It is difficult to exaggerate the cultural shift that has occurred owing to Michael Gove’s dictat that leaseholders – even those in sub-18 metre low-rises – are not to be made to pay a penny for build safety defects.
Instead the money, £4 billion of it, is to come from the developers who built these flawed buildings in a sector-wide distribution of blame by government.
This is the single most important intervention into residential property by the Conservative party in decades.
It ruptures the long cosy intimacy it has had with developers, whose lobbyists – trade bodies, surveyors, assorted lawyers etc – have always relied on receiving a sympathetic ear. And, of course, property interests have provided a good 25% of the party’s recent funding (with Labour also on the receiving end when there is a serious prospect of it actually governing).
Among politicians of all parties and officials within the deeper state, patience with this sector is utterly exhausted.
For a start, it is massively subsidised by taxpayers through Help To Buy and other grants from Homes England.
And how has it repaid this generosity – which has turned housebuilder footsoldier-turned-senior-managers into multi-millionaires?
First, it cheated its customers with doubling ground rents and the wheeze of leasehold houses, needlessly scattered around the country. The Competition and Markets Authority is doing an excellent job in wrestling this to the ground.
Then it built blocks of flats so badly that they are dangerous, with the tragic consequence of Grenfell, and bodged other safety defects – fire compartmentation for example – which broke even rudimentary building regulations.
Government sets out new plan to protect leaseholders and make industry pay for the cladding crisis
Levelling Up Secretary resets government action on building safety in England Leaseholders living in their own flats will not face any costs to fix dangerous cladding, with developers and cladding companies paying instead Industry given two months to agree to a plan of action to fund remediation costs, currently estimated at £4 billion New measures to hold firms to account and restore common sense to the market The government has today (10 January 2022) reset its approach to building safety with a bold new plan to protect leaseholders and make wealthy developers and companies pay to fix the cladding crisis.
Now, the Grenfell inquiry is revealing how cladding manufacturers rigged the system for private gain, and yesterday it took a Tory MP (!) – Kevin Hollinrake – to say that privatising the official sounding testing site, the British Research Establishment, may have been an error and it should be re-nationalised.
Broadly, the sector nobbled the regulatory regime for its own gain.
Good news for:
1/ Leaseholders
2/ Common decency
3/ Taxpayers (but … see below)
Four and half years have been largely wasted over this crisis – which LKP began flagging up in the autumn of 2017 – to the intense anguish of hundreds of thousands of often young families who simply made the mistake of buying a new flat.
Mr Gove delicately refers to “past mis-steps”.
Cash to address the crisis was dragged out of government – starting with £400 million in May 2019 it rose to £1.1 billion in March 2020 and then £5.1 billion (with a developer tax over ten years to get another £2 billion).
But still the hope was, in December 2019, that loans could be forced onto the leaseholders to put right the mistakes of others.
Loans were particularly disappointing to us, as our chair Martin Boyd had persuaded the team of then Communities Secretary Sajid Javid that they would not work the year before.
All this is now blown out of the water.
Mr Gove had the choice of hiding behind law – leasehold is the gift that never ceases giving to vested interests – or siding with the consumers.
Without any ambiguity, he has done the latter and that is the new landscape in which this crisis now moves.
The rhetoric deployed is uncompromising.
Mr Gove, the Secretary of State for Levelling Up, said:
“Leaseholders are trapped, unable to sell their homes and facing vast bills.
“But the developers and cladding companies who caused the problem are dodging accountability and have made vast profits during the pandemic whilst hard working families have struggled.
“From today, we are bringing this scandal to an end – protecting leaseholders and making industry pay.
“We will scrap proposals for loans and long-term debt for leaseholders in medium-rise buildings and give a guarantee that no leaseholder living in their own flat will pay a penny to fix dangerous cladding.”
He promised leaseholder protections in the deeply flawed Building Safety Bill – which appears to be set for major reworking – and “and we will restore much needed common sense on building safety assessments, ending the practice of too many buildings being declared unsafe”.
Mr Gove is scathing about practices in the housebuilding sector and “nothing is off the table”. He is clear-eyed over practices such as the liability-shirking “single purpose vehicles” (SPVs) that build out many sites (with directors whose families are often prominent national housebuilders).
