The BSA has Retrospective Effect

Service charge costs incurred before Building Safety Act enacted are not recoverable

Summary

In Adriatic Land 5 Limited v Long Leaseholders of Hippersley Point [2025] the Court of Appeal has ruled that restrictions on service charge costs recovery in the Building Safety Act 2022 (“BSA”) have retrospective effect. The provisions under Schedule 8 of the BSA protect leaseholders from liability to pay for cladding removal, building safety remediation measures and associated legal costs whenever the costs were incurred. The decision denies leaseholders who have paid service charge relating to building safety remediation costs prior to 28 June 2022 the ability to seek a refund, but following the Triathlon judgment handed down the same day, they can still seek a Remediation Contribution Order to cover those costs.

The Case

The Court of Appeal in Adriatic Land 5 Limited v Long Leaseholders of Hippersley Point [2025] EWCA Civ 856 (“Hippersley Point”) considered whether the leaseholder protection provisions in Schedule 8 of the Building Safety Act 2022 (“BSA”) operate retrospectively. Specifically, the court considered whether Schedule 8 would prevent the recovery of costs of remedying historical building safety defects from qualifying leaseholders even where the costs were incurred, or even demanded and payable, prior to the BSA coming into force on 28 June 2022.

The Court of Appeal held (by a majority of 2:1, Newey LJ dissenting) that the provisions under Schedule 8 of the BSA protected leaseholders from liability to pay for cladding removal, building safety remediation measures and associated legal costs whenever the costs were incurred. However, the Court did not go as far as allowing leaseholders to recover service charge costs that have already been paid for by 28 June 2022.

Background

The property in issue is Hippersley Point in Abbey Wood, London. Hippersley Point was constructed in or about 2015 and it has 10 storeys, is more than 18 metres in height, and contains both a commercial unit on the ground floor and 32 residential flats which are subject to long leases. The Appellant, Adriatic Land 5 Limited (“Adriatic”), is the registered freeholder of Hippersley Point.

In the latter part of 2020, it emerged that substantial remedial works were required to remedy defects in the external construction of Hippersley Point which gave rise to fire risk. To avoid delays in executing the works, Adriatic applied to the First-Tier Property Tribunal (“FTT”) for the consultation requirement under the Landlord and Tenant Act 1985 (“L&T 1985”) to be dispensed with (“Dispensation Application”).

The FTT granted Adriatic’s Dispensation Application on the condition that Adriatic be prevented from recovering the costs of the application from the leaseholders. Adriatic appealed and the Upper Tribunal did not uphold the FTT’s imposition of the costs condition, but the Upper Tribunal also noted that paragraph 9 of schedule 8 of the BSA applied, with the result that Adriatic could not recover any costs of its dispensation application from tenants with “qualifying leases” within the meaning of section 119 of the BSA.

The Appeal Decision

There were three main issues that the Court of Appeal had to decide:

1. Are costs of the Dispensation Application within the scope of paragraph 9 of the BSA? (“Scope Issue”)
2. To what extent, if any, does paragraph 9, correctly construed, apply in relation to costs which were incurred before the BSA came into force on 28 June 2022? (“Retrospective Construction Issue”)
3. If paragraph 9 would have retrospective effect, should words be “read into” it in order to render it compatible with Article 1 of Protocol 1 to the European Convention of Human Rights (“A1P1 Issue”)

In summary, all three judges dismissed the appeal on the Scope Issue and the A1P1 Issue but were divided in respect of the Retrospective Construction Issue.

Retrospectivity of Schedule 8 of the BSA

Generally, there is a legal presumption in common law that statute does not have retrospective effect. Accordingly, Adriatic argued that this presumption should be applied and upheld so that paragraph 9 of schedule 8 of the BSA did not have retrospective effect and therefore, did not cover any costs incurred pre-BSA.

Newey LJ, after weighing up the rival constructions of the provision in question, found in favour of Adriatic and found that the presumption against retrospectivity should apply in the circumstances given the relative unfairness that would result from accepting the leaseholder’s or government’s interpretation (i.e. landlords being deprived of accrued contractual rights without compensation). In contrast, Nugee LJ (with whom Holgate LJ agreed) considered that the presumption against retrospectivity should be displaced by a reference to various factors but for the most part on the basis of the underlying statutory purpose behind the Schedule 8 of the BSA and the BSA in general. The majority ruling therefore was that the appeal was dismissed leaving Adriatic unable to recover these costs from qualifying leaseholders.

This decision is important as it:

1. Confirms that Schedule 8 of the BSA prohibits payment by qualifying leaseholders of any service charge caught by paragraph 9 after 28 June 2022 regardless of when the costs were incurred or when service became payable..
2. Leaseholders who diligently paid service charge for building safety remediation costs prior to 28 June 2022 cannot seek a refund of those costs, in contrast to tardy payors who now benefit from the ruling. However, the separate but linked Court of Appeal decision in Triathlon Homes means that leaseholders may still seek repayment of overpaid service charges by making an application for a Remediation Contribution Order under s.124 of the BSA.