Court of Appeal considers RCOs and leaseholder protections under the Building Safety Act

The Court of Appeal has earlier this week handed down two significant judgments on the Building Safety Act 2022 (the “BSA”), providing much-needed clarity on the scope of leaseholder protections and the operation of remediation contribution orders (“RCOs”). The judgments consider the retrospective effect of these legislative provisions as well as the “just and equitable” test for RCOs. These decisions will have a direct impact on landlords, leaseholders, developers, and those managing residential buildings affected by historic safety defects.

Triathlon Homes LLP v Stratford Village Development Partnership

This case concerned RCOs granted by the First-tier Tribunal (Property Chamber) (“FTT”) against a developer (“SVDP”) and its parent company (“Get Living”) in respect of costs incurred both before and after section 124 of the BSA came into force. Section 124 permits the FTT to make RCOs against developers, landlords and their associates, requiring them to contribute to the costs of remedying relevant defects, where it is “just and equitable” to do so. For our Law-Now on the FTT’s original decision, please click here. 

SVDP and Get Living appealed the FTT’s decision, challenging the Tribunal’s application of the just and equitable test, as well as the ability for RCOs to include costs incurred before section 124 came into force.

The Court of Appeal dismissed the appeal. In relation to the just and equitable test:

• The Court upheld the FTT’s approach, confirming that the policy of the BSA is to place primary responsibility for remediation costs on developers and those associated with them. It is not relevant that a respondent had no involvement with the work or had acquired the original developer at a subsequent point in time.
   
• The Court also agreed that the fact that funding for the remedial works had already been received from the Building Safety Fund was not a factor against the granting of an RCO (the so-called “public purse” argument). The fund is intended to be a “last resort” and there was a public interest in securing reimbursement to the fund as quickly as possible. Among other matters, the Court noted that recipients of such funding are required by the government’s standard funding agreement to use “all reasonable endeavors” to recover the cost of remedial works from third parties and to reimburse the fund.
   
• The motive and identity of the applicant is not a relevant factor, provided the statutory criteria are satisfied and there is no malice or bad faith.
   
• There is no requirement for other contractual or tortious claims to be pursued first. The intention of the RCO regime is to ensure that funding is available from the outset pending the resolution of those more traditional claims.

The Court of Appeal also found that RCOs can be made in respect of costs incurred before section 124 came into force. This ensures that leaseholders who have already paid for remediation works, or management companies left with unrecoverable costs due to the operation of schedule 8, are not left without a remedy. The Court emphasised that the just and equitable requirement provides a safeguard against unfairness in this regard.

The Court drew support for its conclusions as to retrospectivity from the Supreme Court’s recent decision in URS Corporation v BDW Trading (a case in which CMS acted). For our Law-Now on that decision, please click here.

Adriatic Land 5 Ltd v Long Leaseholders at Hippersley Point

This case considered whether the BSA prevents landlords from recovering service charges for costs incurred before the relevant provisions of the BSA came into force. The dispute centered on paragraph 9 of schedule 8 to the BSA, which restricts the recovery of legal and professional costs relating to building safety defects from leaseholders with “qualifying leases”.

Adriatic Land sought dispensation from the consultation requirements contained in the Landlord and Tenant Act 1985 (required where a landlord intends to carry out major works to a building for which a service charge is payable). Following a review of its initial decision, the FTT granted dispensation subject to a condition that Adriatic Land could not recover its costs. This was appealed to the Upper Tribunal.

The Upper Tribunal determined that the condition could not be upheld as it was wrong in law. Following commencement of the BSA however, the Tribunal concluded that the costs were nevertheless irrecoverable from leaseholders of qualifying leases, pursuant to paragraph 9 of Schedule 8.

The Court of Appeal upheld the Upper Tribunal’s decision for the following reasons:

• Scope of paragraph 9: The Court confirmed that paragraph 9 is broad in scope, covering legal and professional costs incurred by landlords in relation to their liability (or potential liability) for relevant defects. This includes costs associated with applications for dispensation from consultation requirements under section 20ZA of the Landlord and Tenant Act 1985, where those applications relate to works addressing relevant defects.
   
• Retrospective effect: The majority of the Court held that paragraph 9 does not operate retrospectively to extinguish landlords’ rights to recover service charges for costs incurred before 28 June 2022 (the commencement date for the relevant BSA provisions). In other words, if a landlord had already incurred costs and rendered a service charge demand before that date, the right to recover those sums is not affected by the BSA. However, from 28 June 2022 onwards, no service charge is payable under a qualifying lease for such costs, regardless of when the underlying costs were incurred, provided the charge had not already been paid.
   
• Human rights considerations: The Court also addressed arguments under Article 1 of Protocol 1 to the European Convention on Human Rights (A1P1), concluding that the BSA’s approach — while interfering with landlords’ contractual rights — was a proportionate response to the building safety crisis and did not violate A1P1.

Conclusions and implications

The Court of Appeal has again made it clear in these judgments that the central policy of the BSA is to provide a substantial measure of protection for leaseholders from the financial consequences of historic building safety defects and to allocate responsibility to those best placed to bear it—namely, developers, landlords, and their associates. Those parts of the Triathlon judgment relating to the just and equitable test will also be of interest to those looking to pursue Building Liability Orders under the BSA (for our recent Law-Nows on such orders please click here and here).

The Triathlon judgment also confirms that developers and landlords (and their associated companies) are likely to face an uphill battle when resisting RCO applications (which are not “fault based”), with defences based on grant funding already being available or claims against contractors and subcontractors already being pursued likely to given little weight. To minimise the potential exposure to RCOs and, where applicable, to comply with any obligation under a grant funding agreement to use reasonable endeavours to recover contributions from liable parties, developers and landlords should be proactive in their pursuing others with responsibility for the defects.

In addition, there is likely to be an impact on transactional arrangements for purchasers of properties or development companies:

• Contractual provisions seeking to limit liability or reallocate risk may be overridden by the statutory requirements of the BSA.
   
• The lack of sympathy shown for arguments based on changes in ownership is expected to result in increased scrutiny during corporate transactions involving development companies. Parties will need to consider the risk of RCOs in respect of buildings completed up to 30 years ago. This will necessitate more rigorous due diligence on historic projects, a process complicated by the extended period of potential liability and the possible unavailability of records.

References:

URS Corporation Ltd v BDW Trading Ltd (Rev1) [2025] UKSC 21

Adriatic Land 5 Ltd v Long Leaseholders At Hippersley Point [2025] EWCA Civ 856

Triathlon Homes LLP v Stratford Village Development Partnership & Anor [2025] EWCA Civ 846