Part 5: Other provisions about safety standards, etc. Remediation of Certain defects Section 124: Remediation contribution orders Background
The explanatory note to section 121 discusses how it is common practice for owners of freeholds of multi-occupied residential buildings (as well as owners of other superior lease interests in those buildings) to use thinly capitalised companies such as special purpose vehicles to hold the interests. While the freeholder itself often has very limited capital, these entities are often part of well-resourced wider group structures.
	The explanatory note to section 122 explains how the leaseholder protections provisions in Schedule 8 operate. The provisions protect leaseholders by preventing altogether or otherwise limiting the costs that can be passed through the service charge to leaseholders in connection with relevant defects. Where costs are not otherwise recoverable under leases, the Schedule, and powers made under it, make provision for those amounts to be recovered from landlords under leases of the building including the freeholder and superior landlords such as headlessees. This means that under the provisions of Schedule 8, landlords, including freeholders and headlessees, are liable for some or all of the costs connected with remediating their buildings.
	It is important that, where costs in relation to relevant defects are not recoverable from leaseholders, that funding is made available so that work to remediate defects can take place promptly and buildings can be made safe. Remediation contribution orders support this aim in two ways.
	The first way in which remediation contribution orders are intended to contribute to the timely remediation of buildings is by providing a new legal remedy to require developers to pay for the costs of remediation. If the Tribunal considers it just and equitable, it can require a developer for the building to make payments in connection with remedying relevant defects. A wide range of parties can apply for remediation contribution orders: as well as the Secretary of State and regulatory bodies such as the Building Safety Regulator, persons with a legal or equitable interest in the building can apply for an order. Persons with a legal or equitable interest include, for example, the freeholder of the building, superior landlords such as headlessees, and leaseholders.
	As discussed above, freeholders and landlords will have new liabilities to pay for remediation costs under Schedule 8. Remediation contribution orders will allow landlords to seek to recover these costs from the building’s developer by applying to the Tribunal for an order against the developer. Similarly, leaseholders would have the ability to apply for an order against the developer; for example, if leaseholder contributions are required under Schedule 8, or if leaseholders have already paid costs towards remediation before the coming into force of the leaseholder protections, they may wish to seek to recover these costs using a remediation contribution order.
	As discussed in the explanatory note to section 121, it is also common practice for residential property developers to use special purpose vehicles which are wound up on completion of the project. Remediation contribution orders can also be made against persons associated with the developer; this will include, for example, parent companies where developments have been run through special purpose vehicles which are thinly capitalised or have since been wound up.
	The term "developer" is defined at subsection (5). The Government has agreed with large residential property developers that they will remediate buildings that they had a role in refurbishing or developing in the past 30 years. It is therefore unlikely that remediation contribution orders would need to be made against this group of developers. However, developers who have not made an agreement with the Government will be in scope of remediation contribution orders.
	Remediation contribution orders made against developers complement other legal remedies expanded and created by this Act, which allow those responsible for building safety defects to be held to account. These other remedies include the extension of the limitation period under section 1 of the Defective Premises Act (section 135), building liability orders (sections 130 to 132), and the new cause of action against the manufacturers of defective construction products (sections 147 to 151).
	The second way in which remediation contribution orders are intended to contribute to timely remediation is by ensuring landlords meet their obligations under the leaseholder protections provisions. Schedule 8 makes provision for liability in connection with the remediation of historical building safety defects to sit with freeholders and landlords. This liability applies irrespective of whether costs can be recovered from a third party such as a developer. Where the developer does not step forward or cannot be identified, and external sources of funding cannot be found, this means that building owners and landlords will need to meet the costs of remediation from their own resources. Even where legal claims are possible, the Government has been clear that seeking to recover costs from third parties cannot delay remediation taking place, and that building owners and landlords must not wait until the outcome of legal claims before commencing building work, meaning that in some circumstances, freeholders will need to forward-fund remediation to ensure that work can take place.
	It is expected that landlords will comply with their new obligations to forward-fund, or fund in full from their own resources, the remediation of their own buildings. Should a party with a liability in relation to building safety remediation be failing to meet its obligations, remediation contribution orders will allow the Tribunal to require payments to be made. In particular, remediation contribution orders will allow companies associated with relevant landlords to be required to make payments in connection with remediation; this will allow, for example, well-capitalised wider group structures of thinly capitalised special purpose vehicles to be ordered to contribute to remediation costs.
	A wide range of parties are able to apply for remediation contribution orders. This includes the Government and regulatory bodies with a role in monitoring, regulating, and enforcing building safety – the Secretary of State, the Building Safety Regulator, the relevant fire and rescue authority and the relevant local authority. In addition, those with a legal or equitable interest in the building can apply for an order. This includes leaseholders as well as freeholders and landlords for the building. Remediation contribution orders will ensure that all relevant landlords with a liability to pay for remediation under the Schedule meet their obligations.
	Subsection (1) provides that the Tribunal can only make a remediation contribution order if it considers it just and equitable to do so. This is intended to ensure fairness in proceedings while giving the Tribunal a wide decision-making remit which it is expected will allow it to take all appropriate factors into account when determining whether an order should be made, including the wider public interest in securing the safety of buildings, as well as the rights and interests of the individual against whom an order might be made.