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Building Safety Act - the Lifting of the Corporate Veil

The building safety act 2022 ("BSA, the Act") was conceived and enforced following the Grenfell tower tragedy. Grenfell brought to light the lack of accountability in the current system. BSA has been introduced in order to secure the safety of residents, and to improve building standards.

Liability under the BSA is complicated this is due to their being various parties involved in the creation and maintenance of a building, from architects and developers to landlords and contractors. It is imperative to establish who is at fault for unsafe buildings.

The BSA allows for the lifting of the corporate veil, directors of a company will no longer be protected from liability by the entity they have created. The corporate veil means typically, it has been very difficult to hold directors and shareholders liable for the actions of their company unless there has been some form of misconduct; in the construction industry it has been commonplace for developers to create companies known as Special Purpose Vehicles or SVPs in order to mitigate risk and avoid liability. The BSA will combat this, as directors and associated companies will potentially be liable.

Building Liability Orders - Section 130

Section 130 of the BSA allows for the parent company of an SVP to be accountable for any liabilities of their SVP. This can be done via an application made to the high court under the Defective Premises Act; Section 38 of the Building Act 1984; or as a result of a 'building safety risk' which is defined in Section 62 of BSA.

A building safety risk is 'a risk to the safety of people in or about a building arising from 1) the spread of fire, 2) structural failure, 3) any other prescribed matter'. The Act's definition of a building safety risk is creating a broad scope for the passing on of liability which has the potential to be far reaching.

Relevant defects - Section 120

The definition of a 'relevant defect' as per section 120 of the BSA is very broad 'anything done (or not done) or anything used (or not used) in connection with relevant works.' Or anything that 'causes a building safety risk'

A landlord may be tasked with remediation work for 'relevant defects', but liability can be extended to those partnerships 'associated' with a landlord if they are responsible for the works which lead to the defects.

Associated person - Section 121

Section 121 of the BSA outlines the definition of an 'associated person', it states a partnership or body corporate (a company) is associated with another person where:

A person's interest in a relevant building was held on trust at the 'qualifying time', any partnership or body corporate which was a beneficiary of the trust at that time is to be regarded.

A partnership is associated with any person who was a partner in the partnership, other than a limited partner, at any time in the period of 5 years prior ending at the 22 February 202

A body corporate is associated with any person who was a director of the body corporate at any time in the 'relevant period'.

A body corporate is associated with another body corporate, if at any time in the relevant period a person was director, or at the qualifying time one of them controlled the other or a third body corporate controlled both of them.

The 'qualifying time' is defined at 'at the beginning of 14 February 2022' The relevant period is 'the period of 30 years ending on 28 June 2022' which is 28 June 1992 - 28 June 2022.

Section 121 has a broad reach in both time and description of an 'associated person' to ensure the corporate veil will not offer protection by allowing the avoidance of liability presently or retrospectively. Liability will be established under the BSA where it is owed.

Liability of Officers - Section 161

Section 161 outlines when 'a director, manager, secretary or other similar officer of the company, or anyone purporting to act in any such capacity, or anyone attributable to any neglect on the part of any such person', will be liable for an offence and may be punished accordingly.

The BSA uses the language 'other similar officer' which is allowing for a wide scope and a catch-all definition. As we see claims and trials surrounding the BSA it is likely the definition of other similar officer will be established, but as it stands it is difficult to establish exactly who which officers of a company may held liable.

Conclusion

The definitions within the BSA of who will be liable are broad and far reaching, in order to implement a more stringent regulatory regime for buildings particularly high-rise buildings in England. The broadness of the BSA has allowed the corporate veil to be lifted, therefore associated companies, directors, and officers of the company are at risk of liability if they do not abide by the new regulations. The BSA will inevitably leave more companies and people open to disputes and litigation.

At Forbes Solicitors we are experts in construction and commercial litigation, we are able to offer advice to all who fall under the enforcement of the BSA. Please contact our commercial litigation team if you require advice.

For more information contact Sheroze Nadeem in our Construction & Infrastructure department via email or phone on 01772 220163. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Construction & Infrastructure department here

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