Remediation contribution orders take centre stage

Last week the UK's real estate sector learnt that the First-tier Tribunal has made remediation contribution orders (“RCOs”) totalling £46,500,650 against Urban Splash Limited and its wider group. The orders relate to fire-safety remediation costs at seven Manchester residential buildings. This decision is significant for the UK's real estate sector because it shows the RCO regime being used not just against the original developer, but also against associated entities that did not build the relevant buildings, including a later group development vehicle, the ultimate group holding company, a commercial-property company and an LLP owned by the senior Urban Splash leadership.

This means that building-safety liabilities are now a material diligence, valuation, financing and investment-risk issue across the whole real estate capital stack, not only for developers, but also for holding companies, group property vehicles, funds, JV platforms, lenders and purchasers of interests in residential buildings. However, the decision is not simply a “deep pockets” case. The Tribunal refused to make RCOs against private or family investment companies and against entities in the residential fund structure, demonstrating that statutory association is only a gateway and that the “just and equitable” test remains a real constraint. This briefing will look at the judgment and share some thoughts on what the case might mean for the real estate sector.

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THE DECISION

The case concerned seven high-rise residential buildings in Manchester developed by Urban Splash Limited between about 2000 and 2008. After the Grenfell tragedy, the buildings were found to be subject to serious fire-safety defects, which were remediated at a cost of over £60 million, around £51.5 million of which was paid from the Building Safety Fund. The Tribunal found that £60,638,548 was reasonably incurred or was reasonably to be incurred in remedying, or otherwise in connection with, those defects. The RCOs were lower than the total reasonably incurred remediation costs principally because the Tribunal applied a 10% reduction to BSF-funded expenditure to reflect Government’s contribution to the wider building-safety crisis (as a discretionary adjustment within the “just and equitable” assessment) with further adjustments including credit for the Shed KM settlement and separate treatment of non-BSF Moho management-company costs. The table below shows how each entity was assessed by the Tribunal. A key point for the sector is that association is only a gateway - the Tribunal repeatedly distinguished between entities with a substantive connection to the Urban Splash property enterprise and entities whose association was more technical, private or investor-facing. That distinction explains why R1–R4 and R11 were ordered to pay, while R5–R7 and R10 were not.

Respondent category	Identity	Outcome	Analysis
Original developer, R1	Urban Splash Limited	RCO made	Developer sat at the top of the hierarchy of responsibility.
Successor development vehicle, R2	Urban Splash Developments Limited	RCO made	Continuity of ownership, management, personnel, purpose and business identity.
Ultimate holding company, R3	Urban Splash Group Holdings Limited	RCO made	Apex of surviving Urban Splash group and point of ownership/control.
Commercial-property company, R4	Urban Splash Work Limited	RCO made	Longstanding constituent of same property-centred enterprise.
Stubbs Mill LLP, R11	Stubbs Mill LLP	RCO made	Controlled by senior Urban Splash individuals and financially/commercially connected with wider enterprise.
Family/private investment companies, R5/R6	TBI 2000 Limited / TM Freeholds Limited	No RCO	Private/family investment assets distinct from Urban Splash enterprise.
Residential fund entities, R7/R10	SURE Residential A Limited (formerly Urban Splash Residential Limited) / SURE Residential LLP (formerly Urban Splash UK Residential LLP)	No RCO	Fund assets held overwhelmingly for investors unconnected with the developments. R10 held not to be associated with R1 or R3.
Shed KM entities, R8/R9	Shed KM Holding Limited / Shed KM Limited	Applications withdrawn	Settlement before final hearing.

RCOS ARE NOW A CORE REAL ESTATE RISK ALLOCATION MECHANISM

RCOs were introduced under section 124 of the Building Safety Act 2022 to make funding available to fix building-safety defects and to reimburse costs already incurred in fixing them; applications may be made to the First-tier Tribunal and can seek payment from landlords, developers and persons associated with them. Section 124 provides that the First-tier Tribunal may make an RCO in relation to a relevant building if it considers it “just and equitable” to do so. In this decision, the Tribunal treated that discretion as broad and confirmed that an RCO can be made for all, part, or a proportion of the relevant costs.

Key RCO caselaw

The landmark case is Triathlon Homes LLP v Stratford Village Development Partnership [2024] UKFTT 26. Here, five blocks at the former London 2012 Olympic Athletes’ Village, now East Village, Stratford, contained serious fire-safety defects in their external walls, and the remediation works were being funded through the Building Safety Fund. Triathlon was a social housing provider with long leases of the affordable housing units; Get Living owned the market-rent side of the estate through group companies. SVDP was the original developer and Get Living had, in effect, owned SVDP since 2018. The key points from Triathlon are:

RCOs can cover costs incurred before section 124 came into force on 28 June 2022;
The developer sits at the top of the hierarchy of responsibility;
Public funding is not treated as the final answer; the Building Safety Fund is a last resort;
A wealthy associated company can be ordered to pay even if it was not itself the original builder; and
The “just and equitable” test is broad and fact-sensitive.

