Who pays for defective housing? The impact of the Vista Tower judgment
The £13m remediation contribution order against the original developer of Vista Tower offers insights into how the Building Safety Act is being applied. Cecilia Busby, an associate at law firm Trowers & Hamlins, explains what it means for social housing providers
Cecilia Busby is an associate at Trowers & Hamlins
Last month, pursuant to new remedies under the Building Safety Act 2022 (BSA), the First-tier Tribunal (FTT) made a remediation contribution order (RCO) for £13m against 76 companies associated with the original developer of Vista Tower to pay for a raft of rectification and fire-safety works (Grey GR Limited Partnership v Edgewater (Stevenage) Limited and others [2024]).
Vista Tower is a 16-storey block in Stevenage that was converted from offices into flats in 2015 by developer Edgewater. Grey GR purchased the freehold in 2018 on behalf of Railpen, the railway workers’ pension fund.
The conversion included combustible panels on the outside of the walls and serious defects in fire stopping and compartmentation. Last year, Grey GR was subject to a remediation order brought by the government, and it brought the RCO application to seek recovery of the majority of its costs of these works from the original developer and companies associated with it.
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There are a number of key takeaways from the judgment that will be of interest to social housing providers that may be in a similar situation to Grey GR or may have been in a joint venture with developers on schemes with defects.
The judgment is the first major RCO application to be decided since Triathlon and confirms the approach taken by the FTT in that case on the issues of liability and the ‘just and equitable’ test. As with Triathlon, the judgment held that the developer was positioned at the top of a ‘hierarchy of liability’, and it was part of the purpose of the BSA regime to seek costs from those at the top before calling on contributions from those lower down.
Hence, the FTT dismissed the argument that Grey GR, being well funded, could afford to pay for the remediation. Significantly, it also held that non-qualifying leaseholders should be protected from costs in a case where there was clear developer fault.
“The judgment held that the developer was positioned at the top of a ‘hierarchy of liability’, and it was part of the purpose of the Building Safety Act regime to seek costs from those at the top before calling on contributions from those lower down”
Social housing providers seeking to identify ‘relevant defects’ and ‘relevant measures’ will want to review the judgment closely. The tribunal took a wide approach to the identification of relevant measures, finding that the developer was responsible for costs incurred that, strictly speaking, were not related to relevant defects, but which the FTT considered were required to make the building safe.
For example, the tribunal allowed the costs of replacing all fire doors, even where these had not been installed by the developer, as the works were undertaken “to seek to reduce the severity of or prevent or reduce harm to occupants that could result from, a fire”, and could therefore be included as the costs of ‘relevant steps’.
The part of the judgment that will be of particular interest to those who might be seeking an RCO, or be on the other end of an application, is the careful consideration of the just and equitable test.
The tracing of associated persons under Section 121 of the BSA includes any company that shared a director in the period between 14 February 2017 and 14 February 2022. Of the 96 respondent companies, all shared at least one director with the developer in this period.
The BSA, however, does not automatically make such companies responsible; the FTT has to consider whether it is just and equitable to make the order.
“The tribunal found there was a degree of control, and hence liability, for 76 of the respondents, and found them ‘jointly and severally’ liable for £13m of remediation costs”
The tribunal found that many of the companies had a tightly overlapping set of directors and owners linked by family and business partnerships, regardless of whether there was, in fact, a formal group structure. On this basis, the tribunal found there was a degree of control, and hence liability, for 76 of the respondents, and found them “jointly and severally” liable for £13m of remediation costs.
Where the ‘common director’ linked the developer to a company that appeared to be quite separate from this nexus and had significant levels of ownership by clearly independent entities, the FTT excluded them from the RCO on the basis that it would be unfair to those independent shareholders. The implication is clearly that the degree of overlapping involvement and control over the actual developer was an issue for deciding liability.
The careful application of the just and equitable test in this case may give some indication of how the FTT would view a social housing provider that has procured works in association with a developer (and so may be caught by the statutory definition of developer in the BSA), but where it may have had no control or involvement in the actual construction.
It remains to be seen whether all or some will appeal the judgment, but for now, the case sheds valuable light on the tribunal’s approach to some of the trickier questions related to RCOs, and will be of interest to all registered providers trying to navigate this area of new law.
Cecilia Busby, associate, Trowers & Hamlins
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