Developers must foot the bill for correcting building safety defects

The question of who should pay to fix unsafe buildings has been a key topic in the construction sector, especially since the Grenfell Tower tragedy.

The recent Court of Appeal decision in Triathlon Homes LLP v Stratford Village Development Partnership has provided clarity. The message is clear: developers should foot the bill for putting right building safety defects.

Triathlon Homes

The case centres on five residential blocks in Stratford, built to house athletes during the 2012 Olympics. Subsequently, these blocks were converted into permanent homes, with Triathlon Homes taking on the affordable housing leases and Get Living acquiring the private flats. The development itself was managed by Stratford Village Development Partnership (SVDP).

In 2020, serious fire safety defects were discovered in the cladding and external walls of these blocks. The management company, East Village Management Ltd (EVML), was responsible for repairs and maintenance costing more than £24 million. The government’s Building Safety Fund eventually stepped in to pay for the works, whilst Triathlon Homes applied for a Remediation Contribution Order (RCO), a tool under the Building Safety Act 2022, allowing parties to ask the tribunal to order developers to pay for the cost of remedying safety defects.

SVDP and Get Living argued that it wasn’t fair to make them pay, especially since the repairs were already being funded by the government.

Judgment

The Court of Appeal dismissed the developers’ appeal on all counts. The court decided:

• Developers should pay: The policy behind the Building Safety Act is clear – developers (and their associated companies) should bear the primary responsibility for the cost of fixing building safety defects. Public funding should be called upon as a last resort.
• No automatic orders, but a strong presumption: RCOs do not always have to be made if a developer qualifies, but in practice, it will usually be fair to make an order if the developer is responsible and has the means to pay.
• Public funding doesn’t let developers off the hook: Public funding does not equate to a lack of liability. The court made clear it is still just and equitable to require developers to reimburse the public, so the taxpayer does not foot the bill.
• No need to wait for other legal claims: The court also confirmed that applicants do not have to exhaust other legal avenues before seeking an RCO. The Building Safety Act gives leaseholders and others an additional, independent route to secure funding for remediation.
• RCOs can cover past costs: The court confirmed that RCOs can be made for costs incurred before the relevant parts of the Building Safety Act came into force. Developers can be required to pay historical defects.

Wider implications

The judgment reinforces the principle that developers cannot sidestep their responsibilities for building safety defects. The court has made it clear that the taxpayer should not pay for any defect when a developer is able to pay. Even if public funds have already been used, developers can be ordered to reimburse those funds.

The decision may lead to an increase in applications for RCOs as leaseholders, management companies and others seek to recover the costs of remediation from those responsible for the original defects and take advantage of recovering historical costs. Alongside this, attempts to avoid liability through technical arguments, such as being a leaseholder as well as a developer, or relying on the fact that public funding is in place, are unlikely to succeed.

This article was authored by Nathan Shipley, Paralegal in the Construction and Engineering team.