Articles, News, Updates
Making an Application for a Remediation Contribution Order (RCO)
4th July 2023
James Fieldsend looks at applying for remediation contribution orders under the BSA.
Section 124 BSA (Building Safety Act) 2022 gives to the First-tier Tribunal (Property Chamber) (FTT) the power to make an RCO. That is an order:
- made on the application of an interested person;
- requiring a specified body corporate or partnership;
- to make payments to specified persons;
- for the purpose of meeting costs incurred or to be incurred in remedying relevant defects (or specified relevant defects) relating to a relevant building.
An order may be made when it is just and equitable to do so.
The application must relate to: (1) a relevant building, as to which see s.117 BSA and (2) costs incurred/to be incurred in remedying relevant defects, as to which see s.120 BSA.
The application must be made by an “interested person”. That is a “person” within the list at s.124(5), which includes public bodies as well as persons with a legal or equitable interest in the relevant building.
The respondent to the application will be the body corporate or partnership against whom the order is sought. An order cannot be made against individuals.
The persons to whom any ordered payments are to be made do not have to be named as a party to the application, but necessarily they must be identified in the application.
It follows, that an applicant can make the application for the benefit of (1) themselves, (2) themselves and others, or (3) for others only. This enables a public body that is an “interested person” to make the application for the benefit of leaseholders.
Approach to the application
The FTT is perhaps a jurisdiction with which not all property litigators may be familiar. Importantly, it has its own procedure rules (SI 2013/1169) by which the tribunal is encouraged to avoid “unnecessary formality” and seek “flexibility in the proceedings” (r.3(2)). It follows that it is not uncommon for the FTT to take a less formal approach to “pleadings”, or the evidence filed in support of a party’s position. Litigators not familiar with the FTT’s jurisdiction can often be taken by surprise by the informality of the proceedings.
Having said that, in the case of 9 Sutton Court Road (unreported) LON/00BF/HYI/2022/0002, which as 23 June 2023 is the only published decision on a RCO, the FTT was firm in requiring the exchange of comprehensive statements of case (SoC) before case management directions were given, even to the extent that the landlord respondent who failed to comply was, in consequence, debarred from participating in the application.
The importance of such a direction is obvious: (1) it provides transparency as to the case each party is required to meet; (2) it informs as to the evidence required to resolve the dispute (including what if any expert evidence) thereby assisting case management; and (3) it enables a more informed time estimate for the final hearing.
So, whilst there is the published Form BSA2 on which an application for a RCO can be made, it is recommended that applicants supplement the information required by the form with a SoC and invite the FTT to direct a comprehensive response and thereafter reply before listing the application for a case management hearing or otherwise moving on to give directions.
For the purposes of preparing their SoC, applicants and respondents alike may find it useful to consider the following questions:
- Q1: what order am I asking the FTT to make?
- Q2: what arguments will I need to make to persuade the FTT to make that order?
- Q3: what evidence will I require to support those arguments?
As well as assisting the preparation of an SoC, consideration of those questions will enable the parties and the FTT to identify the evidence (particularly expert evidence) that will need to be marshalled for the final hearing and thus, what case management directions will be required. (As with conventional court proceedings reliance on expert evidence requires the FTTs’ permission – r.19). So, for example, where costs have not yet been incurred, what are the relevant defects and what is the likely cost of carrying out the remedial work? Where the SoCs put those matters in issue, a direction for permission to rely on evidence from (as applicable) building surveyors, structural engineers, fire officers and quantity surveyors will be needed.
In considering Q2, the focus of attention will be on the jurisdictional threshold for making a RCO: whether it is just and equitable to do so.
That is a broad test of an open-textured nature. It is unlikely that the FFT (or higher courts on appeal) will approach its application prescriptively. As has been said in connection with the similarly open-textured “reasonableness” test that applies to residential service charge recovery, “factual situations are almost infinitely variable, and different considerations will come into play in different circumstances.” Nevertheless, the 9 Sutton Road case does provide some insight as to how the FTT may approach RCO applications (it being noted that the panel included the FTT’s President).
The case concerned a claim by tenants for reimbursement of previously paid service charges. The payments were made before the coming into force of the BSA. Had they fallen due after the passing of the BSA, the service charges would not have been payable because the freeholder landlord was the developer of the property (see para.2, Sch.8 BSA).
As already mentioned, the freeholder was debarred from participating and so the application was effectively one-sided. It follows that the FTT’s reasoning is limited. Nevertheless, notable reasons given for making the order include that the contribution (service charge repayments) “ought to be paid” and there were no “mitigations or other matters” to be taken into account in the exercise of the FTT’s discretion.
Use of the phrase “ought to be paid” is interesting. There was no conventional “cause of action” requiring payment: no contractual or tortious right to repayment. Rather, the FTT used the RCO jurisdiction to effectively give retrospective effect to the BSA; by ordering repayment of previously paid service charges, the FTT enabled the tenants to benefit from the BSA protections that were not in force at the time the payments were made. Thus, the repayments “ought to be paid” not with reference to a cause of action but with reference to the policy underlying the BSA; that is what the FTT felt justice and equity required.
From the perspective of an understanding of how the FTT will approach RCO applications, it is perhaps unfortunate that the landlord was debarred from defending. So, whilst the FTT recognised that there may be “mitigations or other matters” militating against the making of an RCO, it did not have the benefit of argument from the party affected by the order and there was no consideration of what “mitigations or other matters” might be relevant.
It therefore, remains to be seen to what extent the FTT will weigh in the balance the practical and financial consequences to all affected by the order, or the existence of an otherwise cause of action under which a claim for payment might have been made but which is time barred under a statutory limitation defence. Moreover, is not yet clear how “mitigations or other matters” may be reflected in the quantification of the contribution; it being recalled that it is a contribution order not necessarily an indemnification against costs.
A further, and as yet unexplored question of interest in the application of the jurisdiction, is the scope of costs that the FTT may wrap-up in an order for compensation. The cost of remedying relevant defects will of course capture the cost of the works themselves. But what about consequential costs, e.g., (where required) of providing temporary alternative accommodation for the duration of the works. Here, a “necessity” test would appear to be appropriate: is it necessary to incur the costs to enable the remedying of the relevant defects?
A final point. There is currently a RCO application relating to the Olympic Park that is listed before the Upper Tribunal (Lands Chamber) to be heard as a first instance decision following transfer of the application from the FTT. The decision in that case is likely to provide greater insight into the correct approach to RCOs. Nevertheless, the fact sensitive nature of the just and equitable enquiry means that whilst broad guidance will naturally be useful, how it falls to be applied (both in terms of the required evidence and form of order) will vary from case to case.
This article first appeared in Property Law UK in July 2023.