Chapter 2: Key definitions
This chapter defines the key concepts involved in the remediation contribution order process.
This chapter defines the key terminology involved in the remediation contribution order process, including:
- who can apply for a remediation contribution order (2.1)
- who can be made to pay through a remediation contribution order (2.2)
- what is meant by “associated persons” (2.3)
- the gateway criteria to pursuing a remediation contribution order (2.4)
- what costs can be included in a remediation contribution order (2.5)
- what is meant by “just and equitable” in the context of remediation contribution order proceedings (2.6)
Section 124 of the Building Safety Act 2022 and accompanying regulations specify the “interested persons” who can apply for a remediation contribution order. These are:
- the Secretary of State
- the Building Safety Regulator
- the local authority for the area in which the relevant building is situated
- the fire and rescue authority for the area in which the relevant building is situated
- a person with a legal or equitable interest in the relevant building or any part of it. This may include residential leaseholders or a landlord in the building. Equitable interests may not be obvious, and applicants may wish to seek legal advice on who might be covered in any specific set of circumstances.
- the Homes and Communities Agency (Homes England)
- the named manager in relation to the relevant building
- the residents management company (RMC) in relation to the relevant building. An RMC is a company which is party to the lease and has responsibility for the management of the building, whose shares are owned by leaseholders. RMCs usually have the repairing obligation.
- the right-to-manage (RTM) company in relation to the relevant building. An RTM company is a company formed by leaseholders to allow them to take over management of their building, under sections 73-74 of the Commonhold and Leasehold Reform Act 2002. RTM companies usually have the repairing obligation for their building
- any other person prescribed by regulations made by the Secretary of State
Section 124(3) of the Building Safety Act 2022 specifies which entities an application can be made against (“the respondent”), and, if successful, be ordered to pay under a remediation contribution order. These are:
- a current landlord under a lease of the relevant building, or any part of it
- a person who was a landlord at the relevant time (14 February 2022), even if they are not currently the landlord
- a developer of the building
- persons associated (see section 2.3 for a definition of ‘associated persons’) with any of the above entities
The respondent(s) must be a company or partnership. Individuals (where they are not in a partnership) cannot be subject to remediation contribution orders.
Applicants will need to provide evidence to demonstrate that the proposed respondent(s) meets the criteria to be named as such in a remediation contribution order. For more information on the evidence necessary to demonstrate that a respondent meets the criteria, see sub-section 3.1.3.
If an applicant is considering naming an entity incorporated overseas as a respondent, they should seek specialised legal advice on whether, and how, to pursue such an entity. For more information on naming overseas entities in a remediation contribution order application, see sub-section 5.3.2.
2.2.1 Naming multiple respondents
Multiple respondents can be named in a remediation contribution order application. Applicants may find it useful to name multiple respondents to ensure that the full contribution sought can be recovered. For more information on the circumstances where naming multiple respondents may be appropriate, see section 5.3.
As explained in section 2.2, the Building Safety Act 2022 allows applicants to pursue a remediation contribution order against a partnership or body corporate “associated” with a landlord or developer of a relevant building. Section 121 of the Building Safety Act 2022 sets out the circumstances in which a partnership or body corporate is associated with another, for the purposes of remediation contribution orders, and the relevant timeframe in which the association must have taken place, namely the period from February 2017 to 14 February 2022. The definition of an associated person depends on whether the entity in question is a body corporate or a partnership.
It may not be possible to identify whether an entity may be an associated person from publicly-available documentation alone. Therefore, prospective applicants considering naming an associated person as a respondent should carefully consider the provisions in section 121 and seek specialist legal advice to ensure their intended respondent meets the required criteria.
2.3.1 When a body corporate may be associated with another person, company or partnership
This section sets out the circumstances where a body corporate is considered to be associated with another person, body corporate or partnership.
A body corporate is associated with another person, if one of the following applies:
-
on 14 February 2022, that person’s interest in the relevant building was held on trust, and the body corporate was a beneficiary of the same trust at that time
-
that person was a director of the body corporate between 14 February 2017 and 14 February 2022 (the relevant period)
A body corporate is associated with another body corporate if either of the following applies:
-
a person was a director of both bodies corporate at any time in the relevant period (between 14 February 2017 to 14 February 2022)
-
on 14 February 2022, one of the bodies corporate controlled the other, or a third body corporate controlled them both.
