Another BSA question answered

Another piece of the Building Safety Act 2022 puzzle has been solved in the latest case to reach the Upper Tribunal (Lands Chamber), as landlords, tenants and third parties alike grapple with the provisions of the 2022 Act and how they are to be applied in practice. One of the key elements of the 2022 Act is the way in which it imposes duties on an “accountable person” to manage the fire and structural safety risks of a high-rise building. The definition of an accountable person is set out in section 72 of the 2022 Act as, broadly, someone who owns or has relevant obligations to repair any of the common parts of a higher-risk building. Relevant obligations means obligations arising under a lease or by virtue of an enactment. The definition is therefore apt to include freeholders, landlords and right to manage companies. The purpose of the provision is to ensure that there is a clear duty-holder who has statutory obligations for building safety. By section 24 of the Landlord and Tenant Act 1987, the First-tier Tribunal is entitled to appoint a manager. The jurisdiction is generally exercised “for cause” – that is to say, in circumstances where there has been poor management of the block in the past. The manager derives their powers from the tribunal’s management order. The 2022 Act has amended section 24 of the 1987 Act to provide that a breach of a building safety obligation by an accountable person cannot now be relied on for the purpose of appointing a manager under section 24. The two statutory regimes are intended to be separate. Any new management orders made after the coming into force of the 2022 Act may not provide for a tribunal-appointed manager to carry out functions if the 2022 Act provides for that function to be carried out by an accountable person. Facts of the case The manager in Unsdorfer v Octagon Overseas Ltd and others [2024] UKUT 59 (LC); [2024] PLSCS 55 was appointed in 2019 to manage the mixed-use estate at Canary Riverside, east London. Five of the buildings on the estate are higher-risk buildings, being at least 18m in height or having at least seven storeys. Clearly, as a tribunal appointee, the manager did not hold any legal estate in these buildings. Accordingly, he could only be an accountable person if he could show that he was under a relevant repairing obligation in relation to any part of the common parts. The cladding of the buildings requires substantial remedial work, which is likely to fall within the duties of the accountable person. The manager in this case had taken some preparatory steps to get these works completed and had applied to the Building Safety Fund to cover the costs. However, funding had been rejected because the fund took the view that the manager was not an accountable person. The decision The question for the UT was whether a manager appointed by the FTT under section 24 of the 1987 Act could be an accountable person. The FTT had held that a tribunal-appointed manager could not be such a person; their repairing obligations derived from the management order appointing them, not from any lease or enactment. On appeal it was argued for the manager that the FTT had taken too narrow an approach to the statutory construction and had paid insufficient regard to the “absurd” consequences that might arise from the finding. It was further argued that, adopting a proper statutory interpretation, the manager’s repairing obligations arose under an enactment, being the management regime of the 1987 Act. Accordingly, the manager could be an accountable person. The UT did not agree. It held that the clear intention of parliament and the proper construction of section 72 was that a tribunal-appointed manager could not be an accountable person under the 2022 Act. The meaning of the expression “under a lease” meant an obligation imposed by a lease, not obligations imposed or assumed by some other less direct route, such as the obligation on the manager to comply with the terms of the management order. The same may be said of obligations arising under an enactment. It is the management order which gives rise to the obligations, not the 1987 Act itself. Moreover, the 2022 Act did not produce the absurd results relied on by the manager. This is because, on a proper construction of the legislation, existing management orders (ie those that were made before the 2022 Act came into force) are not affected. The manager remains obliged to comply with an existing management order, including the performance of the functions of the accountable person which are already functions of the manager under the order. When the management order expires, the responsibility for all management functions will return to the landlord, or the FTT may make a new order instead. If it does so, the manager will not be ordered to carry out the functions of the accountable person. Any overlap in responsibilities is therefore temporary and will resolve itself once the existing management orders expire or another order is made. The implications This decision will be highly relevant to tribunal-appointed managers, lessees and freeholders who are subject to a management order that pre-dates the coming into force of the 2022 Act, under which the manager’s responsibility for fire safety, etc now overlaps with the accountable person. Indeed, estate owners may find themselves prevented, under the terms of the management order, from carrying out duties that are imposed on them by statute, for which they may face criminal sanctions. The manager may find that they are unable to continue managing the building without further directions. It may be that in those cases the manager or the landlord needs to apply to the FTT for directions to modify or discharge the order to prevent any duplication of functions. Such an application is likely to require co-operation and collaboration between landlords, managers and other interested parties to ensure that the application is made by the person most likely to obtain the order required. Katie Gray is a barrister at Tanfield Chambers