Bad news for:
1/ Developers and property cartel generally
2/ Surveyors and managers seeking to clean up with works to low-risk sites
3/ Property managers who bought up management contracts of cladding sites
4/ Entrepreneurial fire safety consultants
5/ RICS
As for warranties, “we will introduce immediate amendments to the Building Safety Bill to extend the right of leaseholders to challenge those who cause defects in premises for up to 30 years retrospectively”.
As with developers, the government seems to have fallen out of love with the property professionals, primarily the Royal Institution of Chartered Surveyors, who have decided that the vast majority of newish blocks of flats have safety risks (and thus considerable fees will be required to put them right).
Mr Gove wants to “focus relentlessly on making sure it [the money] is risk driven” and thousands of low-risk buildings are removed from scope.
In the Commons debate yesterday, Robert Jenrick, Mr Gove’s predecessor as housing secretary – who was initially booed by MPs for his record over the building safety crisis – went further by blaming RICS for “a scandalous assessment of risk”. (He also blamed the Treasury for excluding low-rise buildings above 11 metres and below 18 metres from taxpayer aid.)
Using the leverage of Help To Buy and moral suasion, Mr Gove appears confident that the developers will pony up. Two examples of recent robust actions were the suspension of Rydon Homes from Help To Buy and Homes England aid owing to its connections to the refurbishment of Grenfell Tower, and he helped urge Mercedes to dump the sponsorship of cladding manufacturer Kingspan.
Developers don’t like it, and here is an early squeal of pain that will doubtless get louder:
The unanswered question is: will it work? Can the sector be made to come up with this sort of money?
You would have to be very optimistic to bet that taxpayers escape without making up some sort of shortfall, but we shall see.
Gove’s cladding fix doesn’t go far enough | The Spectator
Michael Gove’s building safety announcement today addresses the two contrasting problems of the cladding scandal, but fails to provide any convincing solutions. On the one hand, the Secretary of State for the Department for Levelling Up, Housing and Communities (with the unmemorable acronym DLUHC – …
Mr Gove could not be more bullish, however. He told MPs:
“We should not ask hard-working taxpayers to pay more taxes to get developers and cladding companies making vast profits off the hook. We will make industry pay to fix all of the remaining problems and help to cover the range of costs facing leaseholders. Those who manufactured combustible cladding and insulation, many of whom have made vast profits even at the height of the pandemic, must pay now instead of leaseholders.”
The optimism at LKP is that at last we are dealing with a ministerial team eager to support the consumer and powerful enough to do so effectively.
There were excellent contributions from all sides in the parliamentary debate over the annoucement yesterday.
Lisa Nandy, Mr Gove’s shadow, played a weak hand well: welcoming the announcement but highlighting the lack of detail. She is not wrong, there is not very much at this stage.
Then came contributions from MPs who have been fighting this issue for years.
All the three MPs who co-chair the APPG on leasehold and commonhold reform spoke in the debate.
Sir Peter Bottomley urged the importance of inflated insurance costs that have risen 10-fold from £300 to £3,000 over the past two years of building safety crisis. He referenced “price-gouging” and urged involvement of the Competition and Markets Authority and a re-insurance pool scheme.
Mr Gove replied: “Lord Greenhalgh will be talking to Baroness Morgan of Cotes and others in the Association of British Insurers to ensure that more insurers, like Aviva, do the right thing.”
Disappointment for:
1/ Leaseholders who have already paid to remediate building: not retrospective
2/ Leaseholders who have spent thousands on waking watch to cover the compliance backsides of anonymous and often offshore landlords
3/ Perhaps Buy To Let investors who have purchased flats through corporate vehicles (the comms are wobbly, at this stage)
Justin Madders asked whether there was any chance of reimbursement for leaseholders who have paid out thousands for waking watch. He received compliments for his brilliant work on leasehold reform, but the answer was: no retrospective payments.
Daisy Cooper was worried about light touch regulation and a race to the bottom of standards, but received nicely phrased compliments in response and no more.
Other stalwarts of the campaign spoke at the debate.
Sarah Jones spoke of high rises in her Croydon constituency, Longitude and Altitude, that have to pay for compartmentalisation. Bridge House is cladded, but its cladding is not categorised as the right type to qualify for funding.
“Some of my constituents live in blocks where the developer has gone bust and the freeholder is overseas, and they have a tenuous relationship with the managing agent.”
Mr Gove suggested further private talks, and his department has a project team, Operation Apex, which is aware of some of these issues.
Ian Duncan Smith named developer Telford Homes as unresponsive. “The biggest problem is getting the developers to talk to those who have suffered,” he said.
