How to solve the Accountable Person riddle - FTT’s first decision on the identity of Accountable Persons
The Building Safety Act 2022 (“the Act”) is, as has been seen since its inception, legislation which brings fertile ground for litigation over its meaning and effect.
One of the new facets of the Act is to create the concepts of Accountable Person and Principal Accountable Person for higher-risk buildings (as a reminder, buildings at least 18m high or with at least 7 storeys and with at least 2 residential units – subject to some limited exceptions and extensions).
Identifying who the Accountable Persons are or the Principal Accountable Person can sometimes feel like a riddle with a hard come by solution. However, where there is a dispute as to the identity of an Accountable Person or the Principal Accountable Person (and we have seen a number), an interested party can apply to the First Tier Tribunal (“FTT”) for determination.
A number of these applications have been made but none has yet reached decision stage until now. The recent decision in Octagon Overseas Limited and others v Mr Sol Unsdorfer and others, is the first reported decision of the FTT on the identity of Accountable Persons and has also thrown the question of whether a tribunal-appointed manager can be an Accountable Person into the mix.
In October 2016, Mr Sol Unsdorfer was appointed by the FTT (“the Management Order”) as a Manager under section 24 of the Landlord and Tenant Act 1987 (“the LTA 1987”) and has carried out his duties under the Management Order. The estate he managed comprises five Higher Risk Buildings (“the Buildings”). The freeholder for all 5 buildings is Octagon Overseas Limited. Octagon granted long leases to:
- Canary Riverside Estate Management in respect of buildings one to four
- Riverside CREM 3 Limited in respect of building five.
With the implementation of the Act, a question arose as to who the Accountable Persons are for each building under section 74 of the Act and what was the effect of section 24(2E) LTA 1987 on this determination. Section 24(2E) LTA 1987 states that a Management Order may not provide for a Manager to carry out a function in relation to a higher risk building where that function is to be carried out by an Accountable Person for that building.
Section 72(1) of the Act provides that an Accountable Person for a higher risk building is either:
- a person who holds a legal estate in possession in any part of the common parts (which, for this purpose includes the structure of the building) or
- a person who does not hold a legal estate in any part of the building but who is under a relevant repairing obligation in relation to any part of the common parts.
Further to this, section 72(6) of the Act defined the ‘relevant repairing obligations’ as obligations imposed under a lease or by virtue of an enactment.
The parties agreed that Mr Unsdorfer did not satisfy the requirement under section 72(1)(a) because he does not hold legal estate in any part of the Buildings. The question, therefore, was whether Mr Unsdorfer satisfied section 72(1)(b) and is under a relevant repairing obligation in relation to the common parts.
Although the FTT accepted that Mr Unsdorfer was directed to manage the premises in accordance with the parties’ obligations in the lease, it concluded that his powers did not derive from the lease itself – they were imposed by the tribunal as part of the Management Order.
Further consideration was given to the words ‘by virtue of an enactment’ in Section 72(6) of the Act and whether they refer to a direct requirement imposed by legislation or whether they can include obligations imposed by an order, such as the Management Order. It is the Management Order which imposes repair obligations on the Manager.
The FTT considered the words used in the Act to be ambiguous but nevertheless determined that ‘by virtue of an enactment’ applies to cases where a direct requirement is imposed by legislation, not by an order of the court or tribunal. Therefore, the FTT concluded that a tribunal appointed Manager cannot be an Accountable Person under the Act.
This does seem to be an unhelpful conclusion given that, for all other intents and purposes, the Manager is the person with control over the building and its management. However, as has been seen in other cases, the FTT are restrained by the wording of the statute (and the powers given by the Act).
The Tribunal and the parties concluded that the following were Accountable Persons for the buildings:
- Octagon is an Accountable Person of Buildings one to five;
- Canary Riverside Estate Management Limited is also an Accountable Person of Buildings one to four;
- Riverside CREM 3 Limited is an Accountable Person for Building five;
- Circus Apartments Limited is also an Accountable Person for Building five, as they own a 999 year underlease.
The decision is likely to have significant practical consequences for the Manager in this case and other Managers over higher-risk buildings in carrying out their functions under a Management Order. Although the tribunal determined the identity of the Accountable Persons for the various buildings, it did not give any indication as to who is responsible for which parts of the Buildings. If the parties are unable to agree, it is envisaged that a further determination will be required. In addition, there may be further Tribunal time either to deal with an expected appeal or to ascertain the identity of the Principal Accountable Person for the Buildings, or, most likely – both.
How to solve the Accountable Person riddle? Well, we don't seem to be there yet, but this decision may be the start of the answer.
