Urban Splash ordered to pay £46.5m for fire safety repairs

What happened

Urban Splash, along with related companies, has been ordered to pay £46.5m following legal action by the government to recover the cost of remedial works on several of its former developments, according to Construction Enquirer. The First-tier Tribunal (Property Chamber) issued the judgment after finding the firms liable for the public money used to address fire safety defects in a group of residential buildings originally developed by Urban Splash between 2000 and 2008.

The deadline for payment is 3 December. Most of the order relates to the recovery of Building Safety Fund (BSF) grants already spent or committed for remedial works. The Tribunal’s decision followed a taxpayer-funded legal process initiated by the government after fire risks were uncovered post-Grenfell at the buildings in question.

Specifically, the case covers Burton Place, Chips, Moho, The Box Works and Christabel, Emmeline and Sylvia houses. The Tribunal confirmed that Urban Splash Limited, Urban Splash Developments Limited, Urban Splash Group Holdings Limited, Urban Splash Work Limited and Stubbs Mill LLP are all jointly and severally liable for the full sum.

A separate sum of £741,594 must also be paid directly to Moho’s residential management company. In addition, a previous £600,000 settlement agreed by Shed KM Holding Limited and Shed KM Limited was deducted from the figure relating to Moho.

The background

Government investigations following the Grenfell Tower fire led to a sector-wide review of cladding safety and other fire risks. In the buildings formerly developed by Urban Splash, the investigations uncovered combustible cladding, ineffective cavity barriers, defective fire-stopping, and compartmentation failures. At the time these defects were found, Urban Splash was no longer the direct owner of the properties, but the government chose to pursue the firm and related entities for costs.

The government’s total outlay through the Building Safety Fund on these developments amounted to roughly £51.5m. The sum covers both money already paid and further funds committed to complete repairs.

Urban Splash contested both the overall scale and specific costs of the remedial works. The firm argued that the availability of public grants had led to repairs that were more extensive and expensive than necessary. As an example, the estimated cost for repairs at Burton Place increased from £9m to nearly £23m, with a similar increase for Moho.

The Tribunal rejected Urban Splash’s argument, finding instead that the cost increases arose during the process as additional defects came to light during investigations and opening-up works. The Tribunal stated that there was no evidence of unnecessarily expensive repairs driven by the availability of public money and that no cheaper, technically viable alternatives were demonstrated by the developer.

To reflect the government’s role in the broader building safety crisis, the Tribunal did cut the amount recoverable from Urban Splash by 10%. Government failings, as assessed by the Tribunal, meant the sum was reduced accordingly.

What people are saying

The Tribunal found that the "evidence did not support the contention that public funding had produced ‘gold-plated’ remediation rather than reasonable responses to the defects encountered." The Tribunal attributed the rising cost of repairs not to wasteful spending but to new issues discovered during the course of intrusive inspections and remediation. It reaffirmed that all five named Urban Splash entities were jointly responsible for the settlement under the ruling.

The ruling’s logic, according to the available reporting, is in keeping with a prior case in which the government recovered £3.68m from Hollybrook for repairs at Hallings Wharf Studios in London. This case was cited as a precedent for public recovery of fire defect remediation costs from responsible private firms.

A separate settlement of £600,000 from Shed KM Holding Limited and Shed KM Limited, architectural designers for some of the schemes, was credited against the Moho claim. Claims against two family investment companies and two residential fund entities involved with the developments were dismissed by the Tribunal.

What happens next

Urban Splash, Urban Splash Developments, Urban Splash Group Holdings, Urban Splash Work and Stubbs Mill LLP are required to pay the ordered sum by 3 December. The majority of the recovered funds will go directly to the government, effectively repaying for the use of the BSF for the completed and ongoing works on the properties.

Moho’s management company is due to receive the £741,594 element of the total. The Tribunal’s decision, deducting the £600,000 paid under the Shed KM settlement, sets out a legal precedent for similar government recovery actions relating to publicly-funded cladding and fire safety remediation.

Dismissed claims against the other associated investment firms and residential funds reduce the overall liability from what was initially sought. The urban residential schemes listed are all older developments, completed prior to 2008. Decisions in this and analogous cases are likely to inform approaches to recovery of public funds in other cladding defect cases.