Insolvent Companies and the Building Safety Act 2022
The purpose of the Building Safety Act 2022 (“BSA”) is to give protection to leaseholders and to hold those considered directly responsible for creating building safety defects to be held accountable; the BSA deems those responsible to be freeholders, landlords, developers and their associates. It also allows relevant parties with the ability to apply for orders to require those to remedy defects and contribute to the costs; including in respect of meeting remediation costs of insolvent landlords.
- Section 125 BSA
Section 125 of the BSA applies if, in the course of the winding up of a company which is a landlord under a lease of a relevant building or any part of it, it appears, (a) that there are relevant defects relating to the building, and (b) that the company is under an obligation (howsoever imposed) to remedy any of the relevant defects or is liable to make a payment relating to any costs incurred or to be incurred in remedying any of the relevant defects, then the Court may, on the application of the insolvency practitioner, require a company or partnership associated with that landlord to make such contributions to the company's or to make such payments to a specified person, in each case as the court considers to be just and equitable, for the purpose of meeting costs incurred or to be incurred in remedying relevant defects.
- Who & where to make the application
In terms of the person with requisite standing to make the application, as an application can be made by a person “acting as an insolvency practitioner in relation to the company, given the wording of the Insolvency act 1986, this appear to include, as well as liquidators, also provisional liquidators, administrators, administrator receivers, monitors, and nominees or supervisors under a CVA.
It appears that s.125 BSA goes beyond the scope of that which originally appears to be covered on the face of it.
With regards where to make the application, it appears that the Court with jurisdiction to wind up the Company is the relevant court for the purposes of s.125 BSA 2022.
- Just and equitable
It is unclear how Court’s will interpret the “just and equitable” requirement; this appears to relate to both the question as to whether the order ought to be made and, if so, the amount of the Order.
- Other considerations
The other point for landlord’s to consider is whether, in light of s.125 BSA, that steps ought to be taken to resurrection dissolved companies, where there are connected parties against whom they can seek contributions to costs, in order to meet any obligations to leaseholders, funders, insurers and warranty providers in order to mitigate their costs.
In conclusion, the question as to what ought to be done in circumstances where a party is insolvent is unclear but is likely to be the subject of considerable discussion and consideration over the coming periods. If you require any assistance with understanding or progressing the certification process, please contact us: BuildingSafety@jbleitch.co.uk