Delving into the detail of facade repairs - Estates Gazette Q&A

Sylwia Jatczak and Simon Allison answer a question on remediation contribution orders.

Question

I am a long leaseholder and I own a flat in a high-rise block which was converted from commercial accommodation in 2006. A few months ago, the freeholder of the block served all leaseholders with a notice advising that extensive works are required to the external facade of the building. The facade has been assessed as unsafe, and the materials used for development of the building and its construction have been deemed to constitute a significant fire risk. The works will involve replacement of cladding and render on parts of the facade. 

The leaseholders have now received a letter stating that the works have commenced and that the total estimated cost of £1.5m is due to be recovered from them by way of service charges. Is the landlord able to do this and, if so, can we require the landlord to contribute to some of these costs?

Answer

Under the provisions of the Building Safety Act 2022 there are significant restrictions on landlords, limiting their ability to recover service charges from leaseholders in respect of such remediation works. Even if they can be recovered, it is now open to the leaseholders to apply for a “remediation contribution order” against the landlord (or a developer, or an associated company of either) and seek to compel them to cover some or all of the costs associated with the works. However, for these provisions to apply, you will have to satisfy the conditions set out in the Act. Finally, the leaseholders will wish to find out why grant funding from the government’s Building Safety Fund 2022 was not or could not be obtained.

Explanation

By section 122 of the Building Safety Act 2022, there are certain circumstances as set out in Schedule 8 to the Act in which service charges would not be payable at all. The most obvious circumstance relevant here is where the leaseholders hold a “qualifying lease” (explained below) and the works require removal or replacement of any part of a cladding system that forms the outer wall of an external wall system and is unsafe.

There are other circumstances where the cost for the works which can be recovered via service charges will be limited. To assess whether you can benefit from these other provisions, you will first have to establish that your building is a “relevant building” for the purpose of the Act. If your block of flats is a self-contained building, at least 11 metres high or with at least five storeys and contains at least two dwellings, then it is going to be a “relevant building”. 

Secondly, you will have to establish whether the unsafe facade is a “relevant defect” under the Act. A relevant defect is a building defect that arises as a result of anything done or used in connection with “relevant works” that causes a “building safety risk”. It appears that the required works relate to the conversion of the building, which was carried out less than 30 years before the Act came into force; therefore, it seems that the requirement of a relevant defect under clause 120 of the Act may be satisfied. 

Where remediation works are needed to address relevant defects in a relevant building, Schedule 8 to the Act restricts how much of the cost of remediation works can be recovered via service charges. If your landlord was the developer or is associated with the developer, then you will not have to pay towards the cost of remediation. If not, you will need to work out which leaseholders hold a “qualifying lease”. 

Most flat leases will be a qualifying lease if they were granted before 14 February 2022 and at the beginning of 14 February 2022: 

1. the dwelling was the tenant’s only or principal home; or
2. the tenant did not own any other dwellings in the UK; or
3. the tenant owned no more than two dwellings in the UK apart from their interest under the lease. 

If these tests are satisfied, it is likely that the landlord will be limited in recovery of these costs via the service charge. However, the provisions of Schedule 8 to the Act are complex and need to be considered carefully against the particular circumstances. 

If the cost of the works can be recharged to leaseholders, an interested person (which includes the leaseholders, whether or not they hold a qualifying lease) can make an application to the First-tier Tribunal under section 124 of the Act to obtain a remediation contribution order against the landlord, a developer or a person associated with them. The FTT can make such an order if it considers it “just and equitable” to do so.

The FTT has considered such applications on a number of occasions now, including in cases such as Batish and others v Inspired Sutton Ltd and others (LON/00BF/HYI/2022/0002 – 13 January 2023), and more recently in Triathlon Homes LLP v Stratford Village Development Partnership and others [2024] UKFTT 26 (PC); [2024] PLSCS 16. Whether or not an order will be made is always fact-specific, and the leaseholders will want to consider against whom an RCO might be sought. Companies in the wider group of the developer – where they can be identified – often have greater assets from which to pay sums they are ordered to pay than other potential respondents.

Finally, it is worth checking whether the landlord has applied for grant funding via the relevant government fund, eg the Building Safety Fund. If the landlord could have obtained funding for the works but failed to do so, this may impact its ability to recover the costs from leaseholders via the service charge, as the FTT might find that the costs have not been reasonably incurred.

Sylwia Jatczak is an Associate at Charles Russell Speechlys LLP and Simon Allison is a barrister at Landmark Chambers.

This article was first published in Estates Gazette on 3 April 2024.