In this edition of Building Safety Act 2022 (BSA) briefings we consider the Upper Tribunal decision in Unsdorfer v Octagon[JC1] .
Whilst the decision dates back to 2024 it is useful in providing some clarity on the roles and responsibilities of “managers”, “special measures managers” and “accountable persons” appointed in relation to higher-risk buildings (HRBs).
The question considered by the Upper Tribunal was whether a manager appointed under s.24 of the Landlord and Tenant Act 1987 (LTA 1987) could be an “accountable person” within the meaning of s72 of the BSA.
In summary, even where day-to-day control of an HRB has been handed to a manager, the BSA’s obligations of the accountable person can remain with the freeholder.
For anyone involved in the owning, letting or management of HRBs (i.e. buildings at least 18 metres high or with 7 or more storeys and at least 2 residential dwellings), understanding where that responsibility sits is not an optional consideration.
Why this case matters
The BSA places significant duties on what it calls the “accountable person” for HRBs. The accountable person is responsible for building safety risks when an HRB is occupied. They must register the building with the Building Safety Regulator, maintain a safety case report showing how building risks are being managed, keep detailed records and engage with residents on building safety matters.
In most HRBs, the accountable person is the person who owns, or has “relevant repairing obligations” in relation to any of the common parts, i.e. the structure and exterior of the building.
There can be more than one accountable person, in which case there will be a “principal accountable person”.
In many cases, the accountable person will be the freeholder. But what happens when the freeholder has failed so badly in its management obligations that a tribunal has stepped in and appointed someone else to run the building? Does the appointed manager assume the role of accountable person too? Or do those duties remain with the freeholder who has been, in effect, displaced? Get it wrong and the regulatory consequences are serious.
The answer the Upper Tribunal gave has practical implications for freeholders, managers and anyone advising on BSA compliance in buildings with complex or contested management arrangements.
Appointment of a Manager under the LTA 1987
Under s.24 of the LTA 1987, the FTT can appoint a manager to take over the management of a residential building where a landlord has failed to meet its obligations. The manager is appointed by order and given specified management functions. These functions can include repair, maintenance, and insurance obligations. Critically, the manager does not acquire any legal interest in the building.
This was the case at the Canary Riverside Estate in east London, a development comprising five HRBs that has been the subject of several BSA decisions concerning fire safety defects. A manager had been appointed following failures by the landlord.
The question before the Upper Tribunal was whether the appointed manager was the accountable person under the BSA, or whether that role remained with the freeholder.
Why the manager is not the accountable person
As the manager did not hold a legal estate in the common parts, the Upper Tribunal had to consider whether the manager could be an accountable person by virtue of having “relevant repairing obligations” under s.72(6) of the BSA i.e. where such obligations arose under a lease or “by virtue of an enactment” (s.71(1)(b) of the BSA).
It was suggested that parliament could not have intended for managers to be precluded from being an accountable person, as this could result in building safety risk reverting to a landlord whose previous failings had resulted in the manager being appointed in the first place. That, in turn, could require the leaseholders to seek the appointment of a “special measures manager” to undertake certain responsibilities of the accountable person, despite a manager already being in place.
The Upper Tribunal held that the accountable person remained the freeholder.
The manager, despite running the building on a day-to-day basis, did not have a “relevant repairing obligation” as its obligations arose by virtue of the FTT’s order and not under any enactment (i.e. legislation). This point was contrasted with the example of a landlord’s repairing obligations implied into a residential lease under the Landlord and Tenant Act 1985.
Whilst the detailed and comprehensive reasonings of the Upper Tribunal is beyond the scope of this note, the practical result is that an FTT appointed manager is not an accountable person. However, the manger remains obliged to perform the functions required of it by the management order, which may include some of the building safety responsibilities of an accountable person. To the extent that there may be an overlap of functions, the manager can make an application to the FTT for a modification of the management order to remove any duplication.
What this means in practice
In short: a defaulting landlord is not excused from its accountable person obligations just because a manager with repairing obligations has been appointed.
For the s.24 manager, the position is more nuanced. The manager is not the accountable person and does not carry the full weight of the Act’s statutory duties. But the manager is running a building subject to the higher-risk regime and will inevitably be involved in aspects of management that touch on building safety. In practice, there needs to be a clear and workable arrangement between the freeholder and the manager that allows the freeholder to fulfil its accountable person obligations despite not being in operational control of the building.
Further, if the manager is not the accountable person, then it is unable to apply to the Building Safety Fund for the funding of building safety remediation works.
The decision does not resolve every practical difficulty that can arise where a freeholder remains legally responsible but may not exercise day-to-day control. However, the decision provides a detailed analysis of who (and who is not) the accountable person and how that role interacts with a s.24 manager and/or a special measures manager in the context of the accountable person’s statutory obligations.
For those owning, acquiring or lending against HRBs, the decision is a reminder to carefully check where BSA compliance responsibilities actually sit. The presence of a manager does not mean the building’s accountable person obligations are being divested by the freeholders..
Equally, the appointment of a manager may mean that the accountable persons for the purposes of the BSA are not fully complying with their obligations. Due diligence on accountable person status and the adequacy of current compliance arrangements is therefore a necessary part of assessing an HRB’s regulatory position.
It should be noted that to ensure the clear allocation of responsibilities, the BSA provides that certain persons may apply to the First-Tier Tribunal (FTT) for a determination of who are “accountable persons” and who is the “principle accountable person”.
The broader picture
Unsdorfer v Octagon Overseas is part of a growing body of decisions which considers what the BSA’s accountable person regime means for buildings that do not fit the single-freeholder model. In this case, the respondents included the freeholder of the estate, the reversionary leaseholder of 4 of the buildings, the reversionary leaseholder of the 5th building, the long leaseholder of the 5th building and also the Residents Association.
Buildings with head leases and underleases, buildings owned through special purpose vehicles, buildings with resident management companies and buildings in insolvency situations all present their own versions of the same fundamental question: who actually holds the accountable person obligations, and are they meeting them?
As the Building Safety Regulator‘s enforcement activity develops and the consequences of non-compliance become clearer, getting that analysis right is increasingly important. Getting it wrong exposes the possibility of enforcement action and, ultimately, criminal prosecution. In buildings with complex or contested management and ownership arrangements, assuming that someone else is dealing with “building safety risks” is not a position that is likely to withstand scrutiny.
