Construction Brief Nov 2025: market insights and latest decisions

We briefly review some notable and significant developments currently affecting the industry. This includes the impacts of the US trade tariffs, building liability orders (BLOs) and a case summary of Almacantar Centre Point Nominee v De Valk & others [16.09.25].

US Trade Tariffs: Impacts on the Construction Industry

The US administration’s trade tariffs have been front and centre of news media since “Liberation Day” on 2 April when the United States announced a series of significant trade tariffs, including introducing a 10% baseline tariff on imported goods from nearly all countries. In June, the United Kingdom and the United States reached a deal to cut some tariffs, including reducing a 25% levy on cars and automobile parts to 10%.  However, an agreement has not yet been reached on steel and aluminium tariffs which have remained at 25%.

US importers who are subject to tariffs are incurring higher costs, which will likely lead to price increases in the materials in construction projects. This means significant direct inflation of the cost of materials. Additionally, there will inevitably be consequential knock-on inflation effects. For example, many traditionally cheaper export countries, such as China, may seize the opportunity to increase prices, forcing companies to pay increased domestic prices for sourcing materials/goods.

Due to increasing costs, there will continue to be delays in global supply chains and the production of materials. This will impact both new projects and reinstatement works, which could cause an inflation in repair and replacement costs. This has the obvious impact of extending repair periods and construction timelines, exposing contractors and insurers to delay-related losses and contractual disputes.

As to potential coverage considerations, the starting point for insurers is to consider whether any inflationary aspects of tariffs can be identified.  In some cases, they may be identifiable easily (e.g. % increase on steel) but in other cases, the impacts of tariffs may be less clear (e.g. if a turbine manufacturer increases its prices for spare parts, the tariff element may not be obvious). Generally, we expect that these will form part of the “cost of repair” and therefore fall within the basis of indemnity. However, insurers should verify whether tariff-driven inflation is excluded under any “changes in law” or “trade restriction” provisions.Brokers have begun to introduce endorsements, such as expanded coverage where policyholders are receiving an increased limit above the standard allocation for goods and materials affected by tariff price surges, and increased coverage where the increased costs are directly attributable to tariffs enacted within 24 months of loss. Insurers will need to carefully consider the potential costs implications of these endorsements.The tariffs are currently under review by the US Supreme Court, following an appeals court ruling in August that stated President Trump may have exceeded his tax authority under the International Emergency Economic Powers Act 1977. Whilst the Supreme Court is yet to hand down its decision, a ruling against the administration could require repayments of up to US$90 billion in tariff duties already collected.Until clarity is provided, insurers should remain alert to tariff-related inflation and its effect on construction costs. It is essential to closely monitor supply-chain delays, increase in materials costs, including steel and aluminium, and policy wordings.

Authors: Alice Simm and Lourenzo Fernandez

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Building Liability Orders (“BLOs”): A Summary

A BLO is a legal mechanism introduced by The Building Safety Act 2022 (“the Act”) that allows the Court to pierce the corporate veil where the company responsible for ‘relevant defects’ cannot meet a judgment, but another ‘associated’ company (usually a company in the same group) can do. The intent of the BLO regime was to avoid situations where a developer sets up an SPV to carry out building works, which then has no assets available to meet its future liabilities.

As it was put by the First Tier Tribunal (“FTT”) in Triathlon Homes LLP and Stratford Village Development Partnership [2024]: 

The obvious purpose behind the association provisions is to ensure that where a development has been carried out by a thinly capitalized or insolvent development company, a wealthy parent company or other wealthy entity which is caught by the association provisions cannot evade responsibility for meeting the cost of remedying the relevant defects by hiding behind the separate personality of the development company.

A BLO extends liability for building safety defects to associated companies, even if they were not directly involved in the original works, applying a “just and equitable” test as to whether it is reasonable to extend the liability of the contracting company to one of its associates.  

There is no guidance in the Act as to what will make it “just and equitable” to grant a BLO. But a series of recent decisions in the FTT (in relation to associate provisions in the Act) make it clear that the courts should consider a number of factors, which include the following:

1. The nature of the defect(s)
2. The cost of the repairs
3. The extent of the damage
4. If there is any alternative recourse
5. The solvency of the companies in question and
6. Whether a fair trial can take place.

