Building Safety - Building Liability Orders

Introduced by the Building Safety Act 2022 (the BSA), and in force as of 28 June 2022, Building Liability Orders (BLO) essentially pierce the corporate veil by providing a mechanism through which the costs of remedying building safety risks (see Lauren Michaelides’ earlier blog on what amounts to a building safety risk), can be sought from companies who had no involvement in the original build.

Section 130 of the BSA provides:

(1)         The High Court may make a building liability order if it considers it just and equitable to do so.

(2)         A “building liability order” is an order providing that any relevant liability (or any relevant liability of a specified description) of a body corporate (“the original body”) relating to a specified building is also—

(a)         a liability of a specified body corporate, or

(b)         a joint and several liability of two or more specified bodies corporate.

In simple terms this can mean seeking a recovery from an ‘associated’ (as defined in section 131 of the BSA) immediate parent or subsidiary of the company original held liable, however from the wording of the BSA other companies within a wider group structure could potentially be targeted. In the Construction Risk team's recent Breaking Ground Discussion there was a discussion as to what might be a relevant liability for the purpose of making a BLO, and what might count as a sufficient connection between two companies for them to be ‘associated’ for the purposes of the BSA.

There is also a discretionary ground for making a BLO though. which is where a Court considers it to be “just and equitable” to do so. As yet there is no guidance as to when this might apply, and so it is likely to be a future area of debate. For now though the following factors could be relevant to a Court determining this issue:

• If the parties involved in the original construction had contracted on terms that limited liability, e.g. for insurance purposes or capping liability for the level of the fees, this might be a factor against a BLO being awarded.
• The underlying purpose of a BLO is to prevent companies evading liability through the use of specific purpose vehicles (SPV), i.e. a company set up solely for the individual transaction, that later dissolves. Scenarios involving the use of SPVs seem more likely to be susceptible to a BLO.
• The primary purpose of the BSA is to secure the safety of people. Where therefore a developer/ owner of a property is of limited means and unable to properly carry out remedial works, then a BLO might be more reasonable if made against a party which can financially afford to do those works.
• Similarly where a wealthy developer/owner can afford to carry out works, but is seeking to pass on that liability via a BLO to a much smaller entity, then this may mitigate against a BLO being awarded, particularly where a BLO might create the risk of insolvency and risk separate claims from individual flat owners/ individuals about a building’s construction not being fulfilled, e.g. by exhausting the financial pot available from the liable contractor.