By Liam Spender
Liam Spender is a Trustee of the Leasehold Knowledge Partnership. Personally affected by the cladding scandal, Liam is a Solicitor-Advocate and Senior Associate at Velitor Law practising commercial litigation and arbitration in the City of London. Views in this article are personal and do not constitute legal advice.
Today this House of Lords made a further attempt to protect leaseholders from the crippling costs of cladding replacement and other fire safety work. In an unusual move, the Lords voted by a majority of 86 (322-236) to add an amendment proposed by the Bishop of St. Albans to the Fire Safety Bill. Several peers, included Lord Adonis, indicated that the Lords is prepared to see the bill run out of Parliamentary time unless it is amended to include protection for leaseholders.
The 86 vote majority was up from the 78 vote majority on a leaseholder protection amendment in March. There was only a 13 vote majority the first time the Lords tried to add leaseholder protection in December 2020.
The effect of the Bishop of St Albans’s amendment is to prevent leaseholders being billed tens of thousands in costs to replace cladding and to fix other fire safety defects. The amendment prevents these costs from being passed on to leaseholders until the government comes up with a scheme to cover the costs, preferably by allocating those costs among responsible parties, including builders and others.
Following the 2017 Grenfell Tower fire many residential buildings have been found to lack basic fire safety measures such as cavity barriers and fire stopping. Compounding this failure by developers, the government has heaped further costs on leaseholders by moving the goalposts on cladding and allowing fire service chiefs to impose 24 hour waking watches on buildings.
The Fire Safety Bill must now return to the Commons. Time draws short for the bill to be passed. The current session of Parliament is expected to end soon, before the Queen’s Speech on 11 May. If the Fire Safety Bill is not passed by the end of the current session it will fail. The government will then have to start again in the next Parliamentary session.
The government has taken a gamble by running down the clock on the Fire Safety Bill in an effort to press the Lords and rebel Conservatives into not adding any leaseholder protection. There is now a very real risk that the bill could run out of Parliamentary time. It will be interesting to see if the government makes further concessions to protect leaseholders to get the bill through.
A date for the Fire Safety Bill to be considered in the Commons should be announced on Thursday morning, along with Commons business for the rest of the week.
A Tale of Two Scandals?
As Baroness Pinnock pointed out during the debate, the government’s continued refusal to change the law to protect leaseholders is in stark contrast to its move yesterday to bail out investors in the failed London Capital & Finance (“LCF”). Around 12,000 people lost nearly £240 million when LCF failed in January 2019. LCF marketed risky mini-bonds as safe cash ISA accounts providing generous returns.
The failure of LCF led to a damning December 2020 report on the Financial Conduct Authority’s (FCA’s) failure to regulate the firm properly. A retired Court of Appeal judge concluded the FCA’s negligent supervision led to investors’ losses. Both the judge and the Commons Treasury Select Committee gave Sir Andrew Bailey – then boss of the FCA and now Governor of the Bank of England – a public kicking over the FCA’s incompetent supervision of LCF.
The Treasury announced yesterday that it will change the law to give all investors the protection they would have enjoyed had they been eligible to claim on the financial services lifeboat, the Financial Services Compensation Scheme, see details here: https://www.gov.uk/government/publications/london-capital-finance-compensation-scheme
Leaseholders are also the victims of regulatory failure and the greed and unscrupulous practices of the British construction industry. There is no reason at all why the government cannot protect leaseholders in the same way it has chosen to protect London Capital & Finance investors. The fact the government chooses not to do so is the source of the anger seen today in the Lords and among millions of leaseholders.
Powerful speeches in the Lords
There were a number of powerful speeches in the Lords, led by the Bishop of St Albans, Baroness Pinnock and Lord Adonis.
Rt Rev Alan Smith, Bishop of St Albans, again made the moral case for intervention. Dr Smith noted that the entire machinery of government had rapidly swung into action to call a summit and propose changing the law to ban the proposed European Football Super League. The bishop argued there was nothing preventing the government addressing the serious injustice caused to leaseholders in the same way.
Baroness Pinnock referred to the LCF bailout and again repeated that leaseholders were facing ruinous costs through no fault of their own as a result of failures by regulators, developers and others involved in construction. Baroness Pinnock said that if the government can intervene in relation to support for innocent victims of the Covid pandemic then it could easily fix the cladding scandal.
Lord Adonis spoke powerfully against the government’s attempts to bounce the Lords into voting the Fire Safety Bill through without amendment. Lord Adonis noted that the government had delayed deliberately bringing the bill back from the Commons even though amendments to the Trade Bill, considered on the same day, had been brought back to the Lords within a few days. Lord Adonis said that the Lords would not bend on this issue, which is of critical importance to hundreds of thousands of leaseholders.
Other speakers included the Earl of Lytton, who did not put his amendment to a vote, but who said there was a clear need for government intervention.
Lord Newby also spoke, repeating that Lord Greenhalgh and the government were continuing to avoid the issue as if they were copying a script from 1980’s TV series “Yes, Minister”. During his speech Lord Newby demolished many of the bureaucratic excuses offered by Lord Greenhalgh to justify not amending the bill.
The full voting record is here: https://votes.parliament.uk/Votes/Lords/Division/2507
Two Conservative peers voted against their party whip (Lords Blencathra and Randall).
Cross-bench former Law Lords Brown, Collins and Hope each voted in support of the amendment, despite the government’s warning that including the amendments in the bill would lead to litigation.
Retired judge Lord Etherton, former Master of the Rolls, joined the retired Law Lords in supporting the amendment.