Mr Gove replied that he wanted to proceed consensually, but “we will deploy heavier artillery to ensure that we get the necessary support to those on the frontline”.
At one point Mr Gove was telling Jeremy Corbyn that “perhaps for the first time, I am almost wholly in accord with him”.
One of the most curious contributions came from Tory MP Kevin Hollinrake, respected as a property expert, who said that Mr Gove’s announcement “ticks all the boxes needed to solve this crisis, not least pointing the finger at construction product manufacturers.
“There is no doubt they have gamed the system to get some of their products approved inappropriately, but that gaming was facilitated by the Building Research Establishment, which, as my right hon. Friend knows, was privatised about 25 years ago. Will he make sure that these manufacturers contribute towards the costs of remediation and will he consider bringing the Building Research Establishment back under public ownership?”
The response was that Mr Gove would have to ask the Chancellor, but LKP raised Mr Hollinrake’s observation on TalkRadio this morning.
In the brief debate, MPs who have been on the right side of this argument for years also made contributions, including Clive Betts, Ruth Cadbury, Bob Blackman, Hilary Benn, Royston Smith, Stephen McPartland, Esther McVey, Florence Eshalomi, Barry Gardiner, Kate Green among them.
LKP thanks them all. A huge battle has been won, and the seemingly unending cladding scandal enters a new phase. But finally, a path has been set for a conclusion.
Related posts:
Gove backs cladding leaseholders in urging investor Norges Bank Investment Management (NBIM) to make UK housebuilders pay for build defects
Michael Gove gets the cartel of taxpayer subsidised housebuilders to pay up £5bn towards the building safety scandal … but not Lendlease or Galliard
MPs join leaseholders at protest to ensure no one is left facing building safety cash calls
No ‘backsliding’ on Gove’s £3bn building safety levy, says his successor Greg Clark
Don’t trust developers to put right the wrongs that they created, Clive Betts tells government
Reverse ferret: Taylor Wimpey NOW agrees to sort out re-sale buyers of its rip-off ground rent leasehold properties
Are we to applaud that this Tory government has, it seems, made one small – ok biggish – step in addressing the evils of leasehold? It remains the case that there are those in the Tory Party who will fight tooth and nail to protect their paymasters. It remains the case that a vast array of developers, freeholders and professionals (including lawyers) will collude and scheme to stay all and any reforms which might diminish their wealth and earnings.
IT REMAINS THE CASE THAT LEASEHOLD STILL EXISTS, and with no prospect of any government doing the right thing and abolishing this grotesque evil.
THE CLADDING CRISIS MUST NOT LEAVE ANY LEASEHOLDERS OUT OF POCKET, GOVERNMENT PLANS TO ADDRESS THE CLADDING CRISIS HAVE BEEN WELCOMED AS A STEP IN THE RIGHT DIRECTION BY THE LAW SOCIETY OF ENGLAND AND WALES.
The devastating Grenfell Tower fire and subsequent public inquiry exposed the widespread use of hazardous cladding. Many thousands of flat owners living in potential fire traps are being hit by huge bills to manage and rectify life-threatening cladding issues affecting their homes.
Most who want to sell are unable to do so.
Michael Gove, the secretary of state for leveling up, housing and communities, today (10 January) announced that support for leaseholders would be extended to those in blocks below six stories, as well as plans to make developers pay for the costs of remediation.
LAW SOCIETY PRESIDENT I. STEPHANIE BOYCE SAID:
“Today’s announcements are a step in the right direction for innocent homeowners who are under intense emotional and financial pressure. “We have been raising concerns for some time now that leaseholders, who live in unsafe buildings through no fault of their own, are bearing the brunt of the costs of cladding remediation.
“We argued that the government should remove the block height restriction on eligibility for financial support available to leaseholders for cladding remediation and are pleased to see this step now being taken for 11-18 metre buildings.
“The restriction of financial support to those in the tallest blocks unfairly deprived leaseholders in small and medium-sized blocks of any remedy and left them significantly out of pocket for a problem, not of their own making.
“We urge the government to go further and remove the height restriction completely so that leaseholders in blocks of any height can access financial support.
“We welcome plans for developers responsible for dangerous building defects to pay for works to rectify these defects, which we have called for. If developers cannot reach a consensus on how to play their part, then they should be legally obliged to do so.”
Independent, Ben Chapman, 10 January 2022: A Precis With Additions
The government’s plan to end the building safety crisis is still full of large holes.
