Building liability orders: What commercial developers need to know about a new era of corporate liability

Property development has always involved a careful balance between opportunity and risk. Large-scale projects require substantial capital, complex delivery structures and long timelines. For that reason, developers have long relied on well-established corporate structures to manage exposure. 

One of the most familiar of these is the special purpose vehicle (SPV). A dedicated company created for a single development, the project is delivered through that entity, and once the scheme is complete the vehicle may be wound up or retained with minimal assets.

For decades, this model has formed part of the practical framework of property development. It enables funding arrangements, simplifies joint ventures and isolates liabilities within a specific project.

However, the Building Safety Act 2022 has introduced a mechanism that could significantly reshape how secure that structure really is. One of its most significant provisions is the Building Liability Order, often referred to as a BLO.

While the concept is often discussed in relation to residential buildings following the Grenfell Tower tragedy, the principle behind it has wider implications. For developers working across the commercial property sector, BLOs introduce a new level of scrutiny around corporate structure and liability exposure.

In simple terms, a Building Liability Order allows the High Court to extend liability for building safety defects beyond the company directly responsible for the development and onto other companies within the same corporate group.

For development businesses built around project-specific vehicles, that possibility represents a significant shift in how risk may ultimately be allocated.

Why building liability orders were introduced

To understand the significance of Building Liability Orders, it helps to consider the problem they were designed to address.

Historically, when serious building defects emerged years after construction, those seeking to recover the cost of remedial works often faced a practical obstacle. The company responsible for delivering the development might no longer exist or might have limited financial resources.

This situation frequently arose where developments had been delivered through SPVs created solely for that project. Once the scheme had been completed and the development vehicle had served its purpose, there was often little left within the company if major building safety issues later came to light.

Following the Grenfell Tower tragedy, the government introduced a wide range of reforms aimed at strengthening accountability across the construction industry. A central theme of those reforms was that the costs of unsafe buildings should fall on those involved in their development and construction, rather than on building owners or occupiers who had no role in their construction.

Building Liability Orders were introduced as part of that broader effort.

Rather than limiting liability to the development company alone, the courts now can look beyond that entity and consider the wider corporate structure behind a project.

Looking beyond the project company

Under traditional principles of company law, each corporate entity is treated as legally separate. This principle has long allowed development groups to organise projects through multiple companies while containing liability within a specific entity.

Building Liability Orders introduce an exception to that approach where building safety defects are concerned.

If a company involved in a development is liable for building safety failures, the High Court can order that liability should also be treated as the liability of another company associated with it. This could include a parent company, subsidiary or another entity within the same corporate group.

The court must be satisfied that making such an order would be “just and equitable” in the circumstances.

This gives the court considerable discretion. Rather than focusing solely on the formal corporate structure, the court may examine the wider commercial relationships behind the project and determine whether responsibility should extend beyond the original company.

For developers operating through complex group structures, that discretion introduces a new layer of potential exposure.

Early cases are beginning to test the powers

Although Building Liability Orders are still a relatively recent addition to the legal framework, the courts have already begun to explore how these powers may operate.

In 381 Southwark Park Road RTM Company Ltd v Click St Andrews Ltd, the Technology and Construction Court issued what has been widely recognised as the first Building Liability Order under the Building Safety Act. The case concerned defects in a London residential building, where the court allowed liability arising from the development to extend to another company within the same corporate group.

Although the dispute itself related to a residential building, the principle underlying the legislation is not confined to that sector. The reasoning applies to any development structure where liability might otherwise remain limited to a single under-resourced entity.

Why this matters for commercial developers

For commercial developers, the introduction of Building Liability Orders does not mean that SPVs will disappear. Project companies remain fundamental to how developments are financed, structured and delivered.

What BLOs change is the extent to which those structures can reliably contain liability if serious defects arise.

If a development vehicle is found liable for building safety defects, claims can extend beyond the project company and into the wider corporate group. Parent companies or sister entities that historically sat outside the immediate dispute may find themselves drawn directly into litigation.

Given the scale of remediation costs associated with building safety failures, this shift matters. Remedial works can run into many millions of pounds, particularly where structural or fire safety systems require extensive replacement.

For developers operating across multiple projects, the financial exposure linked to defective construction may therefore extend far beyond the balance sheet of the original SPV.

Implications for joint ventures and development finance

Building Liability Orders also have implications for joint venture partners and lenders involved in development projects.

Large schemes are frequently delivered through joint venture vehicles where multiple parties share control over the development entity. If liability arising from a project can extend beyond that vehicle, the way those relationships are structured will inevitably come under closer examination.

Lenders may also take a greater interest in how development risk is distributed across the wider corporate group behind a scheme. If liability connected with building safety defects can reach beyond the immediate project company, the exposure associated with a development may be broader than previously assumed.

This has the potential to influence how development risks are assessed during the funding process and how contractual protections are structured within project agreements.

How developers can respond

Building Liability Orders do not fundamentally change how development businesses should approach project delivery. What they change is the extent to which liability can be contained within a single project entity if something goes wrong.

The most effective protection remains the same as it has always been: ensuring that developments are properly designed, carefully delivered and clearly documented from the outset.

Strong oversight of design and construction, clear responsibility for building regulations compliance and well-documented decision-making processes all reduce the likelihood of serious defects emerging later.

Contractual protections within the development team are equally important. Building contracts, consultant appointments and collateral warranties should clearly allocate responsibility for design and construction obligations and be supported by appropriate insurance arrangements where possible.

Developers should also look carefully at how projects sit within wider corporate group structures. Where developments are delivered through SPVs, the way those entities operate, how decisions are taken and how responsibilities are recorded may become relevant if the courts are asked to consider whether liability should extend beyond the project company.

A changing risk landscape

Building Liability Orders reflect a wider shift in how the law approaches accountability for unsafe buildings.

For developers operating in the commercial property sector, the message is not that established development structures are suddenly ineffective. Rather, the courts can now look more closely at the commercial reality behind those structures where building safety failures occur.

Developers therefore need to consider building safety risk not only as a matter of regulatory compliance during construction, but also as a long-term corporate liability that may extend beyond a single project entity.

As further cases emerge, the courts will continue to clarify how these powers are applied. What is already clear, however, is that the legal framework surrounding development liability has evolved. For businesses delivering complex property projects, understanding how these risks operate will form an increasingly important part of managing development exposure. Teams who understand this framework will be better equipped to do well.