Former senior civil servants Lord Butler (Cabinet Secretary and Head of the Civil Service 1988 to 1998) and Lord Kerr (Head of the Diplomatic Service 1997 to 2002) also voted to support the amendment, perhaps showing that the government’s objections on the grounds of practicality are ill-founded.
What does the Fire Safety Bill do?
The bill amends the Regulatory Reform (Fire Safety) Order 2005. The amendments make clear that the external walls of all buildings with 2 or more sets of domestic premises must be assessed for fire safety. The amendments also include the front doors of flats – which are often the responsibility of individual leaseholders – in that assessment.
Depending on the guidance the government issues on these assessments, the government’s own figures suggest up to 2 million residential buildings could need to have external wall assessments. Judging by the government’s track record with the Advice Notes (explained here: https://www.leaseholdknowledge.com/government-use-of-extra-statutory-powers-has-made-the-cladding-crisis-far-worse-than-in-australia-or-possibly-scotland-writes-lkp-trustee/) issued since 2017, we may be in line for further moving of the goal posts to suit the government’s headline driven agenda.
The Fire Safety Bill also removes any doubt that leaseholders are responsible for paying these costs. Not all leases currently allow this type of cost to be passed on to leaseholders.
That is why amendments to protect leaseholders from these costs are so important.
How did we end up here?
The text of a bill must be agreed by both Houses of Parliament before it can become law. That is unless the government uses the Parliament Acts 1911 and 1949 to force through a law. This happens rarely in practice, as explained in this House of Commons Library paper: https://commonslibrary.parliament.uk/research-briefings/sn00675/
The Fire Safety Bill has been passing backwards and forwards between the Lords and the Commons since February 2021. This is because the government will not accept changes to the bill to protect leaseholders from the ruinous costs of replacing cladding and repairing internal fire safety defects.
By convention the Lords is limited to asking the Commons to think again, not blocking or killing off legislation. It is unusual for the Lords to have held up the Fire Safety Bill for so long, making repeated attempts to amend it to protect leaseholders.
What does the result mean for leaseholders?
The substantial 86 vote majority in favour of the McPartland-Smith/St Alban’s amendment causes a serious political and logistical headache for the government. The majority for action to protect leaseholders was 8 votes higher than the last time the bill was considered by the Lords.
The logistical headache stems from the fact that the Fire Safety Bill is up against the end of the Parliamentary session. If the bill is not passed by the time the session ends, it will fail and the government will have to back to the start. There is a very real risk this could happen, which will inevitably reduce the time available for other government measures.
Today’s vote means government will again have to whip its MPs to vote against protecting leaseholders in light of the powerful moral arguments advanced by Church of England bishops to date.
What happens next?
The Fire Safety Bill will now return to the Commons. The bill was last before the Commons on 22 March. Sir Peter Bottomley, LKP patron and co-chair of the All Party Parliamentary Group on leasehold and commonhold reform, led a rebellion of 33 Conservative MPs with 8 abstentions.
Given that strength of feeling is running high on this, we can expect another sizeable backbench revolt when the bill returns to the Commons, as happened on 22 March (https://www.leaseholdknowledge.com/bottomley-leads-tory-rebellion-of-29-mps-but-government-defeats-amendment-to-fire-safety-bill/)
The full Commons vote result from 22 March is here: https://votes.parliament.uk/Votes/Commons/Division/987
Can the government be defeated in the Commons?
The Fire Safety Bill is England and Wales applies to England and Wales only. Theoretically, English Votes for English Laws rules apply, meaning only English and Welsh MPs are able to vote in the Commons.
Excluding Scottish and Northern Irish MPs gives the government a majority of 145 across the 573 England and Welsh constituencies. A rebellion of 73 backbench Conservatives would be required to force the government to accept the amendment in the Commons on English Votes for English Laws rules.
English Votes for English Laws rules were suspended last year as a result of the pandemic. Last time the bill was in the Commons, all Conservative MPs in Scotland voted, although the SNP abstained. MPs for the Northern Irish parties also voted.
A rebellion of anything close to 41 Conservative MPs involved last time will give the government pause for thought.
When will the bill come back to the Commons?
We should find out on Thursday morning (22 April) when business for next week will be announced.
The government is running out of time to get the Fire Safety Bill through. The current session of Parliament is coming to an end soon, perhaps as soon as the end of April. If the bill is not passed by then it will fail and the government will have to go back to square one during the next session of Parliament.
What happens if the Commons still does not agree to the amendment made today?
The bill will then have to back to the Lords. The arcane procedural rules of Parliament mean that each House of Parliament may only insist on the same amendment to the same bill twice (the “double insistence” principle). If that happens then the bill will fail and have to go through all Parliamentary stages again.
If the Commons does send the bill back to the Lords there is a high chance that the bill will fail due to lack of time. By convention the Lords should give way to the Commons. The strength of feeling is high, so that is not guaranteed.
What happens if the amendment is lost and the Fire Safety bill passes?
If the Fire Safety Bill eventually passes with no amendment to protect leaseholders then the forthcoming Building Safety Bill will be a chance to try to amend the law again.
Depending on the scale of any rebellion against the Fire Safety Bill in the Commons, the government may yet announce further concessions in terms of funding, levies on the construction sector or changes (perhaps even the abandonment) of its proposed forced loans scheme.
The government also has the power to produce a comprehensive financial solution to
Leaseholders still have everything to fight for. Affected leaseholders should get on to their MPs, urging them to vote in favour of the amended Fire Safety Bill when it comes back to the Commons.