By Harry Scoffin
LKP chair Martin Boyd was quizzed on fire safety in residential buildings and the government’s handling of post-Grenfell remediation works at City Hall yesterday.
He sat alongside professionals from the London Fire Brigade, the Royal Institution of Chartered Surveyors, London Tenants Federation and Barking & Dagenham Council’s BeFirst regeneration corporation.
Speaking to the London Assembly Fire, Resilience and Emergency Planning Committee, Mr Boyd highlighted that the structural deficiencies of leasehold tenure have an impact on the way high-rise buildings are maintained in this country:
“Speaking as a non-expert on anything to do with the technical aspects of maintaining buildings, there has been a lack of connection between the people who live in these buildings and the way these buildings are controlled. We have to do something to ensure that that changes.
“We also need to address the problems that the Fire Brigade have in being able to inspect the insides of flats and for property managers, the ability to enforce safety within a flat as well as the common areas.”
Readers of LKP will know that “owner-occupiers” of private leasehold flats have no control over how their block is managed with a third-party landlord having appointed the managing agent, which can complicate matters.
The distant freeholder, sometimes offshore, may not have the same interest as those living in the property. LKP has recently analysed government efforts to give freeholders new statutory duties as part of a post-Grenfell building safety regime.
When asked about the immediate barriers to making private residential leasehold blocks safe, Mr Boyd slammed government for “getting itself into a complete bind as to what happens”:
“… When we first went to see the housing department in 2017, after Grenfell, we said ‘this has opened up Pandora’s box and it’s going to get much, much worse.’
“We’re now in a position where the Secretary of State got an agreement to find £200m out of the department’s own budget to fund the private blocks some time after they had agreed to help fund the social blocks.
“But, in doing so, he was required to sign a letter by the permanent secretary Melanie Dawes to say that his use of the money was in breach of government spending rules and that there would be no further funding for other forms of cladding.
“Now everyone knows that we are likely to get other types of cladding found to be unsafe. So we’re back where we were in 2017. Nobody is sure how it is going to be funded. And we have a whole group of people who are suddenly going to be living in blocks that are deemed to be unsafe.
“We will have more waking watch. We will people who can’t sell their homes if they own them. They can’t move if they’re renting their homes.
“They face all sorts of mental stresses.”
Melanie Dawes’ intervention over the ACM cladding fund can be read HERE.
First reported by Inside Housing magazine, the strongly worded letter from the top civil servant to James Brokenshire makes a series of interesting contributions. It signals the civil service’s generally low opinion of leasehold ownership.
Melanie Dawes, permanent secretary of the MHCLG (picture: Guzelian) Government’s £200m cladding fund ‘will not be repeated’, says top housing civil servant #ukhousing #EndOurCladdingScandal In a letter written to the housing secretary James Brokenshire, Melanie Dawes, permanent secretary of the Ministry of Housing, Communities and Local Government (MHCLG), wrote that the grant fund for the remediation of aluminium composite material (ACM) cladding failed the government’s ‘managing public money’ test, and that the secretary of state “should be clear” that it will not be repeated again.
It was suggested that establishing a fund to pay for the removal of combustible Grenfell-style cladding represented a wealth transfer to middle class leaseholders:
“The distributional impact is likely to be slightly regressive since leaseholders, on average, have incomes higher than those of the general population. As such the proposal does not meet the normal tests of Value for Money.”
The Melanie Dawes letter also ruled out emergency loans to help flat lessees cover the costs of cladding removal.
However, the communication showed an awareness of the fact that freehold landlords are not landlords in the traditional sense of the word.
LKP has long argued that third-party freeholders are primarily interested in the income streams of a building – they care less about the day-to-day maintenance and health of a block, especially when there is minimal reversionary value (999-year leases).
Ms Dawes said this of building owners:
“Too many private sector building owners have failed to see the serious nature of the situation. Some have been uncooperative and unwilling to let local authorities take the necessary samples to test their cladding. In some cases, it has taken more than 12 months to complete tests on individual buildings. Even when cladding has been found to be unsafe, freeholders have been slow to recognise that they need to act.”
“The companies which own freeholds typically do so for their value as long-term, low-yield investments. Short of taking drastic legislative action, we have no means to compel them to undertake remedial work at their own financial risk. They are therefore reliant on up-front contributions from leaseholders before work can proceed. As a result we find ourselves in a situation where the understandable reluctance, and in some cases inability, of leaseholders to pay is now the main obstacle to further action.”
There is also an acceptance by Ms Dawes that while both prime minister Theresa May and the housing secretary have repeatedly stated their view that recladding costs should not fall on leasehold tenants, the nature of landlord and tenant law means that it is the leaseholders who must pay for any major works to buildings not owned by them:
“But in the vast majority of buildings there is no relevant warranty or insurance policy and under the terms of the leasehold contracts, liability for the cost of the work appears to rest with the leaseholder. The few court actions that have taken place have confirmed this contractual position.”
Alongside a commitment to implementing the proposals for a new building safety regime by Dame Judith Hackitt, Ms Dawes highlights MHCLG’s work to shift away from leasehold by popularising commonhold and the department’s ongoing efforts to improve the regulations around reserve funds:
“… reinvigorating commonhold as an alternative tenure to leasehold, including additional provisions to ensure that commonhold associations have the appropriate financial plans to respond to an emergency; and exploration of reforms to service charges to include consideration of mandatory sinking funds so that unforeseen costs of maintaining a building are accounted for and are transparent to leaseholders.”
At City Hall, Mr Boyd made the policy recommendation of developer bonds:
“We should have got to a better solution by now. We need to find a long-term method of supporting our high-rise buildings.
“They’ve already begun to move to that in some of the other countries, where they require developers to set aside funding to put into a bond system so that can help cover costs of defects that may arise during a building’s life.
“We need that over here at some point. There is no other way – it’s fairly obvious that government cannot keep finding money to fund different sorts of defects in buildings. But we also can’t just put those costs on to the individual people who may own flats in these buildings, whether it is in the social sector and they’ve got a right to buy flat or whether it is in the private sector.”
LKP fully supports this proposal.
In January 2018, a law came into effect in New South Wales, the home of strata title, which mandates developers of high-rise apartment buildings to lodge a building bond of 2% of a building’s contract price.
It puts the focus on housebuilders and the construction industry to up build quality. The money is time-limited and should return to the developer after an inspector has certified structural integrity two years on from building completion. Critics say the initiative could negatively impact the delivery of affordable housing.
Mr Boyd also used his appearance at City Hall to comment on the lack of joined-up thinking in government.
He said that last year’s statutory instrument on recognised tenants’ associations has actually made it harder for leaseholders to act as a collective and have greater say over how their buildings are run, which has a knock-on effect on building safety:
“I think there’s a bit of a problem in that we have got different bits of government facing in different directions.
“We had a statutory instrument introduced last October on recognised tenants’ associations, which everyone accepts has now made it more difficult to form residents’ groups. And yet we have the work of the buildings safety team saying we must engage more effectively with residents.
“So if you’ve made it more difficult for them to form residents groups, and it’s absolutely true, you are not going to get the flow of information coming through these consultations long term. It is only going to happen because either the people who run the buildings are managing to get information across to the people who live there, or the residents themselves are helping to pass that information over. And if you don’t use both of those, we’re going to get inefficiencies in the system.”
LKP maintains that the statutory instrument on RTAs needs to be completely rewritten if government is serious about leaseholder empowerment.
Residential leaseholders are naturally more vigilant around potential safety breaches than managing agents and third-party freeholders who do not live in the buildings.
They must be allowed to set up recognised groups with as minimal bureaucracy and stress as possible.