“A recent High Court case determines whether defective works presented a building safety risk that resulted in the grant of a building liability order”
The Building Safety team at specialist property solicitors JB Leitch look at a recent High Court case which addressed whether a developer’s defective works amounted to a building safety risk which constituted a ‘relevant liability’ for the purposes of the Building Safety Act 2022, such that the RTM company could successfully claim a building liability order.
The background
381 Southwark Park Road RTM Company Ltd and others v Click St Andrews Ltd (in liquidation) and another company [2024] related to a purpose-built block of residential flats in London, of which the first defendant developer held the freehold and head lease. The RTM company contracted with the developer to erect an additional storey by way of three prefabricated modular units installed on the rooftop of the building. The developer agreed to sell the freehold to the RTM company and take a leaseback of the three new rooftop units. The second defendant guaranteed the performance of the first defendant’s obligations.
The works required the roof of the building to be removed. The roof space was not watertight during the works, and the building suffered water ingress as a result of heavy rainfall, which caused damage to other flats. The first defendant failed to successfully remedy this damage. Structural and fire safety defects were also identified in the construction of the new units.
The RTM company, together with a number of leaseholders, brought claims under the Defective Premises Act 1972 for a building liability order under the Building Safety Act 2022, in addition to further claims for breach of covenant, breach of agreement, and claims for nuisance and negligence.
The first developer is an insolvent company in liquidation, the parent company of which is the second defendant and guarantor.
The decision
The High Court found that the defective works amounted to a building safety risk which constituted a “relevant liability” under s.130(3)(b) of the Building Safety Act 2022. As a result, the RTM company was in a position to seek a building liability order against the parent company guarantor. This was determined in the RTM company’s favour – at a separate hearing.
The RTM company’s beneficial interest in acquiring the freehold of the property further entitled it to recover individual leaseholders’ losses for breach of covenant from the developer and its parent.
The building liability order could not be pursued under s.2A of the Defective Premises Act 1972, which only came into force on 28 June 2022, and could only be applied to the remediation works undertaken by the defendant. However, the structural and fire safety defects were found to amount to a “building safety risk”, constituting a “relevant liability” for the purposes of the Building Safety Act 2022.
A further hearing resulted in a building liability order being made against the second defendant, giving procedural guidance for the seeking of such orders.
The first defendant was found to have made inadequate protection against rainfall, even of a normal level. As a result, the defendant had breached its contractual obligation to carry out works in a good and workmanlike manner and to use reasonable endeavours to repair loss and damage. In addition, it was also found to be a breach of the quiet enjoyment covenant due to the defendant’s failure to rectify the damage. Claims for negligence and nuisance were dismissed.
The High Court found that the second defendant was liable to pay the RTM company damages that were incurred as a result of the first defendant’s breaches.
Advice and action for landlords
This is a notable Building Safety Act 2022 decision, the first in the High Court to find that a developer’s defective works and breaches amounted to a building safety risk, such that a “relevant liability” was established and enabled the RTM company to successfully seek a building liability order. The Building Safety Act 2022’s wording gives the courts broad jurisdiction when deciding whether to make a building liability order, and it is anticipated that this decision will be a point of reference when assessing what is “just and equitable” for the purposes of s.130(1).
Landlords, freeholders, and guarantor companies should be aware of this decision, together with the guidance set down by the courts regarding the process of applying for a building liability order. RTM companies and leaseholders will look to rely on the provisions of the Building Safety Act when seeking remedies for defects, which has been further supported by the High Court in this case.
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