The Supreme Court has listed an appeal on two issues: whether the Court of Appeal took the right approach to the “just and equitable” test, and whether RCOs can cover costs incurred before section 124 came into force.

The second of the high profile RCO cases is (Stevenage) Ltd v Grey GR Limited Partnership [2026] UKUT 18 about Vista Tower in Stevenage, a 16-storey building converted from offices into 73 residential flats. The Tribunal made RCOs against the developer and numerous associated companies for about £13.26 million. The Upper Tribunal dismissed the developer's appeal and gave important guidance on several points. It confirmed that the FTT can impose RCO liability on a joint and several basis, meaning any one respondent can be required to pay the whole sum, leaving contribution issues to be sorted out between respondents. The case is important for four reasons:

The Upper Tribunal held that section 124 permits joint and several RCOs where just and equitable.
Associated companies can be liable even without direct development involvement. Participation in the development or receipt of profits is not a rigid prerequisite.
The Upper Tribunal treated a "risk” in section 120 as meaning any qualifying risk, not only a high or intolerable risk.
Challenges to the chosen remedial scheme need evidence. It is not enough to assert that a cheaper scheme could have been used; the respondent needs to put forward a coherent, technically viable alternative.

WHAT COULD THIS CASE MEAN FOR THE REAL ESTATE SECTOR?

3.1 Remediation contribution orders can be used as a vehicle to recover BSF funding

The Tribunal treated the RCO regime as a way to recover BSF funding. That reinforces the need for owners and managers to retain detailed records of BSF applications, eligibility decisions, cost approvals, contracts, variations, professional advice and payment trails.

3.2 Management companies can be direct recipients of RCO payments

The Tribunal held that section 124(2) does not require RCO payments to be made to the applicant; they can instead be made to a “specified person”. Here, the Tribunal ordered £741,594 to be paid directly to Moho Management Company Ltd for non-BSF remediation expenditure. Resident management companies, RTM companies and building owners should therefore assess whether they have recoverable out-of-pocket remediation costs, not just whether BSF funding was obtained.

3.3 Owners should preserve evidence of reasonableness

The Tribunal accepted costs where they had been competitively procured, professionally administered, reviewed by cost consultants and scrutinised through the BSF process. It rejected a more forensic “construction final account” approach, holding that an RCO application is not equivalent to a construction final-account dispute requiring every item to be proved by detailed primary documentation. Owners should therefore ensure that remediation files include procurement reports; consultant appointments; tender analyses; contract administration records; variation approvals; cost consultant reviews; BSF correspondence; payment records; and contemporaneous technical advice.

3.4 Waking watch costs need proper evidence

The Tribunal excluded the Moho waking watch costs because, although a waking watch was likely to have been necessary, the Applicant had not proved that the claimed amount had been reasonably incurred because of the lack of a comparable process of professional, commercial or expert scrutiny for those costs.

3.5 Corporate structuring are under the microscope

The Tribunal repeatedly looked beyond labels such as “group”, “family” or “fund” and focused on ownership, control, business purpose, continuity, assets, financing and practical relationships. This is especially important for real estate businesses that use multiple SPVs, holding companies, joint ventures and fund vehicles.

        
            Impacts on lenders
        
Historic residential development exposure is a group-level credit risk, not just an SPV-level issue.  For new lending, lenders should consider adding or strengthening:

representations on historic development activity and BSA exposure;

information undertakings for RCO, remediation order, BSF and regulator correspondence;

covenants requiring notice of RCO applications or threatened claims;

restrictions on intra-group asset transfers where building-safety exposure exists;

specific events of default for material BSA orders;

valuation assumptions addressing cladding and remediation liabilities; and

due diligence on associated entities, not merely title to the charged asset.

Existing security packages may be affected by RCO enforcement risk - secured lenders to group property vehicles should examine whether their obligors are “associated” with historic developers and whether RCO exposure could affect covenant compliance, headroom, valuation, enforcement strategy or refinancing.

Cross-collateralisation may increase forensic scrutiny - Stubbs Mill LLP was drawn into the RCO net partly because its financing became materially connected with Urban Splash entities, including pooled security arrangements and onward lending to an Urban Splash commercial company. The Tribunal treated the financing history as further support for the conclusion that the LLP's affairs were connected with the wider Urban Splash enterprise. Lenders should therefore be cautious where “separate” investment vehicles are cross-collateralised with developer group assets, participate in group refinancing, or make intra-group loans.

