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Introduction

The First-Tier Tribunal (Property Chamber) recently issued its decision in Grey GR Limited Partnership v Edgewater (Stevenage) Limited & Ors, concerning an application for a Remediation Contribution Order (RCO) under Section 124 of the Building Safety Act 2022. The case revolved around the responsibility for remediation costs associated with significant fire safety defects at Vista Tower, Stevenage, a residential building originally developed by Edgewater (Stevenage) Limited and its associated entities.

Background

Vista Tower, initially constructed as an office building in the 1960s, was converted into residential apartments in the mid-2010s. Following the Grenfell Tower tragedy and subsequent fire safety investigations, significant defects were identified, including combustible insulation materials, inadequate fire stopping, and the absence of effective cavity barriers. The Applicant, Grey GR Limited Partnership, acquired the freehold of Vista Tower in 2018 and later sought a RCO against various parties involved in the development, arguing that they should contribute to the estimated £13.2 million cost of necessary remedial works.

The Tribunal examined the conversion process and identified key players, including:

• Edgewater (Stevenage) Limited (R1): The original developer responsible for commissioning the conversion works.
• Gould/George Baxter Associates: Engaged to design and provide other services related to the works.
• Procare Building Services Ltd: The main contractor for the building conversion.
• Midwest Holding AG (R17): The main initial funder and beneficiary of the Vista Tower project
• Railpen Group: The pension fund on whose behalf the Applicant had acquired Vista Tower as a part of a portfolio of ground rent investments operated for railway workers with about 500,000 members. The Applicant became the landlord of the flat leaseholders within Vista Tower.

What is a Remediation Contribution Order?

A RCO is a legal mechanism introduced under Section 124 of the Building Safety Act 2022. It allows the First-Tier Tribunal to order certain parties such as developers, former landlords, or associated entities, to contribute financially towards the costs of remedying fire safety and structural defects in residential buildings.

Key Features of an RCO:

1. Purpose: To ensure that the cost of remedial works is borne by those responsible for the defects, rather than leaseholders or the public.
2. Who Can Apply: Applications can be made by an interested person, including:
   • The freeholder or landlord of the building
   • Leaseholders affected by the defects
   • The Secretary of State, local authorities, or fire and rescue authorities.
3. Who Can Be Ordered to Pay? The Tribunal may order payments from a “specified body corporate or partnership”. The definition is wide enough to include:
   • Developers who were responsible for constructing or converting the building
   • Former landlords who owned the building at the time the defects arose
   • Associated persons, such as parent companies or individuals who profited from the development and companies with common directors.

The definition of an “associated person” for the purposes of Section 124 of the Building Safety Act 2022 is set out in Section 121 of the Act. This section outlines when a person or entity is considered “associated” with a developer or landlord and can therefore be subject to a RCO.

A person (including a company or other entity) is associated with another person if, at any time during the “relevant period” (15 February 2017 – 14 February 2022), any of the following conditions apply:

1. Directors

• A body corporate is associated with any person who was a director of the body corporate at any time in the relevant period.
• A body corporate is associated with another body corporate if at any time in the relevant period a person was a director of both of them.

2. Control Over the Other Entity
   • One entity controls the other, or they are both under common control.
   • “Control” is defined as having more than 50% of shares or voting rights, or having the ability to appoint or remove directors.
3. Group Companies
   • A company and its parent company, subsidiary, or fellow subsidiaries are associated.
   • This includes companies within the same corporate group.
4. Partnerships
   • If one person is a partner in a partnership (including LLPs), they may be considered associated with the other partners.
5. Influential Individuals
   • A person who had significant influence over the management of a company or partnership (even if they were not a formal director or owner) may be considered associated.
6. Trusts and Beneficiaries
   • If an individual holds shares or voting rights on behalf of another person (e.g., as a trustee), the beneficiary may be deemed an associated person.
7. Successor Entities
   • If a company transferred assets, liabilities, or business interests to another company to evade liability, the new entity may still be considered associated.

Why Is This Important?

The definition of “associated person” is crucial because Remediation Contribution Orders (RCOs) can be imposed not just on developers or former landlords, but also on their associated entities, ensuring that liability cannot be avoided through corporate restructuring.

For an RCO to be made, the Tribunal must find it just and equitable to require a party to contribute. This involves considering:

• Their role in the development or management of the building
• Whether they made a profit from the defective works
• Their financial ability to pay
• The impact on leaseholders if they are not held accountable.

4. What Costs Can Be Recovered?
   • Costs of remedying safety defects (such as replacing dangerous cladding, installing fire barriers, or fixing compartmentation issues)
   • Interim safety measures, including waking watch services or fire alarms
   • Expert reports required to assess the defects
   • Legal and project management fees related to remediation work.

An RCO can require full or partial payment of remediation costs, either as a lump sum or in instalments.

