Building Safety Bill means … leaseholders are going to have to pay a lot of money to clear up the mess of other people

Disastrous to sort building safety before culpability of government regulators or builders is established for the cladding scandal

By Martin Boyd

The government has published its Building Safety Bill that is likely to be highly contentious to all those living in blocks impacted by the legislation. Initially, the Bill looks to cover blocks above 18 meters but allows for other blocks to be included in the future.

The Bill is subject to initial scrutiny by the Communities (HCLG) Select Committee, headed by Clive Betts MP. Their call for evidence has just opened and will accept submissions until September 14. It is especially important that cladding leaseholders provide their input.

Pre-legislative scrutiny of the Building Safety Bill – Committees – UK Parliament

The Draft Building Safety Bill was published on 20 July 2020 and will, according to the Secretary of State, “deliver the biggest changes to building safety for nearly 40 years and make residents safer in their homes.” The draft Building Safety Bill takes forward the Government’s commitment to fundamental reform of the building safety system.

Background to the Bill

More than three years ago the chair of the Grenfell inquiry wrote:

“… there is an obvious need for my inquiry to complete its work as quickly as possible in order to identify defects in the design, construction (including refurbishment) and management of the building that may exist elsewhere and put at risk others who live and work in similar high-rise structures.”

Part of that inquiry is to consider:

“The scope and adequacy of building regulations, fire regulations and other legislation, guidance and industry practice relating to the design, construction, equipping and management of high-rise residential buildings”

The inquiry has yet to reach any view on the adequacy or regulation. We still have thousands of people living in blocks at risk with over 85% of ACM blocks in the private sector yet to be remediated. The leaseholders in those blocks have often faced huge costs, in spite of repeated calls by government ministers that “the leaseholder should not pay” for these errors.

Yet, the leaseholder is being required to pay, partly because we still have two diametrically opposing views as to who is at fault. Government and its officials argue that buildings failed to comply with regulations at the time of construction; developers argue that building regulations were at fault.

No court case has been undertaken to resolve this.

Ministers and officials have argued that the problem is one of the developers simply failing to follow the regulations.

Neil O’Connor, building safety director in charge of building regulations and the building safety reforms at MHCLG, explained in oral evidence to the Communities Select Committee:

“We were aware that other cladding products had been used that we did not regard as compliant with building regulations.”

MHCLG officials tell MPs: Don’t know costs of waking watch. No idea that at least three cladding sites are uninsured. We are not to blame but ’30 years of developer failures’ – Leasehold Knowledge Partnership

The most senior officials in the MHCLG concerned with the cladding scandal told MPs that they had no idea that some apartment blocks are at present uninsured. They also had no details of the scale of the devastating waking watch costs – and other interim measure – that are falling on leaseholders, the Public Accounts Committee was told yesterday.

The building sector argues that regulations have been inadequate and unclear, but that the buildings had complied with regulations at the time of construction. Some builders have gone further and suggested that materials now deemed not acceptable were agreed as suitable for use by the warranty providers at the time

On blocks with Grenfell ACM cladding the government has agreed to fund the remediation of just under half the private residential blocks, but it limits what it will pay for. Officials reference expert advice that the key issue is to pay for the cladding, but not the waking watch, or the interim alarms, or the compartmentation breaches or balconies etc … So, while the govenment has from the outset said the leaseholder should not pay, they are in fact being made to pay.

In an environment where there is still a dispute about who is at fault, there has to be some question whether a Building Safety Bill should be introduced before the Grenfell inquiry comes to conclusions about fire regulation and its failures, and who is liable for that failure.

We all want to have safe buildings, but there is a question about whether the Building Safety Bill is the answer.

For the MHCLG’s logic to hold true when it claims that suppliers failed to follow regulation, it would mean that somehow 2,150 public and private buildings constructed over more than two decades, including hospitals, were somehow built in breach of regulations.

That would mean hundreds of developers, tens of thousands of professional architects, engineers, contractors and suppliers all failed to understand and apply the regulations properly.

For the developers’ view to hold true, they would need to have grounds for assuming that putting flammable material on the outside of buildings was safe. So, cladding related fires that happened around the world in the years preceding Grenfell would somehow not apply to their buildings. The building sector did nothing to affect change, but then neither did government until 72 people had been killed.

Almost inevitably both sides will be shown to be both right and wrong. Some developments were in breach of regulations, and the clear evidence from the inquiry so far is that Grenfell was in breach of regulations. But the arguments that regulations were also deeply flawed also seems to hold true. The government clearly accepts the need for radical reform of both regulations and legislation.

