The Building Safety Act 2022 (BSA) significantly expands liability beyond the construction and residential sectors, affecting corporate groups and associated companies even if they were not involved in construction or cladding. The BSA addresses building safety issues for commercial and mixed-use properties, extending limitation periods for fire risk and structural defect claims under the Defective Premises Act 1972 (DPA).
Key Remedies Under the BSA
- Remediation orders: Require specified remedial works within a prescribed timeframe.
- Remediation contribution orders (RCO): Oblige parties to contribute towards remediation costs.
- Building liability orders: Enable claimants to hold "associated" entities liable for remediation costs, piercing the corporate veil.
- Extension of limitation periods: Extends DPA claims from 6 years to 30 years for works completed before 28 June 2022, and 15 years for works completed after that date.
Liability by Association
- Definition of "associated" entities: Includes entities controlled by another, under common control, sharing a common director, or connected through trust arrangements or voting rights.
- Relevance period: Varies by claim type, with some focusing on 14 February 2022 (qualifying time) and others on a 5-year period ending on that date.
- Exceptions: Liability can attach even if the entity is no longer associated, as long as it was associated during the relevant period.
Examples of Association
- Example one: Company B is an associate of Company A if it controls A, is controlled by A, shares common control, or has a common director.
- Example two: Entities associated through parent companies, sister companies, shared directors, or investment vehicles can be held liable.
Just and Equitable Requirement
- RCOs: Courts have been reluctant to refuse RCOs, even if the entity did not benefit from the project, as seen in a case involving a registered charity.
Recent Cases
- Crest Nicholson v Ardmore: Confirmed that building liability orders can be pursued based on adjudication awards.
- Vista Tower: Demonstrated that 76 associated entities can be held liable jointly and severally despite no direct involvement in the development.
Implications for Different Stakeholders
- Insolvency practitioners: Face challenges in cashflows, recoveries, and restructuring due to emerging liabilities.
- Lenders: Should assess exposure to building safety claims, impact on cash flow, covenant compliance, and security values.
- Corporates: Need to review exposure to historic projects and evaluate association with entities facing construction-related claims.
- Sponsors and investors: Must include BSA liability in transaction diligence, focusing on historic development, group structures, directorships, and insurance protections.
Key Takeaways
- Building safety risk extends beyond cladding issues.
- Liability can arise from historic projects due to extended limitation periods.
- Corporate association provisions override traditional ring-fencing.
- Acquisition activity can create exposure to legacy liabilities.
- Early diligence and risk assessment are critical.