        
            Impacts on investors and asset managers
        
Just and equitable - The Tribunal stressed that an entity does not become liable merely because it is a developer or is legally associated with one; section 124 requires the Tribunal to decide whether the order is just and equitable. This is critical for investors, because the case shows both sides of the line: group/property-enterprise associates were ordered to pay, but family investment vehicles and the residential fund were not.

Funds with external investors received important protection - The Tribunal refused to make RCOs against SURE Residential A Limited and SURE Residential LLP, entities in the residential fund structure. It placed substantial weight on the fact that the fund’s assets were held overwhelmingly for investors who had no involvement in the development of the buildings. The Tribunal also found that R10 was not associated with R1 because influence was not control, and the fund retained genuinely independent investment processes. In particular, independent decision-making by SURE, the Investment Committee and STAR as AIFM helped defeat the association case.  Fund managers should therefore ensure that investment committees, AIFMs, conflict procedures and approval processes operate in substance, not just on paper.

“Pipeline” relationships are not risk-free - The fund had a close and mutually beneficial commercial relationship with Urban Splash, and Urban Splash supplied most of its early investment opportunities. The Tribunal accepted that this created a substantial connection with the wider Urban Splash enterprise, but held that this was not enough to transfer liabilities to the fund and its investors. Investors in developer-adjacent funds should diligence whether the fund is genuinely independent or is effectively a balance-sheet tool for a developer group.

Private wealth vehicles are not automatically exposed - The Tribunal declined to make RCOs against TBI 2000 Limited and TM Freeholds Limited, which it characterised as private or family investment companies distinct from the Urban Splash property-centred enterprise. The Tribunal said the RCO regime is not simply a means of pursuing the private wealth of individuals connected with a developer.

        
            Impacts on property owners
        
The Tribunal will look at commercial reality - The Tribunal repeatedly looked beyond labels such as “group”, “family” or “fund” and focused on ownership, control, business purpose, continuity, assets, financing and practical relationships. Corporate separateness remains relevant, but it will be tested against commercial reality, including ownership, control, continuity, business purpose, financing and benefit.

Successor development platforms are exposed - R2 did not exist when the buildings were developed, but the Tribunal found that it became the principal vehicle through which Urban Splash continued its property development business after the 2013 restructuring. The Tribunal treated continuity of ownership, management, control, personnel, commercial purpose and business identity as highly significant.  Purchasers, investors and lenders should investigate whether a “new” development platform is functionally a continuation of a historic developer.

Parent companies can be expected to stand behind developers - R3 was not the developer and did not exist when the buildings were developed, but it sat at the apex of the surviving Urban Splash group and was treated as the point at which ownership and control of the enterprise resided. The Tribunal therefore held that R3 should stand behind R1 in respect of remediation liabilities arising from R1’s development activities. Holding companies with residential development subsidiaries should assess contingent BSA exposure across the group.

Commercial-property vehicles are not outside scope - R4’s business was principally commercial-property ownership and management, not residential development. The Tribunal nevertheless made an RCO against it because it was a longstanding constituent of the same property-centred enterprise as R1 and operated under common ownership and control. Real estate groups should not assume that non-residential asset companies are insulated from residential remediation liabilities.

Associated LLPs can be within reach - The Tribunal found R11 associated with R1 because the same senior Urban Splash individuals controlled both R11 and R3, and because R11’s development, management and financing had substantial connections with the wider Urban Splash enterprise. LLP structures and personal-investment vehicles may be vulnerable if they are functionally part of, or materially integrated with, a developer’s property enterprise.

WHAT THE DECISION DOES NOT MEAN

The decision does not mean that every company associated with a developer will be liable for remediation costs. The Tribunal refused to make RCOs against R5 and R6 because they were private or family investment companies distinct from the Urban Splash property-centred enterprise.

It also does not mean that developer-adjacent funds are automatically exposed. The Tribunal refused to make orders against the residential fund entities, giving substantial weight to the interests of external investors and the fund’s independent governance arrangements. The Tribunal was convinced by witness evidence made on behalf of the fund, with specific examples of R10 rejecting transactions proposed by the individuals who controlled the original developer and its holding company.

Nor does the decision make private wealth a target in itself. The Tribunal expressly rejected the idea that the RCO regime is simply a route to pursue the private wealth of individuals connected with a developer.

CONCLUSION

This decision moves the RCO regime further into the mainstream of real estate risks. For owners, lenders and investors, the immediate lesson is clear: building-safety exposure is now a diligence and structuring issue across entire real estate platforms, not merely a technical defect issue at ground level.

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