From 24 July 2024, section 125A of the Building Safety Act 2022 (BSA 2022) introduces specific notification obligations for insolvency practitioners (IPs) appointed in relation to responsible persons for higher-risk buildings or relevant buildings. This article explores the scope and implications of these obligations, which were added by section 119 of the Freehold and Leasehold Reform Act 2024.
The new rules place additional duties on IPs to ensure that regulators and local authorities are promptly informed of their involvement in such cases, enabling enhanced oversight of building safety risks.
Section 125A establishes a mandatory framework for IPs to notify the appropriate authorities when they are appointed in relation to a responsible person connected to certain buildings.
Who is a Responsible Person?
Under section 125A(2) and section 72 of the BSA 2022, a responsible person is defined as:
- A person with an interest in possession of the common parts of the building, unless another person is under a repairing obligation for them.
- A person under a repairing obligation in relation to the common parts of the building.
Types of Buildings Covered
The notification obligations apply in connection with two types of buildings:
- Higher-Risk Buildings
Defined in section 65(1) of the BSA 2022, these are buildings in England that are:- At least 18 metres in height or have at least seven storeys.
- Contain at least two residential units.
- Relevant Buildings
Defined in section 117 of the BSA 2022, these are residential buildings in England that:- Are at least five storeys or 11 metres in height.
Who is an Insolvency Practitioner?
Under section 125A(8), an IP includes:
- Administrators.
- Administrative receivers.
- Receivers appointed by the court or by a mortgagee.
- Liquidators.
- Trustees in bankruptcy.
Notification Obligations
Upon appointment, the IP must notify:
- The local authority in the area where the building is situated.
- The fire and rescue authority in the same area.
If the building is a higher-risk building, the IP must also notify the Building Safety Regulator, which operates under the Health and Safety Executive (HSE).
These notifications must be made within 14 days of the appointment and must include specified details about the building, the responsible person, and the IP’s role.
Commencement Provisions and Retrospective Application
The legislation does not explicitly clarify whether section 125A applies only to appointments made on or after 24 July 2024, or if it could apply to earlier appointments. However, it is assumed that the obligations apply prospectively.
Nevertheless, IPs with appointments made shortly before 24 July 2024 may wish to notify relevant authorities as a precaution. This is particularly important in cases where their appointment would have triggered a notification requirement had it occurred after the provision came into force.
Purpose of the Notification Obligations
The introduction of section 125A aims to improve oversight and accountability in the management of higher-risk and relevant buildings during insolvency processes. By requiring IPs to notify key regulators, the provision ensures that authorities can:
- Identify potential risks to building safety arising from insolvency.
- Monitor the actions of responsible persons to ensure compliance with safety obligations.
- Facilitate coordination between the IP, the Building Safety Regulator, and other authorities.
Practical Implications for Insolvency Practitioners
1. Identifying Covered Cases
IPs must determine whether their appointment involves a responsible person for a higher-risk or relevant building. This requires understanding the specific definitions in sections 65(1), 72, and 117 of the BSA 2022.
For example, an IP handling the insolvency of a company that owns the common parts of a high-rise residential building would likely need to notify authorities under section 125A.
2. Ensuring Timely Compliance
The 14-day notification period is strict. IPs must develop internal processes to:
- Review appointments promptly to assess whether section 125A applies.
- Prepare and submit notifications with all required information.
Failure to comply with the notification obligations could expose IPs to regulatory action and damage their professional reputation.
3. Coordinating with Relevant Authorities
In cases involving higher-risk buildings, IPs will need to engage with multiple authorities, including the Building Safety Regulator. Effective communication and cooperation will be critical to ensure that safety concerns are addressed during the insolvency process.
Challenges and Uncertainties
The new obligations introduce several potential challenges for IPs:
1. Ambiguity in Retrospective Application
As noted, the commencement provisions are silent on whether section 125A applies to appointments made before 24 July 2024. Until further guidance or case law clarifies this point, IPs may need to take a cautious approach and notify authorities for recent appointments as a matter of prudence.
2. Resource Implications
The additional administrative burden of preparing and submitting notifications may strain resources, particularly for smaller insolvency practices. IPs will need to allocate sufficient time and staff to comply with these obligations.
3. Potential Overlap with Other Reporting Duties
Section 125A obligations may overlap with other reporting duties under insolvency or building safety regulations. IPs must ensure that their notifications are consistent with other reports and do not omit key information.
Regulatory Guidance and Support
The Insolvency Service has issued guidance on the new requirements in Dear IP, Chapter 17, Article 70. This guidance provides an overview of section 125A and offers practical advice for compliance.
IPs should familiarise themselves with this guidance and seek legal advice if they are uncertain about their obligations in specific cases.
Conclusion
Section 125A of the Building Safety Act 2022 introduces significant new responsibilities for insolvency practitioners appointed in relation to higher-risk and relevant buildings. These obligations reflect the heightened focus on building safety in the wake of the Grenfell Tower tragedy and subsequent reforms.
By requiring IPs to notify local authorities, fire and rescue services, and the Building Safety Regulator, the provision aims to ensure that building safety risks are properly managed during insolvency processes.
For IPs, the key to compliance lies in understanding the scope of the obligations, identifying covered cases, and ensuring timely and accurate notifications. While the requirements may present initial challenges, they also represent an important step in enhancing the safety and accountability of high-risk buildings in England.
