Louise Shiels

The application was made by 18 leaseholders of a high-rise self-contained block of flats in Sutton (“the property”) against three respondents:

1. Inspired Sutton Limited (the freeholder landlord and the developer);
2. Inspired Asset Management Limited (in liquidation) (the parent company of the landlord); and
3. two directors of the landlord.

The leaseholders sought repayment of £192,000 of service charge payments made in respect of remedial works necessary to remove defective cladding.

The facts

In 2017, the landlord converted the property from office accommodation to flats. In September 2020, the landlord gave notice to the applicants of proposed remedial work to the property to replace all unsafe ACM and HPL cladding and parts of the render on the façade of the property, as well as replacement of all unsafe balconies. The remedial works commenced in February 2021 and the leaseholders presented their application in August 2022.

No defence was advanced by the landlord and there was no dispute that the cladding materials were unsafe, so the Tribunal had a relatively straightforward path to making its decision. However, under the Act, the Tribunal had to satisfy the following before it was able to make an order:

• The property was a relevant building under the Act. This was confirmed without dispute, given the property was structurally detached and had at least 5 storeys.
• The leaseholders were interested parties holding legal interests in the property and the landlord was a relevant specified body corporate. Again, this was confirmed without difficulty.
• The costs the applicants sought to recover related to the remediation of “relevant defects” which the landlord was responsible for and constituted a “building safety risk” as defined in the Act. The court determined that only costs relating to the fire safety works could be recovered. This meant that improvement works carried out by the landlord, not related to removing the defective cladding, which were included in one service charge could not be recovered by the applicants.
• It was just and equitable that the order was made. Although no reasons were given, the court also held this to be the case.

The applicants were successful against the landlord. However, the application against the parent company was dismissed following a challenge by the joint liquidators on the basis that the applicants did not seek the required leave of court in order to raise the action. The application against the directors was also dismissed on the basis that the Act provides only for partnerships or bodies corporate to make payment under remediation contribution orders - not individuals.

Key takeaways

So, what does this mean going forward?

• Relief for tenants – the court has shown a willingness to make remediation contribution orders under the Act. This will be welcomed by individuals who have incurred costs in relation to fire safety measures
• What can be recovered? – the court gave useful guidance on what can be recovered. In particular, applicants are only entitled to recover those parts of a service charge which specifically relate to fire safety works.
• (Personal) relief for directors – As set out above, directors of development companies are likely to be spared from contributing to such orders personally. This will provide some relief, although group companies and partnerships can still be required to contribute to future or past costs.

Louise Shiels is a partner at Brodies LLP