The test to determine whether one body corporate controls another will depend on whether the controlled body is a company or limited liability partnership.
A body corporate (X) controls another company (Y), if X possesses or is entitled to acquire any of the following:
-
at least half of the issued share capital of Y
-
rights to exercise at least half of the votes exercisable in general meetings of Y
-
such amount of Y’s issued share capital to entitle X to at least half of the income of Y, if the whole of Y’s income was distributed among shareholders
-
on the winding up of Y, or under any other circumstances, have rights to receive at least half of the assets of Y which would be available for distribution amongst shareholders
A body corporate (X) controls a limited liability partnership (Y), if X:
-
holds a majority of the voting rights in Y
-
is a member of Y and has a right to appoint or remove a majority of other members, or
-
is a member of Y and controls a majority of the voting rights in Y, either alone or pursuant to an agreement with other members.
A body corporate (X) controls another body corporate (Y) if X has the power to secure that the affairs of Y are conducted in accordance with X’s wishes.
2.3.2 When a partnership may be associated with another PERSON
Under section 121 the Building Safety Act 2022, the definition of a partnership is:
-
a partnership within the meaning of the Partnership Act 1890;
- a limited partnership registered under the Limited Partnerships Act 1907; or
- a firm or entity of a similar character formed under the law of a country or territory outside of the United Kingdom (and the reference to ‘limited partner’ is to be read accordingly)
A partnership is associated with another person, if either of the following applies:
-
on 14 February 2022, that person’s interest in the relevant building was held on trust, and the partnership was a beneficiary of the same trust
-
they were a partner (not a limited partner) in the partnership at any time between 14 February 2017 and 14 February 2022 (the relevant period)
2.3.4 Associated person examples
Below are 2 examples of how the Building Safety Act 2022’s associated persons provision could be applied.
Example 1
Company A is a development company set up in 2017. Company A constructs a building known as Building Heights in 2018 and sells the building to Freeholder A. Company A is then dissolved in 2019.
A local authority carries out an inspection and discovers that Building Heights has relevant defects to the external cladding system of Building Heights. Freeholder A, the owner of Building Heights, has limited financial resources and cannot cover the cost of remediating the defects.
Before being wound up, the directors of Company A were also the directors of Company B between the years 2017-2019.
Company B has significant assets in the jurisdiction (i.e., the United Kingdom). As a person was a director of Company A and Company B during the relevant period, Company B is an associated person to Company A within the meaning of section 121 of the Building Safety Act. An interested person is therefore able to seek a remediation contribution order against Company B, (subject to meeting the relevant criteria and to the Tribunal finding that it is just and equitable to make an order).
Example 2
Freeholder C is the owner of High Tower, a building constructed in 2006 with combustible insulation used across the whole building. The developer company is dissolved and so are any associated persons (as defined under section 121 of the Building Safety Act 2022) of the developer company.
A regulator has received complaints from leaseholders at High Tower, who are concerned about the fire safety risks at the building. Freeholder C refuses to carry out the works and has limited assets.
Company D holds the majority of voting rights in Freeholder C (and has done since its incorporation) and is a member of Freeholder C with the right to appoint or remove a majority of other members. Company D owns multiple assets in the jurisdiction.
As Freeholder C is controlled by Company D, it is associated with it. An interested person can therefore seek a remediation contribution order against Company D, (subject to meeting the relevant criteria and to the Tribunal finding that it is just and equitable to make an order).
The Tribunal can only make a remediation contribution order in relation to relevant defects in relevant buildings. This section defines both of these “gateway criteria”.
2.4.1 relevant building
Remediation contribution orders can only be made in respect of ‘relevant buildings’. Under section 117 of Building Safety Act 2022, a relevant building is a building in England that:
- is a self-contained building or a self-contained part of a building
- contains at least 2 dwellings
- is at least 11 metres high or has at least 5 storeys
As set out in section 117(4), a building is self-contained if it is structurally detached.
