Building Liability Orders (BLOs) were introduced under Section 130 of the Building Safety Act 2022, in response to the Grenfell Tower tragedy and look to provide tenants and owners with more rights and powers to make homes safer, including certain protections from the costs associated with remediating historical defects.
Designed to address issues of accountability and liability in the context of building safety BLOs can “pierce the corporate veil,” meaning they can hold parent companies or associated entities liable for the obligations of their subsidiaries or special purpose vehicles.
The court applies a “just and equitable” test to determine whether it is appropriate to pierce the corporate veil. This examines the relationship between the entities, the conduct of the parent, and whether the parent has benefited from the subsidiary’s activities.
The Act introduces a range of measures to enhance the safety and regulation of buildings. Building Liability Orders (BLOs) interact with the Building Safety Act 2022 in the following areas:
- Clarification of Responsibilities.
- Enforcement of Safety Standards
- Remediation of Unsafe Buildings
BLOs are designed to ensure contractors who have contributed to defects or safety issues are held accountable, some of the impacts and liabilities of this:
- Financial – determine responsibility for costs of repairing or remediating defects in buildings previously worked on
- Non-Compliance – where building regulations have not been met apportion responsibility for the resulting issues and relevant costs
- Remediation Costs – in cases of multiple parties BLO’s will determine the portion of remediation costs each party must bear
- Penalties – legal and regulatory penalties can be enforced via the BLO
- Remediation Orders – requirements to undertake specific works; both immediate and long term maintenance.
- Compensation – the affected parties costs and damages resulting from the work including loss of property value and temporary accommodation.
The limitation periods under the Building Safety Act have been extended to provide greater protection for building owners and residents, allowing more time to identify and address safety defects and hold responsible parties accountable. The retrospective extension aims to address historical issues and ensure that where defects are identified remedies are available. Crucially BLOs can be used to bring actions against companies with regard to buildings that they believe they are no longer responsible.
Following Grenfell many Professional Indemnity policies were renewed with exclusions or restricted cover relating to fire safety matters and if an issue related to fire safety arose from a historic project then cover under the Professional Indemnity policy could now be subject to an exclusion for all or part of the issues raised.
The intention of BLOs is to do the right thing in dealing with the issues of the past and remedy defects in buildings however the implications for contractors need to be carefully considered as they import the liabilities of the past into today without the insurance cover being in place to provide the comfort the business needs to ensure balance sheet protection.
To learn more about Gallagher Specialty and how they can help your business, contact their construction team:
Clara Hudson, clara_hudson@ajg.com (Construction)
