Hippersley Point and Triathlon Homes: Court of Appeal draws retrospective line in the sand regarding recovery of costs under the BSA

The Court of Appeal has handed down the hotly anticipated judgements in the linked appeals of Adriatic Land v Leaseholders of Hippersley Point (“Hippersley Point”) and Stratford Village Development Partnership v Triathlon Homes LLP (“Triathlon Homes”).

Both appeals were held sequentially, and whilst they raise different, specific issues upon their facts, they have both confirmed that aspects of the Building Safety Act (the “BSA”) have the potential to be applied retrospectively.

Background

Hippersley Point

Hippersley Point is a ten-story residential block in Greenwich, which contains 32 residential flats. The freehold proprietor of the block had identified several fire safety defects in the building in 2020, predominantly due to the use of defective cladding which needed to be remediated. The freehold owner wished to utilise the service charge provisions to recover the cost to remediate under service charge expenditure from the leasehold owners under s.20 of the Landlord and Tenant Act 1985 (the 1985 Act). Due to the immediacy required for the works to ensure the safety of the residents, the freeholder applied to the First-Tier Tribunal (the FTT) to dispense with the statutory consultation requirements ordinarily required as a pre-requisite to recharging the cost of major works through a service charge. The FTT granted dispensation but ordered that the costs of dispensation would not be recoverable under the 1985 Act.  The Landlord challenged that determination and while the Upper Tribunal agreed that the 1985 Act could not prevent the recovery of costs for seeking dispensation, it concluded that the leaseholder protections under Schedule 8 of the BSA applied to prevent recovery, even through the application and the dispensation pre-dated 28 June 2022, when the BSA came into force.

Triathlon Homes

Triathlon Homes is a provider of social and affordable housing within the East Village, Stratford, which formed part of the former Athletes Village for the London 2012 Olympic Games. Investigations at the village uncovered a number of significant building safety defects, which would require extensive remediation. Triathlon made an application to the FTT for a Remediation Contribution Order (RCO) under s.124 BSA, which would require the original developer, Stratford Village Development Partnership (SVDP) and Get Living plc (SVDP’s parent company), to contribute to the remediation costs and to reimburse the previously incurred expenditure.  The FTT granted the RCOs and ordered the payment of over £17.5 million to Triathlon Homes.

The appeals

Both decisions were appealed. In Hippersley Point the appeal concerned whether the costs of seeking dispensation under the 1985 Act fell within the leaseholder protections and whether the leaseholder protections had retrospective effect.  In Triathlon Homes the appeal concerned whether it was just and equitable for SVDP and Get Living to be subject to an RCO and whether the Tribunal’s jurisdiction to make an RCO applied to costs that were incurred prior to the BSA coming into force.

Retrospective application

Retrospectivity was in issue in both appeals and in each case the Court of Appeal agreed with the lower Tribunal’s decision that the specific provisions in question did have retrospective effect.

It is important to stress that legislation in general terms is not considered to apply retrospectively unless there is clear evidence of that being Parliament’s intention and, if there is such intention, it is construed as having retrospective effect only to the extent the same is necessary to give effect to the intention of Parliament.

In the case of the BSA the Court of Appeal concluded that it was certainly Parliament’s intention that those sections of the BSA under consideration had retrospective effect and the critical question was to what extent.

In Hippersley Point the costs of dispensation (where the works to which the dispensation application related to remediation of building safety defects) were properly considered to be costs associated with a building safety defect and so fell within the BSA leaseholder protections.

As to the retrospective reach of the protections under consideration the judges in the Court of Appeal came to different conclusions. The minority concluded that the retrospective effect of the BSA was limited to costs that were incurred prior to the coming into force of the BSA that related to building safety defects.

The majority concluded that the ambit of protection extended to costs relating to building safety defects where demands have fallen due prior to the BSA coming into force, irrespective of whether the costs have been incurred or the services have been provided.  In other words, it had application to on account charges in anticipation of such expenses being incurred.  However, it was critical, for costs pre-dating the BSA, that the sums had not been paid.  If such sums were charged prior to the BSA coming into force and paid, it was too late to rely upon leaseholder protections.  For service charges where the costs were incurred after the BSA came into force, the leaseholder protection are not contingent on service charges remaining unpaid.

In Triathlon Homes the question of retrospective application was answered on similar terms to Hippersley Point in that all three Court of Appeal judges concluded that the RCO remedy (and indeed the remedy of building liability orders) had retrospective application.  It was Parliament’s intention that these remedies had application to costs incurred prior to the coming into force of the BSA.  In the case of RCOs and indeed building liability orders, the question was binary, so the nuanced considerations had in relation to leaseholder protections in Hippersley Point did not fall to be considered.

Just and equitable

On the just and equitable test (which was in issue in Triathlon Homes) the Court of Appeal dismissed the appeal.  As a matter of policy, the purpose of the BSA was to fix original developers (who created building safety risks) to take responsibility for their remediation.  A purpose of an RCO (as well as building liability orders) was to enable injured parties to look beyond the developer and to associated entities.  This extension of liability was aimed at getting around the challenges created by the use by developers of SPVs.  In determining whether it would be just and equitable to make an RCO the fact that grant funding for remediation costs was available was not relevant, neither was the fact that there might be other third parties (e.g. a contractor) that might also be liable.

Importantly, it was also contended by SVDP that its constitution and ownership was materially different to what it was when the defective works were undertaken, so it would now be unjust or inequitable to fix it with a liability for the acts of a previous owner.  The Court of Appeal concluded that the current owners knew or ought to have accepted the risks associated with acquiring such an entity and the change of ownership was not a relevant factor.

What do these recent rulings tell us about the BSA

Ultimately, this judgement reflects Parliament’s commitment to resolving post-Grenfell costs inequities, through enhanced protections for Leaseholders, and a retrospective look to holding developers accountable for remediating building defects.

It is clear from these recent Court of Appeal cases that the BSA is forward- looking legislation which is able to be applied retrospectively. Under the BSA, Leaseholders are entitled to protection and ultimately, accountable parties can be compelled to pay, even for historic costs. Whether there is scope for further nuanced argument over the precise ambit of retrospective application when it comes to other parts of the BSA remains to be seen, but what does seem clear is that the central policy considerations of the BSA are to make those responsible for building safety defects pay and to protect leaseholders from the costs of remediation, irrespective of whether those costs were incurred before or after the coming into force of the BSA.

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This article was published in the July edition of Property Perspectives.

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