The devastating fire at a residential block in New York this weekend should have reminded Michael Gove of how urgently he needs to fix Britain’s building safety crisis. At least 19 people died, including nine children, bringing back memories of the Grenfell Tower inferno that killed 72, it could all happen again.
There are several issues surrounding and resolving the Cladding Scandal, should the cladding have been fitted in the first place?
North Ayrshire Council ordered the removal of cladding from high-rise buildings after a fatal fire on Friday 11 June 1999.
In Scotland, a change to building regulations in 2005 made it mandatory for builders to ensure that any external cladding “inhibited” fire spreading.
The fatal fire, reported cladding fixed to the outside of the building acted as an accelerant to the fire, witnesses reported that a vertical ribbon of cladding on one corner of the block was quickly ablaze and the fire reached the 12th floor within 10 minutes of it starting,
The legislation was enacted in 2003 by the Scottish Parliament governing the use of cladding.
On Friday 11 June 1999, a fire swept through a 14-storey Garnock Court block, the blaze started at about 12:45 and ended up destroying flats on nine floors of the Garnock Court block.
A 55-year-old man died in the fire and five other people, including a 15-month-old child, were injured.
Witnesses reported that a vertical ribbon of cladding on one corner of the block was quickly ablaze and the fire reached the 12th floor within 10 minutes of it starting.
Additionally, several fires in other countries involved rapid-fire spread due to the cladding. The Parliamentary Environmental Committee debated cladding issues back in 2000.
Great news, at last the Government has seen the right to step up , & make the Developers & suppliers of these flammable products liable to make good & put right the wrong doing in the first place , & not offloading this onto the indecent leaseholders
long over due , but welcomed nonetheless .
The horrors of the Grenfell Fire in 2017 should have immediately triggered a wholesale review of risky buildings by the government.
It should have resulted in rapid work to make the most dangerous blocks safe, with the state agreeing to cover all necessary costs, recovering money where possible from the industry.
Yet, four and a half years after Grenfell, Gove, who is in charge of fixing the mess, admitted on live radio that he did not even have a reliable estimate of the number of defective buildings.
It is an indictment of the lack of urgency with which the government has approached this crisis. Ministers have sought to minimise the scale of the problem, claiming that buildings under 18 metres are safe.
They may or may not be safe, leaseholders would not be forced to pay, which they have been.
Addressing the Commons on Monday, Gove said That it was “long past time” to fix this crisis as if his party had not been in government for more than a decade.
He criticised building owners and lenders for being too risk-averse on fire safety issues, without admitting it, as a result of the government’s own flawed advice.
He called for a “proportionate” and “balanced” approach, without acknowledging that this is only possible if you understand the relative risks posed by each building, which the government clearly does not.
Interim costs are bankrupting leaseholders NOW, many people cannot wait much longer for relief.
It is good action is taken about cladding and other housing issues.
The main issue of abolishing leasehold is not addressed not even looked into.
There are freeholders who are causing
problems and even mental health issues treating leaseholders as slaves
also there are no rights to leaseholders
as the property is theirs .
When will this issue of leasehold be addressed.
Since Mr. Gove has a team working into housing matters they should be able to sort and look into this matter.
Ayisha, it is very good that action is taken about cladding and other housing issues.
I agree the main issue of abolishing leasehold has not been addressed,
I believe it is also the Landlords who mainly employ Rogue Managing Agents such as Firstport Ltd and then allow them to rip off pensioners and leaseholders as regulation is so weak.
When self-regulation relies on organisations such as LEASE, RICS, ARMA, IRPM, and the FTT to supposedly police Leasehold Exploitation.
When doggy Insurance Companies treble premiums and receive treble commissions as the more the premiums costs, the more money they make.
Leasehold began for the peasants and serfs, so they were tied to the land as farmers or builders to stay put, and the landowner provide them with a roof in exchange for a peppercorn ground rent.
.
Michael Gove I believe has a team working into the safety of cladding matters, to expect any more is correct to do so, but others are not important to them?.
It all sounds great, but how will it work. I watched the debate live and one MP asked would HMG guarantee the payment of the bills for remediation when they come in. His reply “No”. Why was that? Who would start work on a project if he did not know if, or when, or how he was going to be paid.? Would you take on a client who said you may, or may not, be paid for some of your work at some stage in the future provided some of your work qualifies. And what about social housing occupied in part by Council tenants and in part by 125 year long leaseholders? Who will pay what, when and to whom and for what?