Section 117(5) sets out that a part of a building may be ‘self-contained’ if:
- the part is divided vertically from the rest of the building
- the part could be redeveloped independently of the rest of the building
- the services provided via pipes, cables or other fixed installations for occupiers in that part are provided independently, or could be provided without significant interruption to services used by occupiers in the rest of the building if works are carried out
Section 118(2) sets out that the height of the building is to be measured from ground level to the floor of the top storey (ignoring any storey which is a roof-top machinery or plant area or that consists exclusively of machinery or plant rooms). Any storeys below ground level are to be disregarded, and mezzanine floors are only counted as storeys if their internal floor area is at least half of the internal floor area of the largest storey in the building above ground level.
See further guidance on the definition of ‘relevant buildings’.
2.4.2 relevant defect
Remediation contribution orders can be made in relation to costs associated with ‘relevant defects’. See section 2.5 for more information on what costs are included in this definition.
A relevant defect is defined in section 120 of the Building Safety Act as a defect that:
- arises as a result of anything done (or not done) or used (or not used) in connection with “relevant works”
- causes a building safety risk. A building safety risk is a risk to the safety of people in or about the building arising from the spread of fire, or the collapse of the building or any part of it
‘Relevant works’ are any of the following:
- works relating to the construction or conversion of the building, if the construction was completed between 28 June 1992 and 27 June 2022
- works undertaken or commissioned by or on behalf of a relevant landlord or management company, if the works were completed between 28 June 1992 and 27 June 2022
- works undertaken after 28 June 2022 to remedy a relevant defect
Where the above criteria is met, examples of relevant defects could include, but are not limited to:
- unsafe cladding systems
- balconies and other external attachments constructed wholly, or in part, with flammable materials
- lack of compartmentation between flats
- defective building foundations
A relevant defect may also include anything done (or not done) in connection with the provision of professional services connected to such works (section 120(4)). For example, if an architect or building designer specified an inappropriate use of flammable materials and the contractor followed those designs, a relevant defect could arise in connection with these architectural or design services.
See further guidance on the definition of ‘relevant defects’.
This section explains what costs a respondent can be made to pay by a remediation contribution order.
A remediation contribution order can be made for the purpose of meeting costs incurred, or to be incurred, remediating relevant defects in a relevant building. This means that a remediation contribution order can be used to secure funding for, or recover costs of, works to fix, or otherwise in connection with fixing, relevant defects in a building. This includes, but is not limited to:
- costs incurred or to be incurred remediating relevant defects in a relevant building
- costs incurred or to be incurred in taking relevant steps which either prevent a building safety risk from arising, or reduce the severity of any incident resulting from a building safety risk materialising. ‘Relevant steps’ means preventative or mitigating steps that can be taken to reduce the risk and/or severity of a fire or collapse of the building (or any part of it) resulting from a relevant defect. This include measures such as Waking Watch fire safety patrols or special alarms that allow for simultaneous evacuation of a building.
- costs incurred or to be incurred obtaining an expert report relating to the relevant building; and/or
- costs associated with temporary accommodation and associated reasonable travel costs, removal costs and storage costs, where a relevant building (or any part of it) has been (or is due to be) decanted:
- to avoid an imminent threat to life or of personal injury arising from a relevant defect in the building
- (in the case of a decant from a dwelling) because works relating to the building created or are expected to create circumstances in which those occupying the dwelling cannot reasonably be expected to live, or
- for any other reason connected with relevant defects in the building, or works relating to the building, that is prescribed by regulations made by the Secretary of State
Under Section 124(1) of the Building Safety Act 2022, the First-tier Tribunal can only make a remediation contribution order if they find it “just and equitable” to do so. This provision is intended to ensure the Tribunal will consider whether it is fair to make an order when making its decision.
“Just and equitable” is not a defined term in the Building Safety Act. Therefore, the Tribunal will exercise its discretion in deciding whether its finds something to be just and equitable using long standing principles of fairness, depending on the specific facts of each individual case. Prospective applicants should seek their own legal advice on how the just and equitable test might be applied in their particular set of circumstances and how they should approach this in their application.