In March, the first BLO was awarded.  In 381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd & Anor [2024], Mrs Justice Jefford granted a BLO against the second defendant (“D2”), a grandparent company of the first defendant (“D1”). Previous hearings had determined that:

1.  D1 had a relevant liability in relation to building safety risks – issues with fire protection and structural inadequacy and
2.  D2 was an ‘associated’ company to D1, given their shared ownership and control.

Jefford J found that it was just and equitable to order D2 to pay the cost of remediating the relevant defects as:

1. D1 was an SPV, thinly capitalised and dependent on other group companies to trade (quoting from the Triathlon case mentioned above);
2. As an associated company, it was just and equitable for D2 to meet the obligations D1 could not meet;
3. D2 had been provided with the opportunity to raise arguments in earlier hearings, and so was not deprived of the right to a fair trial;
4. It was not relevant that the cost of the remedial works had not yet been determined;
5. It was not relevant that D2 itself had financial issues (and so might not be able to meet a judgment against it).

The potential impact of BLOs on the construction industry is far-reaching. They should provide better protection to leaseholders by expanding accountability, enabling claimants to go after the parties who have profited from remedial works. But that will depend in practice on finding a responsible defendant who is capitalised, and has not divested itself of assets by way of shareholder payments.

For developers, BLOs may result in an increased exposure to remediation costs. The days of isolating liability with special purpose vehicles might be numbered, as greater scrutiny will need to be exercised during corporate acquisitions and restructurings. Insurers will face greater exposure under CAR, Professional Indemnity and Public Liability policies. Some insurers, aware of this, have already started making BLO exclusions for historic developments, akin to the fire safety exclusions which have become common over the last six years.

Authors: Francesca Khan, Lourenzo Fernandez

The Building Safety Act and Protections for Leaseholders: Almacantar Centre Point Nominee Ltd v De Valk and Others [16.09.25]

This decision raises a number of fundamental issues relating to The Building Safety Act 2022 (the “Act”) and the protections given to leaseholders in respect of service charge recovery for cladding remediation work. On an initial appeal, the Upper Tribunal (“UTT”) has provided a notable clarification on the definition of ‘cladding remediation’ under Schedule 8(8) of the Act.

Paragraph 8 of Schedule 8 provides:

1. No service charge is payable under a qualifying lease in respect of cladding remediation.
2.  In this paragraph “cladding remediation” means the removal or replacement of any part of a cladding system that – (a) forms the outer wall of an external wall system, and (b) is unsafe.

The UTT decision follows the First-tier Tribunal (“FTT”) decision in March 2024 that no service charges would be payable by lessees in respect of proposed works to the façade of Centre Point House (“CPH”).

CPH is a six-storey building located near Tottenham Court Road Station originally built in the 1960s and converted into twenty-six flats during the 1980s. There has been long standing concern over the safety of the external windows and cladding at CPH with instances of glass liberating from their frames and falling from the building.

The Landlord issued an application under s.27(a) Landlord and Tenant Act 1985 to assign liability to the leaseholders to make service charge payments for the cost of repairing the façade , totalling in excess of £6 million.

The initial hearing was determined by the FTT’s interpretation of Section 122 and Schedule 8 of the Act which contains protections for qualifying tenants against the cost of remediating relevant defects, at which the Landlord lost on all arguments. The external structure of CPH was determined to be a timber ladder-frame system with glass, insulation and spandrel panels fixed with aluminium rods to the concrete frame. This structure was considered to be unsafe “cladding” and a fire risk. Consequently, Schedule 8(8) of the Act applied and it was found that no service charge would be payable by the leaseholders for the proposed remediation scheme.

On appeal, the landlord argued that Schedule 8(8) should be read in accordance with the Act as a whole and consequently limited by the terms ‘relevant works’ and ‘relevant defects’. The landlord additionally argued that the Act was only intended to protect leaseholders from unsafe cladding installed in buildings after 1992, not those constructed prior.

The leaseholders argued that Schedule 8(8) of the Act is clearly and deliberately worded to indicate the legislatures’ intention to protect leaseholders from the imposition of unsafe and/or defective cladding remediation costs.

The UTT affirmed the decision at first instance.

The decision represents a win for leaseholders and for parliament’s intended function of the Act. It serves as a warning for landlords that seek to impose the costs of remedial cladding works on leaseholders where the court is willing to take a broader interpretation of ‘cladding’ under the Act. With permission granted to appeal to the Court of Appeal, expect more scrutiny on the protections to leaseholders in respect of service charges by the Act.

Authors: Dominic Deery, Lourenzo Fernandez