A recent Court of Appeal decision has confirmed that building owners and developers cannot pass on the costs of fire safety remediation work to leaseholders.

The ruling, handed down earlier this month in two separate cases, may significantly shift the financial burden of building safety issues away from leaseholders going forward.

Fire Safety Defects Discovered After Grenfell

Following the Grenfell Tower tragedy, investigations uncovered safety issues in buildings built years, sometimes decades, earlier. This judgment establishes that building owners are not allowed to recover costs from leaseholders for fire safety defects identified before 2022.

Retrospective Power of the Building Safety Act

The court confirmed that certain elements of the Building Safety Act 2022 (BSA) can apply retrospectively, a move that strongly benefits leaseholders and residents. The Act came into force in June 2022 in direct response to the issues exposed by the Grenfell fire in 2017.

Angela Rayner, Secretary of State for Housing, Communities and Local Government, submitted written evidence supporting the retrospective nature of the Act. She stated:

"A retrospective approach provides for effective routes to redress against those responsible for historical building safety defects that have only recently come to light, whatever level of the supply chain they operated at."

The Two Test Cases

The ruling relates to cases concerning Hippersley Point in Abbey Wood, south-east London, and five residential blocks at the East Village Estate in Stratford, east London.

In the Hippersley case, owner Adriatic sought to recover legal costs from leaseholders after a tribunal process. Adriatic had applied to remove certain regulations in order to charge residents more than £250 each for remedial fire safety works.

The East Village case centred on Triathlon, a social housing provider and long leaseholder, who applied for remediation contribution orders (RCOs) requiring the developers to pay for fire safety defect repairs. These were the first RCOs issued under the BSA. The developers appealed the First Tier Tribunal’s original decision to grant the orders.

In both instances, the fire safety issues were uncovered before the BSA became law.

Implications of the Judgment

The Court of Appeal upheld the First Tier Tribunal’s decisions in favour of the leaseholders, affirming that relevant provisions of the BSA do have retrospective effect.

Nitej Davda, partner at law firm Cripps, noted:

"It is quite unusual for such legislation to have retrospective effect."

He continued:

"If you take a step back and you think about what happened with Grenfell, which is where all of this emanates from ultimately, and then you think about what is the intention behind the legislation and what is it intended to do.

"The BSA is intended to do two things fundamentally.
It is intended to give leaseholders protection and it is intended to make developers pay.
If it doesn't have retrospective effect then you are trying to make the act work with at least one hand tied behind your back."

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