What is a Building Liability Order and who can be accountable?

Building Liability Orders ("BLOs") are a powerful remedy introduced by the Building Safety Act 2022 ("BSA"). They enable the High Court to pierce the corporate veil and extend liability for building safety defects from one corporate entity to another associate company within the same corporate group.

BLOs were introduced to address historic challenges faced by leaseholders and building owners in recovering compensation for defects, particularly where the original developer or contractor operated through subsidiaries or a special purpose vehicle (SPV) with limited assets.

What is a Building Liability Order?

A BLO is a Court order that:

• Extends a relevant liability from one corporate body to another associated corporate body;

• Makes the associated entity jointly and severally liable for that liability; and

• Applies retrospectively to liabilities arising before the BSA came into force.  

What is a 'relevant liability'?

A BLO can only be made where there is a 'relevant liability', which includes liability:

• Under the Defective Premises Act 1972 – including breach of statutory duty to do works relating to dwellings in a workman like manner, and to use adequate materials, such that on completion of the work the dwelling is unfit for habitation.

• Under Section 28 of the Building Act 1984 – breach of duty imposed by Building Regulations.

• For a building safety risk – this means a risk to the safety of people in the building arising from the spread of fire or structural failure.

The Court must be satisfied that an underlying liability exists before granting a BLO.

Who can be made liable?

A BLO allows liability to be extended to an associated company.

Two companies are considered associated if, at any time during the relevant period:

• One controlled the other (for example a parent company); or

• A third corporate body control them both (for example a sister company).

'Relevant period' is defined by section 120(6) of the BSA refers to any time from the commencement of the building works up to the date on which the building liability order is issued.

Control is generally defined by reference to shareholding, voting rights or the ability to appoint directors.

When will a Court grant a BLO?

A Court must be satisfied that:

• A relevant liability exists;

• The target company was associated with the original liable entity during the relevant period; and

• It is 'just and equitable' to make the order.

The 'just and equitable' test

There is no definition of 'just and equitable' within the BSA. As such, the Court has discretion when applying the 'just and equitable' test but factors that will be considered may include:

• Whether the original entity has any assets.
• The relationship between the applicant and original entity.
• The extent of common control.
• The extent and severity of defects.
• The availability of alternative remedies.

Why are BLOs significant?

BLOs reduce the risk that a successful claim cannot be enforced because the original development company has no assets or has been dissolved. Where the criteria are met, the Court can extend liability to an associated company within the same corporate group and make it jointly and severally liable.

For example, this allows Claimants to pursue recovery from solvent group entities rather than being limited to an SPV.

For corporate groups, BLOs increase potential exposure for historic developments.

BLOs strengthen the enforceability of building safety claims and widen the pool of defendants who bear responsibility.

Need advice?

Our specialist construction disputes and dispute avoidance team can assist with all aspects of Building Safety Claims. For more information, please contact Dickon Court, Lee Ward, or Chloe Wood.