Lawbite: Who is the “Accountable Person” where obligations have been transferred to a RTM Company?

The First-tier Tribunal (“FTT”) recently determined that a leaseholder of 27 flats within a higher-risk building under a single headlease was not an “accountable person” (AP) under section 72(1) of the Building Safety Act 2022 (“BSA”) as all of the management and repairing obligations concerning the building’s common parts had been transferred to a Right to Manage (“RTM”) RTM Company.

The decision offers important guidance for landlords and tenants of higher-risk buildings where there is a RTM Company in place as to who qualifies as an “accountable person” (“AP”) for the purposes of the BSA. It is also interesting because it highlights a procedural point as to who can make such determination applications.

The decision will be of particular interest to landlords and tenants of Higher-Risk Buildings in England.

The Building

The case concerned Globe View House, a mixed-use higher-risk building in London (“the Building”). The Building included 86 residential units, with Clarion Housing Group (“Clarion”) being the leaseholder of 27 flats under a single headlease.

Clarion had been registered as an AP for the Building for the purposes of section 72(1) of the BSA but didn’t believe that it met the AP criteria as it had no repairing obligations in relation to the common parts of the Building, following the transfer of all management and repairing obligations concerning the Building’s common parts to a RTM Company in March 2021. It applied to the FTT for a determination that it was not an AP under s75 BSA.

Accountable Person

To satisfy the AP criteria set out in s72(1) of the BSA, the person must “hold a legal estate in possession in any part of the common parts of a higher-risk building or be under a relevant repairing obligation in relation to any part of the common parts” of such building.  S72(2) specifies that a person is not an AP if the lease provides that the relevant repairing obligation in relation to all of the relevant common parts is held by another or are functions of a RTM company.

The application

The following issues were addressed by the FTT:

1. Is Clarion an accountable person?

No, the Tribunal found that Clarion is not an AP under s72(1)(a) BSA because under the terms of its headlease, it only holds a legal estate in possession of the flats, and not of any of the common parts of Globe View House.

2. Is there a relevant repairing obligation?

Clarion was not under an obligation to repair the common parts under the headlease. Its leases contained a right to carry out repairs to the common parts, but no obligation to carry them out. This meant that Clarion was not under a “relevant repairing obligation” for the purposes of s72(1)(b) BSA. It was irrelevant that the headlease provided that those obligations would revert to it if the RTM became insolvent.  The FTT confirmed that for the purposes of s72 BSA, what was relevant was whether an obligation was present and extant now and a future potential relevant repairing obligation was not relevant.

Further, the FTT stated that obligations on the part of Clarion as landlord under s11 Landlord and Tenant Act 1985 for the structure and exterior, installations for the supply of water, gas, electricity, sanitation, space heating and water heating, which form part of a part of the building does not automatically make a landlord accountable for building safety.

3. Did the existence of right to manage impact on whether Clarion is an AP?

Yes, the FTT confirmed that management functions, including repairing obligations, had transferred to the RTM Company under ss 96 and 97 of the Commonhold and Leasehold Reform Act 2002. As a result, even if Clarion had any repairing obligations under its leases, they would not apply following RTM acquisition.

Note on who can make these applications

Only an “interested person” can apply to the FTT for a determination as to who is an AP, principal accountable person or the part of the building for which any AP is responsible.

An ”interested person” is defined at s75(3) as being the regulator, a person who holds a legal estate in any part of the common parts (or who claims to hold such an estate), or, a person who is under a relevant repairing obligation in relation to any part of the common parts (or who claims to be under such an obligation).

As Clarion contended that it did not hold a legal estate in possession of any of the common parts and that it was also not under any relevant repairing obligation in relation to any part of the common parts arguably it was not an “interested person”.

The procedural issue was “sidestepped” in this case because the RTM Company had also sought a determination and it was clearly an “interested person” and so could, in essence, be treated as the applicant for the purposes of rule 10 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013.

• The case confirms that only present and extant repairing obligations for higher-risk building common parts are relevant when determining who is an “accountable person” under BSA
• once a RTM Company acquires the right to manage, repairing and maintenance obligations transfer from the landlord to the RTM Company, including obligations under leases, unless they relate exclusively to non-qualifying tenants
• The FTT will strictly construe the test as to who is an “accountable person” for the purposes of s72(1) BSA
• the FTT rejected the RTM Company’s submission that it and Clarion should have dual repairing accountability, reinforcing that statutory definitions and lease structures (and not practical concerns) determine who is responsible for building safety compliance under BSA