Whoever is right or wrong, we have gone from a position that assumed all buildings were safe, because they were designed and built and then signed off as compliant with regulations, to one where it is assumed that all buildings may be unsafe unless they can be proved otherwise.

Hundreds of thousands of people now have homes of “zero value” as the result of what appears to be flawed government thinking.

The data on the number of buildings impacted by the legislation

LKP analysis of the MHCLG figures shows:

1) There are 900,000 to 1,000,000 people living in blocks of flats above 18 meters who will be impacted by the planned building safety legislation.

2) There are 12,500 buildings that fall in scope of the initial building safety legislation.

3) There are currently 2,150 blocks more than 18-meters high that are believed to have some form of unsafe cladding. That number is likely to go up.

4) More than three years after Grenfell the government still has no figures for the number of blocks above 11 meters and no record of the proportion of those blocks that have cladding problems.

5) More than three years after Grenfell, 85% of private-sector ACM cladding blocks have still not been remediated.

6) Despite their claim to be “long-term custodians”, LKP’s survey of cladding sites shows that very few “building owners” have paid to remediate their blocks unless that “building owner” is related to the original developer or owns a substantial part of the site.

Initial review of the legislation

Susan Bright, professor of land law at Oxford University, has published three articles examining the initial impact of the Building Safety Bill.

1/ Sets out an overview of the Bill and important definitions used in the Bill:

The draft Building Safety Bill and Higher-risk buildings: Overview and Definitions

The draft Building Safety Bill was published on 20 July 2020, intending to ‘deliver the principles and recommendations for reform set out by Dame Judith Hackitt’s Independent Review of Building Regulations and Fire Safety.’

The idea is that the ‘golden thread’ of fire safety and building information that Hackitt spoke of will be digitally held to specific standards and carry through from the design and construction stages into the occupation and management phase. At the occupation stage there will be duties imposed on the ‘accountable person’ and ‘building safety manager’ to ensure that the building is safe and that any risks are thought about in advance and, where possible, steps are taken to reduce them.

Professor Susan Bright

2/ Sets out the duties imposed by the Bill

The draft Building Safety Bill and Higher-risk buildings: Key Duties

AP duties The AP is placed under a number of key duties: to register the building with the Building Safety Regulator (cl 62), to appoint a Building Safety Manager (BSM) with appropriate skills, knowledge, and experience (cl 67), to assess building safety risks (cl 72), to take steps to prevent

The duty placed on the Accountable Person is to take ‘all reasonable steps’ to prevent a major incident happening and to reduce the severity of any such incident. As Nearly Legal has observed, the definition of ‘major incident’ is critical and yet linked to the non-defined term ‘significant’. Why only trigger the duty if a ‘significant’ number of people are affected? The risk based Housing, Health and Safety Rating System (discussed here) looks at both likelihood of occurrence and degree of harm: is one death not always sufficient harm?

Professor Susan Bright

Too often there is a hostile relationship between the freeholder and leaseholders, with little information dripping down to those whose lives are most affected. Residents have even been refused copies of the Fire Risk Assessments for their homes (against the specific advice of UK Information Commissioner, Elizabeth Denham).

ibid

First, the Building Safety Regulator must work with a residents’ panel to provide advice on strategy, policy systems and guidance of particular relevance to residents of higher-risk buildings (Cl 11). This panel must include occupiers and may also include non-resident leaseholders and groups representative of residents and/or non-occupying leaseholders. Secondly, the Accountable Person must prepare a residents’ engagement strategy for promoting ‘the participation of relevant persons in the making of building safety decisions’ (cl 82). This strategy must explain what information will be provided and how consultation will occur.

ibid

3/ Sets out the costs associated with the Bill

The draft Building Safety Bill: Costs, and complex buildings

Recovery of costs, clauses 88 and 89 These clauses have caused considerable disquiet amongst lawyers and leaseholders. In outline they provide that the tenant of a long lease must pay the ‘building safety charge’ (BSC) within 28 days of demand.

These clauses have caused considerable disquiet amongst lawyers and leaseholders. In outline they provide that the tenant of a long lease must pay the ‘building safety charge’ (BSC) within 28 days of demand. It works by inserting the new sections into the Landlord and Tenant Act 1985, mirroring much of the existing machinery that apply to variable service charges. So it requires consultation if the costs exceed a specified amount (not yet prescribed) with the possibility of dispensation (and seemingly no requirement of consultation if it is urgent or the building is in ‘special measures’), enables the payability to be challenged (costs must be reasonably incurred, works done to a reasonable standard), and there can be no recovery if there is no demand for payment, or notification, within 18 months of costs being incurred.

