Court of Appeal confirms limits to retrospective effect of Building Safety Act 2022

The Court of Appeal declined to overturn the status quo in its recent decision of (1) Adriatic Land 5 Limited v  (2) the long leaseholders at Hippersley Point [2025] EWCA Civ 856 (“Hippersley”).

This was one of two important decisions handed down by the Court on the same day regarding the Building Safety Act 2022 (“BSA 2022”). Both Hippersley and Triathlon Homes LLP v Stratford Village Development Partnership (1) Get Living Plc (2) and East Village Management Limited (3) [2024] UKFTT 26 (PC) (“Triathlon”) were eagerly awaited in the hope they would bring clarity on certain key issues.

This Insight examines the implications of the Hippersley decision on the recoverability of service charges. For more details of the Triathlon decision, please read our Insight: Court of Appeal backs FTT on Fire-Safety Defects Remediation.

The key question in the Hippersley appeal related to whether the costs and associated costs of remediating relevant defects which had been incurred prior to the commencement of the Building Safety Act 2022 (“BSA 2022”) on 28 June 2022 were liable to be refunded to leaseholders.

Summary of decision

The Court of Appeal, by a 2-1 majority, found that the costs the landlord, Adriatic Land 5 Limited (“Adriatic”), wished to claim could not be passed on to qualifying leaseholders due to the provisions of paragraph 9, Schedule 8 of the BSA 2022.

The Court held more generally that costs caught by Schedule 8 of the BSA 2022, if they had been incurred, demanded and paid before 28 June 2022 (when the BSA 2022 came into force), could not be recovered from landlords by leaseholders. However, costs demanded before that date and not paid by leaseholders were no longer due. The dissenting Judge considered that from 28 June 2022 no service charge was payable for building safety defects only where the liability to pay was incurred on or after 28 June 2022. Given the split in the Court, the decision may be appealed to the Supreme Court.

Background facts

Adriatic, essentially a ground rent investor, acquired Hippersley Point in 2017, and it subsequently emerged that there were serious fire safety issues with the property. Adriatic applied for dispensation from complying with the consultation requirements of Section 20 of the Landlord and Tenant 1985 (“LTA 1985”) which was granted by the First-tier Tribunal (“FTT”) in December 2021. The FTT also made an Order under Section 20C LTA 1985 barring the Landlord from recovering its costs.

However, after a request for a review of that decision, the FTT altered its decision and instead made dispensation conditional on the costs not being passed to leaseholders (which had the same practical effect). Adriatic sought permission to appeal, which was granted, but it was highlighted by the Upper Tribunal that the “leaseholder protections” in Schedule 8 BSA 2022 (which had been introduced after the case was heard in the FTT) may now apply.

Permission to appeal was granted and the Upper Tribunal held that the effect of the Schedule 8 restrictions was to prevent the costs of the application being passed to ‘qualifying tenants' under the BSA 2022. This was because Paragraph 9 of Schedule 8 restricts the recovery of certain professional costs from ‘qualifying tenants’, including the costs of any proceedings before a Court or Tribunal where these were incurred as a result of a ‘relevant defect’. A ‘relevant defect’ is defined in Section 120 BSA 2022 and arises where a ‘building safety risk’ (relating to the spread of fire or collapse or partial collapse of a building) is caused by certain works. The most common scenario where this will have occurred is where defective work was undertaken in the 30 year period ending on 28 June 2022.

A ‘qualifying tenant’ for the purposes of Schedule 8 of the BSA 2022 is someone who holds a long lease in a single dwelling granted before 14 February 2022 in a building over 11m or 5 storeys tall which contains at least two dwellings, is liable to pay a service charge, and at the start of 14 February 2022 they did not own more than three dwellings in the United Kingdom.

Adriatic challenged the FTT’s decision on three grounds;

• Whether the costs of the dispensation application were within the scope of paragraph 9, Schedule 8 BSA 2022;
• Whether paragraph 9 (if applicable), applied to costs incurred before it came into force; and
• Would giving it retrospective effect mean that words had to be ‘read into’ the statute to make it compatible with Article 1 of Protocol 1 to the European Convention on Human Rights?

The decision

The majority in the Court of Appeal adopted the same position as the FTT, deciding that service charges paid before 28 June 2022 relating to matters caught by Schedule 8 did not need to be repaid to leaseholders. In addition, where, at that time, sums were outstanding, leaseholders were no longer liable to pay those arrears.  

The Court had no problem with dismissing the argument that the costs of the dispensation action were not caught by paragraph 9, Schedule 8 of the BSA 2022. These costs stemmed from a relevant defect being discovered and the application for dispensation stemmed from Adriatic’s desire to pass these costs on.

The parties adopted (not surprisingly) wildly different approaches in relation to the second ground of appeal. Adriatic maintained the BSA 2022 did not have retrospective effect whilst the leaseholders argued that all sums paid in the past within scope of Schedule 8 should be refunded. In the meantime, the Secretary of State (who intervened in the proceedings) wished to essentially uphold the FTT’s decision.

The Court of Appeal considered the presumptions against retrospectivity and against interference with property rights and held 2-1 that Parliament’s intention that the BSA 2022 should be retrospective displaced those presumptions.

The finding that Schedule 8 has limited retrospective effect leaves an anomaly whereby leaseholders who paid the service charge demands cannot seek a refund but those that have not paid are no longer liable to do so.

The alternatives were however clearly unpalatable to the Court of Appeal. Finding that costs remained chargeable would, in the Court’s view, undermine a key aim of Schedule 8 of the BSA 2022 to protect qualifying leaseholders from remediation costs. A determination that the BSA 2022 is fully retrospective, however, would have had severe consequences for landlords, in that potentially service charges which had long been paid and dealt with could have been subject to challenge, despite at the time there being no legislation they infringed.

This would have introduced considerable uncertainty and led to further litigation, which could have been hampered by the passage of time. These potential consequences together with a lack of clear wording suggesting this is what Parliament intended swayed the Court.

For landlords, this decision means that where leaseholders have paid costs incurred in connection with remedying relevant defects before 28 June 2022, there is no right for a leaseholder to claim recovery of sums paid. However, where arrears remain outstanding which are caught by the restrictions in Schedule 8 of the BSA 2022, a leaseholder will not be liable to pay those costs whenever they were incurred. As this was a majority decision, there may be an appeal on the retrospectivity issue to the Supreme Court, which will need to grapple with the complex issues at play. On the basis of the decision in Triathlon, however, it remains open to leaseholders and others to apply for a Remediation Contribution Order under Section 124 of the BSA 2022, subject to the application of the just and equitable test.

If you have any queries, please contact Oliver Park or your usual Charles Russell Speechlys contact. This Insight is a summary of this decision and is not intended to substitute legal advice on the circumstances of your particular situation.