I would prefer to see these developers stopped in their tracks. How? By imposing a levy on planning permissions of, say, £10,000 per unit. That should then ensure that before work begins a contribution to remediation is made up front. Yes, it will push up cost, or margin down, but better that and to get this problem sorted out once and for all.
Michael Gove’s plan sounds good but it is all retroactive and will fall to be paid for by the next HMG. Given last year’s behaviour, or misbehaviour, Gove will be back on the back benches.
Or, they could just halt the £100bn being squandered on HS2, of use only to those who travel from London to Birmingham. That should go the way of Cross Rail, remember that anyone?, and be buried alive. It is an expensive luxury we simply cannot afford what with the cost ov Covid, Brexit, etc.
And finally if you refuse to print my post naming names of those in one local authority who have committed criminal offences under T&CPAct 1990 s.60 you become not a part of the solution, but of the problem. You must have the backbone to speak out when you have evidence of wrongdoing and take the consequences. In fact they would never dare to sue as that very fact would expose their criminality. Now my guess is that you will take down this post. I dare you!
You are not going to name people and accuse them of criminal behaviour on this site. To suggest this is lack of backbone on our part is utterly stupid. You would also be identifiable and responsible, incidentally.
As a surveyor I wish it to be known that I have never had, nor would I want to have “cosy intimacy” with this government! I am sure that I am not alone in my profession in that and indeed many of us are actively applying our skills to the benefit of residential easeholders on a regular basis.
Bravo that man for actively applying his skills to the benefit of leaseholders. Might I ask, Mr Muldoom, is there any benefit for you?
My suggestion is that there should be a £10,000 per flat levy on the granting of tower block planning permissions to pay to clear up this mess. So for every 100 new flats built, or permitted to be built, £1m would be raised and raised at once. So this may add to cost of acquisition, or loss of margin, or most likely a bit of both. But if Persimmon can afford to pay an outgoing CEO, large scale developers can contribute £10,000 per new unit. Better still it would raise the necessary cash in advance, local authorities could manage the fund as they would collect the levy, and use it exclusively for remedying the cladding and other defects…and compensate those leaseholders for whatever they have already paid.
Fully agree with Ayisha above.
Abolishing leasehold needs to be addressed.
Likewise the urgent need for proper regulation of managing agents.
Self regulation by sham trade association codes of practice such as that of the ARHM is a joke.
Fully agree with Ayisha above.
Abolishing leasehold needs to be urgently addressed.
Likewise the need for proper regulation of managing agents.
Self regulation by sham trade association codes of practice such as that of the ARHM is a failure.
If I were a young man again I would piss off from this corrupt country and leave those in power who created the mess we call ‘Great Britain’ to carry on with their exploitation using these leasehold schemes which exemplify all that is wrong with how, we the people, are being used to benefit those who have no conscience or concern whatsoever for us and take our hard worked for money in order to pay for lavish lifestyles, usually in tax havens and with the blessing of a corrupt legal system.
I understand that a similar situation of corruption has evolved around the care home funding where payments for care are excessive and used to fund offshore debts.
If any young man or woman is reading this … GET AWAY FROM THIS CORRUPT COUNTRY !!
May I suggest HMG takes a close look at Le Code de la Copropriété passed into law 10 July 1965. Basically it works like a house turned into two flats where the owners are both leaseholders here, but also, usually, own one share each in the freehold. In France they are the outright owners of their flats, but have to comply with the terms of the Règlement de Copropriété so far as use, maintenance and renewal of the common parts are concerned. An AGM is called once a year and an agenda is circulated in advance. Anyone can add to that agenda, but nothing not raised in advance can be brought upon at the meeting. An agent, le gérant, prepares a report open what needs to be done and that is voted upon when, if passed he goes away and sees to it, having obtained quotes if need be. The flat owners usually appoint a committee of two or three who take a more active part. If anything it is worth someone having a look at this scheme. It is not totally different from our own, but the landlord is the aggregate of the flat owners so they all have an interest in seeing that their investment is not neglected, assuming that they can agree on the work to be done that is…and afford to pay.
P S I should also have mentioned that there is an obligatory system of guarantees starting at two months and rising to ten years, for very minor defects to structural ones, somewhat like our NHBC scheme. These have to be in place before work can begin and have to be backed by a bank or insurance company, so if the builder goes bust that institution has to pay up.