Robert Paterson
- Partner
- Insolvency & Restructuring
Do due diligence and your own surveys before appointment
The new Act is still at an early stage, but the actions of an accountable person could leave an office-holder criminally liable, say Robert Paterson and Natalie Pilagos.
The Building Safety Act 2022 (BSA) was the Government’s decisive response to the Grenfell fire tragedy, based on Dame Judith Hackett’s review of building safety. Aimed at improving the safety of people in and around buildings and improving building standards, the scope of the BSA is extensive, with 170 sections and numerous regulations requiring secondary legislation.
This article focuses on key provisions affecting IPs and receivers in real estate and construction situations.
The BSA aims to make buildings safe, creating the Building Safety Regulator (BSR) to oversee safety and standards, improve industry competence, and enforce the new regulatory regime. The BSR is now the sole authority for ‘higher‑risk buildings’ (HRBs), playing a crucial role at all stages of these structures. If you are appointed over a company involved in HRB projects, engaging with the BSR and following procedures is essential.
New registers maintained by the BSR include:
- Occupied higher‑risk buildings
- Building inspectors
- Building control approvers (replacing approved inspectors)
The BSA also aims to persuade owners, developers, and construction parties to fix issues and punishes non‑compliance, bringing major changes to roles and responsibilities in construction.
Higher‑risk buildings
An ‘in occupation’ HRB is defined as a building that is at least 18 metres or seven storeys in height with at least two residential units. There is a slightly different definition for HRBs for entirely new construction work in that care homes and hospitals are also included. For in‑construction HRBs, it is necessary to comply with the ‘gateways’ regime. However, a process similar to the gateways must be complied with for work to existing HRBs.
The gateways regime
The ‘gateways regime’ for in‑construction HRBs refers to the three ‘gateways’ outlined in building safety regulations, and includes a series of ‘hard stops’ that need to be passed with approval at each stage of a project:
- Gateway 1 – As part of planning permission is granted
- Gateway 2 – Before work can start
- Gateway 3 – On completion and before the building can be occupied
Insolvency processes and due diligence
Office‑holders will need to review whether the entity they seek appointment over will have obligations under the BSA – obligations which may not have existed on the last occasion they accepted a similar appointment. There are, for example, extensive obligations imposed on an ‘accountable person’. There might even be more than one ‘accountable person’. Such legal persons will be obliged to assess and manage risks of fire and structural failure in an occupied building. Proposed appointees will need to carry out due diligence. Will they have the time and resources to comply? What information/ documentation will they need to assess the situation? Is an EWS1 (a certificate based on a risk assessment conducted by a fire engineer) necessary to satisfy mortgage lenders? A survey? How much extra cost and risk will be involved, and can they obtain adequate insurance, and ideally an indemnity?
Accountable person
Under the BSA, the accountable person (AP) is defined as anyone who has the obligation to repair and maintain the common parts of an HRB. These common parts can include shared areas like hallways, stairwells, and corridors within a building.
The AP should not be confused with the principal accountable person (PAP). The PAP is responsible for the outer structure of the building. This typically involves the maintenance, repair, and safety of the building’s external elements, such as the facade, roof, windows, and other structural components. The PAP is often the landlord or the management company responsible for the building’s overall upkeep. While APs and PAPs are rarely individuals, there must always be an identifiable legal person or entity assigned to these roles.
All PAPs will necessarily also be APs, but not all APs will be PAPs. It is not open to them to simply delegate their duties elsewhere, but of course they can engage a management company to assist and also seek professional advice.
APs’ duties include assessing and managing building safety risks, ensuring proportionate measures are in place to manage these risks, cooperating with other APs in different parts of a multi‑tenanted building and providing information to the BSR, residents and certain other parties.
PAPs and their duties
PAPs are under the same duties as APs but are responsible for various additional duties including to:
- Register the HRB with the BSR
- Provide key information about the buildings to the BSR
- Apply for a building assessment certificate if directed by the BSR
- Produce a safety case report
- Establish and operate a mandatory occurrence reporting system
- Prepare a residents engagement strategy
- Establish and operate a complaints procedure.
Contravention of these duties is a criminal offence. The AP and PAP are likely to be the borrower or connected company rather than the office‑holder, but nonetheless there could potentially be the risk of fault‑based (tortious) liability and expense claims, so it should very much be in the office‑holder’s interests to take appropriate advice and ensure compliance with these specific BSA requirements.
