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Cladding remediation and related costs recovery – a new case in the FTT: St John Street Property Services Ltd v Riverside Group Ltd

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11th September 2023

Robert Bowker and Jeremy Weaver, an associate director at Bradys Solicitors analyse the recent case of St John Street Property Services Group v Riverside Group Ltd.

Introduction

In LON/00AU/LSC/2021/0255, the FTT (Judge Timothy Powell and Ms Sarah Philips MRICS), determined the recovery of cladding remediation costs, waking watch costs, managing agents’ fees and legal costs. Robert Bowker instructed by Jeremy Weaver of Brady Solicitors, appeared for the applicant landlord.

The case considered a series of issues relevant to the recovery of cladding remediation costs, including the relevance of remediation contribution orders under the Building Safety Act 2022 and potential claims for damages under the Defective Premises Act 1972.

Developing case law

Recent decisions in the FTT are starting to develop a body of case law that will assist property litigators to advise developers, landlords and leaseholders about what they might expect. This is such a case.

Fire safety defects and costs

The case concerned a mixed-use development comprising a supermarket, offices, and private residential and social housing flats. The development’s external wall system was blighted by what had been described as an “unholy trinity of ACM, HPL and polystyrene insulation” which necessitated a waking watch and urgent remediation work. The landlord carried out the work and sought to recover the costs it incurred.

The cost of the work and related costs were settled by agreement with the commercial and private residential tenants but the respondent social housing provider, which held its flats under two headleases, disputed its liability.

Issues for the FTT

At the final hearing, the issues the FTT considered included:

• Whether the lease permitted the recovery of the cost of cladding remediation, waking watch and associated costs and whether recovery was consistent with the principles in Waaler v Hounslow.
• Whether the applicant had failed to evidence that it had taken steps to establish whether third-party funding was available to pay for the cost of cladding remediation, waking watch and associated costs (i.e. whether such costs were therefore “reasonably incurred” under section 19 of the 1985 Act).
• The payability and reasonableness of the apportionment of additional charges to the respondent.
• Whether, and to what extent, the potential for a successful claim under the Building Safety Act 2002 affects the payability of the service charge costs.
• Whether the respondent housing association’s payment of the service charges, notwithstanding its disputing liability, affected the Tribunal’s decision.

The decision

The decision is thorough, running to some 170 paragraphs. The FTT considered familiar decisions including: Waaler v Hounslow; Credit Suisse v Beegas; Dell v 89 Holland Park; Arnold v Britton; Ravenseft v Davstone; Welsh v Greenwich; Oliver v Sheffield; Avon GR v Cowley; 9 Sutton Court Road; and Citiscape. The legislation covered by the decision included: Building Safety Act 2022; Defective Premises Act 1972; Regulatory Reform (Fire Safety Order) 2005; and Building Regulations including Approved Document B.

A key aspect of the respondent housing association’s case was that the applicant landlord should, as a precondition to service charge recovery, have applied for a remediation contribution order under section 124 of the Building Safety Act 2022 or claimed damages under the Defective Premises Act 1972. It relied in particular on the well-known decision in Avon GR v Cowley. The landlord sought to distinguish that decision.  

Critically, the FTT determined (see para 141 of the decision):

“The Tribunal is satisfied that the landlord had taken sufficient steps to establish whether third-party funding was available to meet the remediation costs; that it was not so available; and that the service charge costs were reasonably incurred despite there having been no third-party funding”.

The FTT reasoned (see para 146 of the decision):

“at this stage, the prospects of success are too remote for the Tribunal to reach the conclusion that the applicant failed to take reasonable steps to pursue third parties or to determine that any part of the remediation costs were not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by One Housing.”

Third party funding

The scope of the FTT’s decision is wide-ranging. The part of the determination dealing with third party funding is probably the most significant as far as those advising developers, landlords and leaseholders are concerned. That is particularly so in the light of remediation contribution orders under section 124 of the Building Safety Act 2022 and the circumstances in which a landlord’s decision not to apply for such an order might affect its ability to recover the cost of remediation.

The decision can be found here.

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