Building Safety – Legal Risk, Regulatory Change and Strategic Opportunity

This article explores five key areas shaping the legal response to building safety: transactions, due diligence, regulation, historic cladding claims, and emerging litigation which we expand on further in our building safety series.

Building safety now sits at the heart of construction contracts and parties need to pay close attention to the obligations placed on them under the BSA. This in turn has led to a significant focus in construction contracts on compliance with building safety obligations including on the following key areas:

• Dutyholders: For all buildings under construction or refurbishment, the BSA introduces new dutyholders roles of principal designer and principal contractor to manage and co-ordinate safety and compliance with building regulations throughout design and construction. Notwithstanding their namesakes under the Construction (Design and Management) Regulations 2015, these are specific BSA dutyholders, and clients should take time to ensure their competence and record their proper appointment in construction contracts.
• Contractual protections: Higher risk buildings will be subject to enhanced planning gateway processes administered by the Building Safety Regulator (“BSR”), providing three compliance gateways before certain phases of work can commence or the building can be occupied. Parties will need to carefully consider who takes the risk of insufficient submissions to the BSR and delays caused in the design and/or construction of buildings due to compliance with the BSR gateway processes. This is likely to be a key area of risk for parties and could significantly delay projects.
• Building safety information and the golden thread: The BSA has placed a renewed focus on information to be provided to the contractor at the outset and the information available following completion of works. For higher risk buildings, certain digital information about a building, known as the golden thread, is required to be maintained and it is essential that all professionals and contractors involved in a project proactively and regularly contribute to the collation of this information throughout the course of the works to ensure that there are no gaps on completion.

Building safety should be considered on any transaction involving built assets, whether the transaction involves purchasing, selling, funding or corporate restructuring, given the wide reach of the BSA. Lenders are scrutinising building safety risks, especially in higher-risk residential buildings, when making investment decisions and valuers may downgrade assets lacking clear compliance documentation, affecting loan-to-value ratios and deal viability. Traditional due diligence is therefore unlikely to be sufficient with a more forensic approach to building safety required to address issues such as:

• Class of asset: what is the asset class of building and how does it fall within the BSA regime. For instance, mixed use developments or mixed asset portfolios could fall within the higher risk building category and be subject to enhanced building safety obligations and liabilities.
• Fire safety documentation and compliance: checks should be made to determine if the buildings have all necessary fire safety documentation and/or any building work has been undertaken in compliance with the BSA. If higher risk buildings do not have the golden thread of information this will have to be reconstituted which could be a lengthy and expensive process.
• Risk allocation for historic defects: The BSA extends historic liabilities for building safety related defects and buyers increasingly seek indemnities or price adjustments to reflect potential remediation costs.

The BSA introduces a new regulatory regime with sharper enforcement powers and broader duties which require interpretation and application to specific asset classes:

• Higher risk buildings: The BSA and The Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2023 provide details on which buildings are ‘higher-risk’. The Government has also published guidance for determining whether a building is considered a higher risk building, which depends on use and height. There are different provisions depending on whether a building is in construction phase or in occupation. It is essential to understand whether a building falls within the higher-risk category as it places additional obligations on building owners and occupiers.
• Accountable Person and Responsible Person: The BSA and The Regulatory Reform (Fire Safety) Order 2005 place different responsibilities on designated persons in relation to building and fire safety. Understanding how these regimes apply is essential for any building owner, occupier or those responsible for repair/maintenance.
• Leaseholder protections: The BSA limits the recovery of remediation costs through service charges, especially for buildings over 11 metres. Developers and landlords must absorb certain costs, and recovery is tightly regulated so it is important that parties are aware of the application of such leaseholder protections.

The BSA opens the door to historic claims, some reaching back 30 years. Developers and contractors may face claims for buildings completed decades ago, especially where cladding systems are implicated. The new rights include:

• Extended limitation periods: Claims under the Defective Premises Act 1972 can now be brought up to 30 years after completion. This applies to both new builds and refurbishments.
• Section 38 of the Building Act 1984: Previously dormant, this section allows claims for breach of building regulations, creating a new statutory cause of action for affected parties.
• Remediation orders and contribution orders: Leaseholders and regulators can compel developers or associated entities (which could include group company or parent companies) to carry out works or contribute to costs even if the original developer is dissolved or insolvent.

Building safety is now a fertile ground for litigation with a raft of new or enhanced rights introduced by the BSA. Claims may arise from:

• Defective design or construction: Claims against architects, engineers, and contractors for failing to meet safety standards—especially where the golden thread is missing or flawed.
• Leaseholder enforcement: Leaseholders can initiate claims under the BSA’s new mechanisms, including remediation orders and tribunal proceedings.
• Professional negligence: Solicitors, surveyors, and managing agents may face claims for failing to advise on building safety risks or failing to act on known defects.

Building safety is no longer just a technical issue, it is a legal, financial, and reputational risk. It is essential for all parties involved in the construction sector or who have built assets within an investment or funding portfolio to:

• Proactively assess exposure across portfolios;
• Structure deals and contracts to reflect new liabilities;
• Navigate regulatory complexity with clarity; and
• Defend or pursue claims strategically.

At RWK Goodman we advise on building safety throughout the project lifecycle to help clients successfully navigate this complex regulatory landscape.

Look out for our series of Building Safety articles where we explore each of the above areas in more detail to help you identify the aspects of building safety that may impact on your project, home or business.