Reporting requirements
Where an IP is appointed over a responsible person (RP) there are reporting requirements under s125A BSA.
Who is a responsible person?
- In the case of an HRB, the responsible person is an AP for the building
- In the case of a relevant building (a self‑contained building, or self‑contained part of a building, in England that contains at least two dwellings, and is at least 11 meters high or has at least five storeys) that is not an HRB, the responsible person would be an AP for the building if, effectively, the building was an HRB.
The reporting information to be provided within 14 days of appointment includes the name and address of the person in relation to whom the IP is appointed and details of the IP, the address the building, the register of title and title plan and such information set out in the table in rule 1.6 of the Insolvency (England and Wales) Rules 2016 (SI 2016/1024) as is known to the IP. Readers will know that this rule contains a table setting out information identifying a person, company, office‑holder or proceedings, such as name, address and registration number.
The IP must give the information to:
- The fire and rescue authority
- The local authority; and
- The BSR (if the IP is appointed over an AP for an HRB).
Note also that where there is a live construction project on an HRB and an IP is appointed, there is an obligation for an IP to notify the BSR within 14 days of their appointment. The IP may take on the obligations of the ‘client’ in relation to the HRB work (obligations under secondary legislation under the BSA applicable to construction works) if they progress the works, so all work on any HRBs should not progress unless specialist advice has been taken.
Relevance to IPs
As is often the case with legislation enacted in a hurry, however laudable the aim, the BSA envisages solvent companies controlled by a board of directors and does not always translate well to distressed entities in a formal insolvency process.
Different parts of the BSA have come into force gradually since June 2022 with the reporting requirement only coming into force on 24 July 2024. It is still at an early stage in terms of liability for an IP. To the extent that IPs are appointed over, and therefore in control of, the AP/RP, they may face liabilities as a result of not complying with the duties and obligations of the AP/RP under the BSA. There could be a potential financial impact on an IP who allows or causes an accountable person to breach their obligations, by way of fines, costs, or other unexpected outlays which could rank as an expense of the administration (for example) with ramifications on distributions and of course their own remuneration.
In terms of criminal liability, there is a possibility under the new legislation that an IP could be found criminally liable for the actions of the AP.
The last high‑profile prosecution of an IP reached the Supreme Court in R ( on the application of Palmer) v. Northern Derbyshire Magistrates’ Court and another [2023] UKSC 38. The facts of the case concerned actions by one of the joint administrators to make the employees of the company’s warehouse in Dundonald in Scotland redundant the day after it went into administration.
Section 194 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) requires employers to notify employee representatives of potential redundancies, and failure to do so is a criminal offence. However, s194(3) provides an exemption for certain individuals, specifically those who are not considered ‘officers’ of the employer.
The Supreme Court unanimously allowed the administrators’ appeal on the grounds that Mr Palmer, was not an ‘officer’ for the purposes of s194(3) of TULRCA.
In that case, the Supreme Court held that a person appointed as an administrator under the Insolvency Act 1986 does not meet the statutory definition of an ‘officer’ in that context. An administrator’s role, the court noted, is distinct from that of a company director or other managerial roles that might typically be considered ‘officers’ under TULRCA.
This decision could also apply to s161 of the BSA, which provides for personal liability for offences under parts 2 and 4 of the BSA and uses the word ‘officer’ – albeit the context is very different.
In extreme cases, it may be that the costs of compliance and renovation of an HRB are such that the property is sufficiently ‘onerous’ to warrant the liquidators’ power of disclaimer under s178 Insolvency Act 1986. The better approach is probably to do as much due diligence as possible before accepting an appointment. The prospective appointee will also want to ensure they have sufficient pre‑appointment funding to obtain surveys/ specialist reports to establish if the property falls within the BSA and HRB definition and, if so, establish the extent of remediation works required and the potential cost. The appointor and secured creditors will in addition need to understand the time and costs required to bring the development to market. Finally, the IP will want sufficient funding, comfort (indemnity) and insurance to satisfy themselves and their risk committees that the benefit of the job will outweigh the risk, albeit that the risks are still new and the BSA is still bedding in.
Solicitor apprentice Isabelle Burnett at Wedlake Bell also contributed to this article.
This article first appeared in the Summer 2025 edition of Recovery, the magazine for professionals working within insolvency and business recovery and is reproduced with permission of R3, the Association of Business Recovery Professionals.
Meet the team:
Natalie Pilagos
- Partner
- Construction
