet the required standards in accordance with the BSA.

In June 2020, the Respondent applied to the Government’s Building Safety Fund (the BSF) to obtain funding for remedial works to remove the combustible materials from the building after undertaking an external wall assessment in compliance with the Government’s Consolidated Advice Note (the CAN).

In January 2022, the Government withdrew the CAN following concerns in the industry that the guidance was being misinterpreted and this was leading to disproportionate conclusions about the scope of external wall remedial works. Further delays arose in the process of remediating Vista Tower, some of which were due to the change of approach from CAN to the new ‘PAS 9980’ guidance. Eight iterations of the FRAEW/PAS 9980 Report were issued before eventual agreement to the scope of work with the BSF in January 2023, with funding of a £12.4m contribution to remediation costs agreed in September 2023.

Despite a warning to the Respondent, DLUHC did not consider that sufficient progress was being made with arranging for the remediation works. Consequently, the Applicant sought a Remediation Order to impose a legally binding requirement on the Respondent to fix the fire safety issues identified within a specific timeframe.

The Respondent entered into a grant funding agreement (GFA) with the BSF and into a building contract with the remediation contractor in January 2024. Works started under a letter of intent on 15 December 2023 and are planned to be complete by the end of September 2025.

Once works had started, the Respondent sought to have the application withdrawn on the basis it was no longer necessary as they would commit to completing the remediation works by a fixed date. This was rejected by DLUHC, and the matter went to a hearing in March 2024.

What was the Tribunal asked to determine?

It was not disputed that for the relevant purposes Vista Tower was a “relevant building”, the Applicant was an “interested person” and the Respondent was a “relevant landlord” (all as defined in the BSA). Furthermore, by the time of the final hearing there was no dispute as to the scope of the “relevant defects”, the required specification of the remedial works and details of the programme. Despite the remediation contract and grant funding agreement being in place, the Tribunal was asked to determine whether a Remediation Order ought to be made at all and, if so, on what terms.

Fault?

Consistent with the Tribunal’s approach taken in Triathlon the Tribunal noted that a Remediation Order is not a fault-based remedy. There is no “just and equitable test” of the kind seen in section 124 BSA 2022 (Remediation Contribution Orders) and there was no suggestion that the Respondent would deliberately seek to delay or obstruct the works.

The Tribunal considered, in some detail, the parties’ evidence as to the delays encountered so far but ultimately the Tribunal’s decision placed emphasis on the current situation and what needed to happen to ensure the remedial works were completed:

“As to relevant considerations, we think the facts of the case and in particular the works required and the situation of the relevant parties are much more relevant to the exercise of the discretion than any suggestion of unreasonable delay or even political motivation. We consider that our jurisdiction should be more practically focussed on ensuring the defects are remedied in a responsible fashion.”

Why was a Remediation Order required?

It wasn’t a matter of money. The Respondent’s financial standing was not a concern. It is a well-resourced pension fund for railway workers with cash of £134m and over £32bn in assets according to its 2022 Annual Report. The Tribunal also noted that BSF applications were not means-based and the Respondent was quite entitled to apply for funding in the same way as any other freeholder who bore no responsibility for the creation of the relevant defects.

DLUHC’s application had the backing of 57 leaseholders who had signed a letter of support including one leaseholder who, as a witness for DLUHC, also gave an account of the distress she had suffered since finding out the building was unsafe back in 2019, the delay in the works being undertaken since then and of her fears that she would be responsible for the cost of the works, which she could not afford:

“…the tribunal also agreed with the Applicant that the whole focus of the BSA is on leaseholder protection. 57 of the leaseholders at Vista Tower have asked the tribunal to make a Remediation Order and they are not a party to either the Works Contract or GFA. The works have only just started and are scheduled to last a further 17 months. In the circumstances we consider it is appropriate to make a Remediation Order… as a backstop to give reassurance...”

The decision

The Tribunal agreed with DLUHC in that it had the power to and a discretion as to whether to make a Remediation Order. There was some argument about the meaning of “discretion” under the Act and corresponding regulations, but rather than interpreting this as being analogous to “just and equitable” as per section 124 and Triathlon, the Tribunal considered it simply meant it had the power to make a Remediation Order.

It also provided a draft order to the parties which is published with the decision. This included all of the necessary provisions as to the specificity of the works to be carried out and timing as well as an alternative mechanism for achieving compliance.

Analysis

The Tribunal reported that provided the pre-qualification criteria in section 123 are met then it is likely that a Tribunal will make an order, subject to the facts of each case:

“We accept that a Remediation Order is a novel remedy and agree that although it might appear to be similar to an order for specific performance…different considerations apply…the focus is not on providing redress for non-compliance with a legal obligation…but on remediation of life-threatening building safety defects in tall residential buildings.”

The decision follows the clear policy decision that leaseholder views and interests are paramount. It is, of course, compelling in this case that the freeholder Respondent was of significant means and the outcome of the application would not, in itself, have impacted on the remedial works which were already underway. The terms of the draft order, which gave some flexibility to the parties to confer as to any proposed variations, may have allayed certain of the Respondent’s concerns that it would become hamstrung by the scope of the work and programme under the JCT contract in the same way as one would liken to an order for specific performance.

As noted above the parties had agreed the scope of remedial works required prior to the final hearing. Interestingly that scope was based on an agreed form of a PAS 9980 report and DLUHC (perhaps unsurprisingly from a BSF funding perspective) was not seeking a “higher standard” of remediation.

The Respondent ran the argument that the fiduciary duties of its directors required it to pursue BSF funding. Triathlon was cited in respect of BSF funding of the works:

“We agree with a point made by Mr Nissen KC in opening, which is that public funding is a matter of last resort and should not be seen as a primary source of funding where other parties…are available as sources of funding.”

Despite that, the Tribunal was not critical of the Respondent in delaying work pending BSF funding, as that was consistent with Government policy and market practice at the time – the policy shifted in 2022 with the BSA. There was no order for funds to be paid back to the BSF, as was seen in Triathlon, although that may be outside the scope of section 123.

Whilst the decision, on the facts, may come as no surprise it is striking that DLUHC has chosen to flex its muscles, perhaps if only as a ‘shot across the bow’ to those freehold owners who are sitting back and even being obstructive. It is clear following both Triathlon and this case that awaiting recovery of remediation costs from third parties such as contractors and consultants will be no defence against an order. Whilst this is the first reported instance where DLUHC has applied for and secured a Remediation Order, it is unlikely to be the last and it will be interesting to see to what extent DLUHC might get involved in cases in the future where there is no BSF element, e.g. if delays are becoming protracted.

Owners may encounter difficulties and delays in carrying out remediation where cooperation with management companies is not forthcoming, and it will be interesting to see how that situation may be considered by the Tribunal, and whether there is an ability to apply the order to secure cooperation and access as part of this process.

The Tribunal has now repeatedly demonstrated its proactive and pragmatic approach to ordering BSA remedies and freehold owners ought not to be surprised to see more of these orders being sought.

The message is simple: keep the remedial project moving and be proactive with leaseholder engagement. That is critical whether you are a developer, management company, freehold owner, institutional investor or otherwise.

This article was co-authored by Madihah Shah.