Legal Basis for Obtaining a Remediation Contribution Order

Under Section 124 of the Building Safety Act 2022, a RCO may be issued where it is just and equitable for a corporate body or partnership to contribute towards the cost of remedying relevant defects in a residential building. To obtain a RCO the applicant must demonstrate the following:

1. Existence of Relevant Defects: The defects must pose a building safety risk related to fire spread or structural failure. Section 120 of the Building Safety Act 2022 defines a “relevant defect” as one arising from work done or omitted in connection with the original construction, conversion, or any subsequent remediation work.
2. Identification of a Responsible Party: A remediation contribution order can be made against a developer, former landlord, or a party associated with either, as defined under Section 121 of the Building Safety Act 2022. As set out above, this includes entities that exercised control over the development or derived financial benefits from it.
3. Just and Equitable Considerations: The Tribunal assesses whether it is fair and reasonable to order a contribution, taking into account the role of the parties, the financial standing of the respondents, and whether they profited from the development at the expense of leaseholders.
4. Extent of Costs Covered: A RCO may cover both past and future remediation costs, including investigative surveys, fire safety assessments, legal fees, and construction expenses. Section 124(2A) of the Building Safety Act 2022 clarifies that costs incurred in taking “relevant steps” to reduce fire or structural risks are eligible.

Tribunal’s Findings in Grey GR Limited Partnership v Edgewater (Stevenage) Limited & Ors

This case demonstrates the extremely wide definition of “associated person” for the purpose of RCOs.

The Tribunal determined that:

1. Responsibility for Costs: It was just and equitable to impose a remediation contribution order on certain Respondents, given their involvement in the development process. In reaching this decision, the Tribunal considered several key factors:
   • Profit from the Development: Some Respondents, including Edgewater (Stevenage) Limited and its associated entities, derived substantial financial benefits from the project while failing to ensure that the building met adequate fire safety standards.
   • Control Over the Project: The Tribunal found that specific Respondents had significant decision-making authority regarding the design and construction of Vista Tower, including choices related to fire safety materials.
   • Failure to Address Known Defects: The evidence demonstrated that certain parties were aware, or ought to have been aware, of potential safety concerns and proceeded with the development regardless.
   • Corporate Structuring to Avoid Liability: The Tribunal highlighted how some Respondents were part of complex corporate structures designed to limit liability, yet they had clear connections to the defective works.
   • Justification for Leaseholder Protection: The Tribunal emphasised that leaseholders should not bear the burden of these costs, particularly given the negligent practices of the original developers.
2. Joint and Several Liability: The Tribunal made an order requiring specified Respondents to contribute jointly and severally to the remedial costs. This approach ensured that liability was not unfairly distributed among leaseholders or left to be covered solely by government funding.
3. Refusal to Extend Liability: Some entities and individuals were excluded from the RCO on the basis that their involvement did not warrant financial liability. The Tribunal exercised discretion in assessing whether each Respondent had a sufficient connection to the development of Vista Tower. The Tribunal determined it was not just or equitable to make orders against some of the Respondents, such as those who were not involved in the property sector or who were “genuinely independent” of those against whom RCOs were made.
4. Technical Defects Identified:
   • External Wall Defects: Presence of combustible insulation, Expanded Polystyrene cores in infill panels, and lack of adequate fire barriers.
   • Compartmentation Failures: Gaps in fire stopping measures around staircases and flat partitions, leading to fire risk.
   • Failure to Install Proper Fire Safety Systems: The original conversion did not include working sprinklers or adequate fire suppression measures.
   • Opaque Panel Issues: Materials used did not meet required fire resistance levels, increasing horizontal and vertical fire spread risks.
5. Appeal Rights: The Tribunal outlined that any party wishing to appeal the decision must submit an application to the Upper Tribunal (Lands Chamber) within 28 days of receiving the written decision.

Key Legal Considerations

• Interpretation of the Building Safety Act 2022: The Tribunal reaffirmed that the RCO jurisdiction under Section 124 is not fault-based but rather intended to secure funding for necessary remedial works while prioritising the protection of leaseholders.
• Corporate Structure and Financial Responsibility: The decision highlighted the Tribunal’s willingness to pierce corporate veils where necessary, particularly where companies operated within opaque corporate structures designed to shield liability.
• Precedential Value: This case represents a significant application of the RCO mechanism under the Building Safety Act 2022 and may influence future cases concerning defective buildings and the financial responsibility of developers and associated entities.

Conclusion

The decision in the Vista Tower case reinforces the Tribunal’s commitment to ensuring that those responsible for defective developments bear the costs of remediation, rather than leaseholders. It also demonstrates the Tribunal’s pragmatic approach in balancing legal responsibility with the practicalities of enforcement. Future developments in this area of law will be closely watched, particularly any appeals arising from this decision.

This update is for general purpose and guidance only and does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. No part of this update may be used, reproduced, stored or transmitted in any form, or by any means without the prior permission of Brecher LLP.