The introduction of building liability orders (BLOs) and remediation contribution orders (RCOs) under the Building Safety Act 2022 (‘BSA 2022’) has added a new dimension of risk in the insolvency landscape, particularly for group structures operating in the development and property sectors.
These tools are not insolvency-specific, but they have the potential to expose the wider group to financial liabilities that may not have been anticipated.
BLOs and RCOs offer a statutory mechanism for piercing the corporate veil, extending liability for building safety defects beyond the original developer to associated entities, and thus increasing the risk of exposure for connected entities.
What are BLOs?
A BLO is a statutory mechanism under s.130 BSA 2022. It allows the High Court to make an order that the ‘relevant liability’ (as defined in s.130(6) BSA 2022) of one entity is also the liability of associated entities. This means that associated entities can be held liable for building safety failures, such as the cost of remediation works relating to fire hazards or structural defects.
‘Associated’ entities (as defined in s.131 BSA 2022) can include parent companies, sister entities or subsidiaries within a corporate group, even where those companies were not directly responsible for the works or ownership of the building in question.
A BLO enables claimants to look beyond the insolvent entity to pursue associated entities in the corporate structure. The aim is to provide a route for recovery in situations when special purpose vehicles (SPVs) were used to develop properties and now have no – or no significant – assets, or are dormant, dissolved or insolvent.
What are RCOs?
An RCO is a statutory order under s.124 BSA 2022 that requires developers, landlords or their associated companies to pay the costs of remediation.
RCOs can also be made against associated companies in the group structure where that company has benefitted from development profits.
RCOs can also apply retrospectively.
Piercing the ‘corporate veil’
The corporate veil, which protects shareholders and parent companies from the liabilities of corporate entities, is the foundation of company law.
Historically, courts have not pierced the corporate veil outside of limited circumstances involving fraud or sham arrangements.
BLOs and RCOs, however, provide a statutory mechanism for imposing liability on other corporate entities without requiring the claimant to prove wrongdoing, dishonesty or even direct involvement by the associated entity.
For a BLO, the court can impose liability on an associated entity where:
- a relevant liability exists under the Defective Premises Act 1972 or the Building Act 1984;
- the association test under s.131 BSA 2022 has been met; and
- it is just and equitable to do so.
The Tribunal can also grant an RCO where it considers it just and equitable to do so, and where the associated entity meets the association test as set out in s.121 BSA 2022.
As a result, associated entities can be exposed to significant financial liabilities, even if they acted entirely within the scope of legitimate corporate structuring.
What are the implications in an insolvency context?
A developer and/ or landlord’s insolvency could leave leaseholders without a practical route for recouping repair costs or recovering damages.
BSA 2022, however, offers powerful remedies that shift the burden of unsafe buildings to other entities within the same group – entities which may remain solvent and operational.
This has serious implications for:
- group structures, particularly where assets and liabilities have been strategically distributed;
- directors and officers who have overseen such structuring, as they may face criticism for failing to anticipate BLO/ RCO exposure; and
- lenders and investors, whose security or returns could be compromised by new liabilities attached to borrower entities.
In restructuring or administration scenarios, insolvency practitioners must now consider whether group companies are at risk of claims under the BSA 2022, and whether contingent liabilities should be provided for or disclosed.
What are the recent developments and emerging trends?
The first BLOs were imposed in 2024 and, while their case law remains in its infancy, one developing theme is that BLOs are retrospective, applying to liabilities incurred before BSA 2022 even came into force.
As such, directors and insolvency practitioners should be aware that restructuring efforts during financial distress may be scrutinised if they appear to shift assets away from at-risk entities. In any case, these actions would not prevent a BLO liability from attaching to an associated company (provided the relevant tests are met).
Examples include:
- 381 Southwark Park Road RTM Co Ltd v Click St Andrews Ltd (in liquidation) [2024] EWHC 3569 (TCC). This was the first BLO granted under s.130 BSA 2022. After establishing liability against the insolvent developer, which was an SPV, the Court extended it to the parent company, applying the statutory test.
- Triathlon Homes LLP v Stratford Village Development Partnership & Ors [2025] EWCA Civ 846. The First-tier Tribunal (FTT) ordered both the developer and its parent company to contribute to remediation costs. The Court of Appeal recently upheld the order, confirming that:
- RCOs can apply retrospectively;
- it is not necessary for the parent entity to have directly carried out works;
- the focus on granting an RCO is for the remediation works to be carried out at the earliest time, with the primary responsibility being placed on the original developer; and
- it is reasonable to order an RCO even where: (i) remediation is already funded by the Building Safety Fund and is underway; and (ii) litigation against the original contractor for the defects is live.
What are the key takeaways for directors and insolvency practitioners?
- BLOs and RCOs extend liability beyond the insolvent entity, making solvent group members vulnerable to claims.
- The Tribunal and the courts are willing to grant these orders. The ‘just and equitable’ test is also relatively easy to satisfy.
- Claims may be available to an insolvent entity or its officeholders against the directors, if the company has been exposed to a BLO or RCO liability which could have been identified, and against advisers who failed to identify the risk if that had caused loss.
- Statutory powers override the protection of the corporate veil, even where there is no evidence of misconduct.
- Corporate group structures should be reviewed proactively, particularly where residential development or building ownership is involved.
- Contingent liabilities may impact valuations, restructures, and insolvency outcomes. Insolvency professionals should be aware of the risk.
- Directors should maintain robust records of inter-company arrangements and decision-making to demonstrate proper governance.