The First-tier Tribunal (“FTT”)’s recent decision in Secretary of State v Urban Splash Ltd and others is one of the most substantial determinations yet under the Remediation Contribution Order (“RCO”) regime, which is set out in section 124 of the Building Safety Act 2022 (“BSA”). It provides significant guidance on the recovery of public expenditure for the remediation of unsafe buildings, the exposure of corporate groups and associated entities, and the evidence required to challenge the scope and cost of fire safety related remedial works.
In this judgment, the FTT awarded an RCO against Urban Splash and several related companies – requiring them to pay £46.5 million towards the cost of fire safety remedial works for buildings constructed in the 2000s. While the buildings have already been remediated using funds provided by the Government’s Building Safety Fund (“BSF”), the FTT underscored the intention of the BSA, which is to hold relevant parties responsible for defective works.
Background to the claim
The proceedings concerned seven high-rise residential buildings in Manchester, all developed by Urban Splash between approximately 2000 and 2008. Following the Grenfell Tower fire, investigations into the properties identified fire-safety defects, including combustible façade materials and insulation, ineffective cavity barriers and fire-stopping, and compartmentation failures that created routes for fire spread.
The necessary remedial works had already been undertaken, largely with support from the BSF. Total remediation expenditure exceeded £60.6 million, of which approximately £51.5 million was funded by the BSF.
In a significant exercise of the powers conferred to it by section 124 of the BSA, the Secretary of State sought RCOs to transfer the cost of remedial works away from the public purse and onto Urban Splash and a range of entities alleged to be associated with it.
The FTT ultimately made orders against Urban Splash Ltd and several associated companies, requiring them to pay £46.5 million jointly and severally. Claims against family investment companies and entities within the residential fund were dismissed.
Key implications of the judgment
1. Developers sit at the head of the hierarchy
The BSA places primary responsibility for remediation costs on the developer, and this judgment gives full effect to that policy. Limited recourse against the original supply chain and consideration of the relevant companies’ financial positions were relevant factors but ultimately insufficient to persuade the FTT that an RCO should not be made. An RCO allocates responsibility – it is not constrained by a relevant party’s current affordability.
2. Corporate restructuring will not insulate the continuing enterprise
The FTT considered a restructure of Urban Splash which took place in 2013, and considered that although the restructure was commercially genuine and not designed to avoid building-safety liabilities, it did not sever the connection between the original developer and the wider group. Substantial continuity of ownership, management, personnel, purpose, and business identity meant that the successor development vehicle, holding company, and commercial-property subsidiary were all proper subjects of RCOs.
3. Association requires control, not merely influence
The FTT confirmed that ‘control’ under section 121 of the BSA can operate through common individuals rather than formal ownership chains. The controller of the associated companies must have the practical ability to ensure that the other entity’s affairs are conducted in accordance with its wishes. That distinction was decisive in protecting the residential investment fund, whose independent governance structure and regulated authorised investment fund manager meant that Urban Splash’s founders had influence but not control.
4. Cost challenges require a viable alternative
Allegations that remediation was unnecessarily extensive were rejected. The FTT held that the relevant question is whether the adopted scheme fell within the range of reasonable professional responses – not whether it was the cheapest conceivable option. Competitive procurement, professional oversight, and BSF scrutiny provided persuasive evidence of the reasonableness of the works already completed. Respondents challenging costs must identify a coherent, technically viable, and materially cheaper alternative scheme in order to persuade the FTT on the issue of reasonableness.
5. Government responsibility reduces but does not displace developer liability
The FTT accepted that regulatory failures identified by the Hackitt Review and Grenfell Tower Inquiry were relevant to the just and equitable assessment. It acknowledged these shortcomings (which ultimately flowed from the government) and applied a 10% reduction to BSF-funded expenditure, which Urban Splash and its associated companies would have otherwise been required to pay. That being said, the FTT recognised that Parliament enacted the BSA against the background of the known shortcomings and placed developers at the head of the cost hierarchy. The reduction made by the FTT is a discretionary adjustment, not an apportionment of causal blame.
6. The meaning of “defect”
One of the more significant legal findings in the judgment concerns the proper interpretation of what constitutes a “defect” for the purpose of section 120 of the BSA. The FTT held that “defect” is a broad concept, which can include any deficiency in a building assessed by reference to current building standards. Critically, a feature that does not comply with the current Building Regulations or Approved Document B may be described as defective even if it fully complied with the standards in force at the time of the building’s original construction or conversion.
The Tribunal also held that whether a risk is tolerable or intolerable, material or trivial, is not part of the requirement for determining the presence of a defect. Those considerations may be relevant at a later stage, for example, when assessing what remediation is actually required – but they do not inform whether a defect exists in the first place.
The practical implication is significant. This effectively means that buildings developed in the late 1990s and 2000s face a substantially heightened risk of being found to contain relevant defects when measured against modern standards.
Conclusion
The Urban Splash decision is a landmark in the development of RCOs and the BSA. It confirms that developers sit at the head of the liability hierarchy, and the wider enterprise (not just the original development vehicle) may face exposure where there is sufficient continuity of ownership, control, and commercial purpose. The judgment provides clear guidance on how challenges to remedial schemes need to be presented and how defects should be defined.
With the BSF having funded billions of pounds of remediation nationally, further proceedings against other developers and their associated entities are likely to follow. The Urban Splash judgment will be the essential reference point for all of them.