Who’s Who? - ‘Principal Accountable Person’ under Section 73 of the Building Safety Act 2022

Lewis Silkin recently advised on a dispute between an intermediate landlord (IL) and their management company (MC) over who the Principal Accountable Person (PAP) was under Section 73 of the Building Safety Act 2022 (BSA). By no means an easy task…

The facts

The occupational underleases granted to the tenants of the building (the Occupational Underleases) set out the various rights and obligations of the IL and the MC in respect to the building. In particular, Clause 5 of the Occupational Underleases set out the MC’s covenants to both the occupational tenants and to the IL which included ‘to provide or procure […] the Services and facilities referred to in the Second Schedule’.

The Second Schedule of the Occupational Underleases specified that the MC must maintain, repair, renew, replace, rebuild, redecorate, clean and where appropriate light and heat the ‘Common Parts’ of the ‘Building’ and the ‘Block’.

The definition of the ‘Building’ within the Occupational Underleases was ‘the land and buildings […] more particularly described in the Superior Lease’. The definition of ‘Common Parts’ encompassed all those areas in common between the tenants. The Occupational Underleases, therefore, expressly placed the repairing obligations in relation to the common parts of the building onto the MC in their entirety.

The legal challenge

The MC was claiming that they were joint accountable persons (AP) with the IL under Section 72 of the BSA but that the IL was the sole relevant PAP under Section 73.

Section 72 of the BSA

Under S72(1)(a) of the BSA the AP can be either a person who holds a legal estate in possession in any part of the common parts or a non-legal estate holder who is responsible for repairing the common parts. This subsection covered both the MC and the IL.

However, Section 72(2)(a) then goes on to exclude any persons caught under S72(1)(a) where they have passed down their repairing obligations in respect of the common parts to another person who does not hold a legal estate in any part of the building:

“(2) A person (the estate owner) who holds a legal estate in possession in the common parts of a higher-risk building or any part of them (the relevant common parts) is not an accountable person for the building […] if—

(a) each long lease of which the estate owner is lessor provides that a particular person, who does not hold a legal estate in any part of the building, is under a relevant repairing obligation in relation to all of the relevant common parts”

Given that the IL had passed their full repairing obligations in respect of the common parts of the building to MC within the Occupational Underleases, the IL was accordingly excluded from being an AP by virtue of S72(2)(a) of the BSA.

Section 73 of the BSA

Section 73(1)(a) of the BSA then goes on to confirm that where there is only one AP, that person is also the PAP. In this case, the only AP was the MC and therefore the PAP was also the MC.

Conclusion

Where a landlord not in possession passes all their repairing responsibilities in respect of a building to a third party (who does not hold a legal estate in the building) they are prevented from becoming an AP under the BSA. If they are not an AP, they cannot be the PAP.

So, to decide ‘who’s who?” under the BSA registration provisions you must first confirm ‘what’s what?’ in relation to the repairing obligations. WARNING: cold towel advised for anyone reading the BSA!