Professor Susan Bright

Collectively this is all going to be very costly.

ibid

So leaseholders therefore may have to bear the costs of remedying misconduct by others, such as the developer, the builder, or those producing the government’s own advisory documents.

ibid

The articles state that much of what is proposed remains unclear as it will sit under secondary legislation still in development. It is clear that despite claims that the leaseholders should not pay, the Bill will impose major costs on all leaseholders in taller blocks.

Of great concern to leaseholders is the claim that the new building safety charge will result in greater transparency. What the Bill actually does is replicate many of the known defects in the service charge provisions set out in the 1985 and 1987 Landlord and Tenant Acts. This 35-year-old legislation now has the added provision that landlords can create building safety charges at any point in the year and demand full payment within 28 days.

This Bill should have been welcomed by anxious leaseholders and rental tenants living in dangerous blocks. Instead, the Bill has been met with deep concern.

Specialist leasehold barrister Justin Bates has described the costs regime as a “car crash”.

Landlord and tenant solicitor Giles Peaker has even advised that “no one buy a leasehold property until this is sorted out”.

Perhaps the fault starts with the Hackitt report.

From the outset, Hackitt made clear that she was not concerned with the complexities of the legislation that applies to people’s occupancy of their homes.

Reviewer of building regulations admits post-Grenfell safety regime open to abuse by rogue freeholders – Leasehold Knowledge Partnership

By Harry Scoffin The former health and safety commissioner tasked to investigate building standards following the Grenfell Tower fire has criticised government for allowing it “to take so long” to agree her blueprint for maintaining the integrity of high-rise residential blocks. In comments to the Communities Select Committee on Monday, Dame Judith Hackitt also raised …

The inquiry spent its time speaking to the very groups that the MHCLG argues failed to follow the regulations in the first place.

Many of the groups who caused the problems now seem to be making money from fixing the problems they created. The Bill helps ensure the providers will be paid for making buildings safe and that leaseholders will be made liable to pay, even though the government has repeatedly stated that they should not pay as none of this is their fault.

An analogy with the car industry would be: the government decides brakes are unsafe; all cars over a certain size need to be made safe, but not by the car manufacturers; but by the car manufacturers being able to charge the car buyers to correct these mistakes

The leasehold consumers, and in particular those who pay, have been completely ignored in the drafting of this Bill.

The Bill provides for a new form of an accountable person and a new building safety manager responsible for resident engagement.

Post-Grenfell fire safety regime brings closer scrutiny of building owners … even shadey freeholders anonymously lurking in sunny tax havens – Leasehold Knowledge Partnership

The Leasehold Knowledge Partnership has posed the question of whether the leasehold system could survive the sort of scrutiny it would receive after thousands of blocks of flats were deemed to be covered in combustible cladding. To date, this is costing taxpayers £1.6 billion to put right.

It provides for a regulator system, sitting under the Health and Safety Executive, which will monitor all new construction and all existing buildings. The one thing the Bill totally ignores is how residents are meant to effectively engage with the building safety manager and the regulator.

While every other part of the system is costed, nothing is allowed for to support the resident engagement.

To be very clear, there has been no engagement with private sector consumers during the Hackitt report and very little engagement from the MHCLG.

There has been a resident engagement team in the Hackitt work via the social sector groups, but the resident engagement group included no private sector residential interests.

It did, however, include groups such as the British Property Federation (the representative organisation for landlords) and ARMA (the trade body for managing agents) and the social sector landlords through social landlord Optivo and groups such as Shelter.

Shelter’s latest stated position to the APPG on leasehold reform was: “At the moment I’m afraid this is not an area that Shelter is able to work on.”

We are aware that the government Leasehold Advisory Service chairs a group concerned with social sector resident engagement, but we have no information on what that group has considered.

The need to have safe buildings is important, but there remain many questions about why this Bill seeks to impose such large costs on leaseholders for buildings that have until now been considered as safe.

The Bill suggests an additional cost of £250 per flat per year as a building safety charge when no works are needed.

At a minimum, there must be one fundamental change to the Bill.

It must allow the “residents” and in particular, the leaseholders who pay the bills, to organise and collectively represent their interests and, where relevant, challenge the costs without incurring huge bills in making that challenge.

In June, LKP made detailed proposals to the housing minister for more effective structures for this resident engagement and we await a response from officials.

The government must also explain why after spending years saying the leaseholder must NOT pay for other people’s mistakes that it now proposes legislation that says they must pay for what are the mistakes of either the government or the developers. It must account for the fact it has destroyed the value of the homes of hundreds of thousands of leaseholders.