Building Safety: Whether a social housing provider was liable for costs of building safety works (St John Street Property Services Ltd v Riverside Group Ltd – 2023)
Where urgent building safety works were undertaken to a property, was a social housing provider liable to make a contribution towards the costs of works where it held two headleases?
The background
St John Street Property Services Ltd v Riverside Group Ltd [2023] concerned a mixed-use development, containing a supermarket, office space, privately-owned residential flats and social housing flats. The social housing provider held its flats under two headleases.
An assessment of the development identified issues with the external wall system, including the presence of ACM, HPL and polystyrene insulation, presenting fire risks and requiring the implementation of an immediate “waking watch” and urgent works to remediate the affected areas.
Works were undertaken by the landlord, which then sought to recover the costs from leaseholders. Commercial and private residential leaseholders agreed their contributions, but the social housing provider disputed its liability for costs. The landlord applied to the First-tier Tribunal for determination.
The decision
The First-tier Tribunal found in favour of the landlord, concluding that the landlord had taken sufficient steps to identify whether funding may be available from third parties and that the costs of works had been reasonably incurred.
The FTT considered a number of points:
- Whether the costs of the external wall remediation, waking watch and other associated costs were recoverable under the terms of the lease
- Whether the landlord had taken steps to identify whether third party funding may be available to cover the costs incurred, and therefore whether the costs of the works had been ‘reasonably incurred’
- Whether the social housing provider’s apportionment of the costs of works was reasonable and payable
- Whether, if a successful claim could be made under the Building Safety Act 2022, the service charge costs would remain payable
- The social housing provider paid service charges, and the FTT considered whether this payment affected its dispute over liability.
Relying on Avon GR v Cowley [2019], the respondent argued that the applicant landlord should have applied for a remediation contribution order under s.124 of the Building Safety Act 2022, or alternatively claimed damages under the Defective Premises Act 1972, as a pre-condition to the recovery of service charges.
In its decision, the FTT distinguished this point, finding that the landlord had taken sufficient steps with regards to third party funding, had identified that such funding was not available, and finding that service charge costs were reasonably incurred. The FTT stated that the prospects of success were too remote for the FTT to conclude that the landlord had failed to pursue third parties, or to find that any remediation costs were not to be considered ‘relevant costs’.
Advice and action for landlords
This decision is of particular importance to landlords and managing agents dealing with remediation works under the Building Safety Act 2022, finding that service charge costs may be reasonable and payable where a landlord has taken steps to identify whether third party funding for remediation works is available.
Where a landlord does not apply for a remediation contribution order under the BSA 2022, this may impact its ability to recover costs of remedial works from leaseholders.
The First-tier Tribunal found in favour of the landlord, concluding that the landlord had taken sufficient steps to identify whether funding may be available from third parties and that the costs of works had been reasonably incurred.
