Michael Gove gets the cartel of taxpayer subsidised housebuilders to pay up £5bn towards the building safety scandal … but not Lendlease or Galliard

Succeeding where his predecessors failed, Communities Secretary Michael Gove has forced 35 housebuilders to agree to fix building safety defects revealed after the Grenfell disaster in June 2017.

This is a considerable achievement for Mr Gove, which should be recognised by leaseholders and wider society.

It is certainly recognised by the Home Builders Federation, which lamented that plc housebuilders were characterised as a “cartel” by Mr Gove.

On January 10 this year, Mr Gove said On January 10 this year, Mr Gove said

1. We must protect leaseholders;
2. We must ensure those responsible pay to fix the problems they created; and
3. We must restore common sense to the assessment of building safety risks, speeding
   up fixing the highest risk buildings and stopping buildings being declared unsafe
   unnecessarily.

Missing from the list of housebuilder sign-ups is Australian giant Lendlease, which was quick to go to court in Manchester to ensure cladding remediation costs were dumped on leaseholders.

Ground rent speculators Pemberstone seek £3m tribunal ruling over Grenfell cladding

Also absent is Galliard, owned by the Irish Conway family, who were pugnacious in insisting they would not pay up for cladding early on in the crisis, which centred around the prime site of New Capital Quay in greenwich, south east London.

(Galliard v NHBC v the Government v Cladding suppliers) v the Leaseholders

The non-involvement of Lendlease, which is a member of the Home Builders Federation, is a disappointment to 284 leaseholders at its One The Elephant site in Elephant and Castle, south London.

They claim they are looking at bills of £700,000 to £800,000 to fix composite decking balconies at the site, with no sign that Lendlease is going pay up at all.

This is in spite of Mr Gove saying:

“Our leaseholder protection measures also protect qualifying leaseholders in buildings above 11 metres from costs associated with non-cladding defects, including interim measures such as waking watches.”

Mr Gove added:

“Building owners and landlords will be prevented from passing on costs to fix these non-cladding defects where they are linked to, or are, the developer. Where no landlord is or is linked to the developer, building owners and landlords who can afford it will be required to pay in full for non-cladding costs. Only where the landlord or building owner is not linked to the developer and cannot afford to pay in full, will non-cladding costs be apportioned among all those with an interest in the building. In this case, the contributions of qualifying leaseholders will be capped and those leaseholders who are most vulnerable will be protected in full from all costs.

“Through these legislative protections and by ensuring that all actors take a proportionate approach to remediation, we will protect leaseholders from ruinous remediation bills.”

In June 2017 Lendlease sold the headlease to One The Elephant for £3 million to Adriatic Land 7 (GR1) Limited, part of the secretive Long Harbour fund, which hides the beneficial ownership of the freeholds behind nominee directors and are often held offshore.

Lendlease told leaseholders at One The Elephant in January:

“In reference to your comments on the composite decking on balconies at OTE, as you and your Fire Engineer acknowledged [this point is disputed by the leaseholders], the balconies at OTE complied with building regulations at the time of completion of construction in 2016. Our understanding is that the current building owner is responsible for arranging any maintenance or improvement work that is required to meet the latest government guidance.

“We note your comments on the government announcements last week, we’ve always been supportive of the Government’s drive to deliver an industry wide solution that can help resolve these issues. There is more detail to follow on the latest proposals and we will be considering that as it becomes available. We continue to stress that any measures taken need to be fair, effective, and simple to implement for all parties.”

According to leaseholders at One The Elephant, Lendlease carried out extensive works between March 2018 and November to 80 apartments to rectify issues with walls and ceilings, and residents had to move into temporary accommodation for up to five weeks.

During the same period Lendlease undertook remedial works in apartments after walls were opened and inspected to review fire safety issues.

Between May 2017 and April 2020 Lendlease, with Otis, undertook multiple works on the lift shaft after what leaseholders describe as “significant issues with frequent outages as well as a very poor ride quality”.

Since mid July 2019 Lendlease undertook extensive remedial works to address another major defect that required all facade stones around balconies in the tower (all 254 of them) to be removed and replaced. These works have just been completed.

Finally, the soffit panels on all balconies need to be replaced, according to leaseholders, as the powder-coated finish has not been correctly applied. These works were due to start in January 2022 and continue until May/June, “causing even more disruption and inconvenience to leaseholders”.

Last month the government was hailing the investment of £28.5 billion Australian investment in the UK, with Lendlease accounting for £5.5 billion of it.

Australian investors commit £28.5bn in major economic boost for UK

Top Australian investors announce £28.5 billion for clean energy, technology and infrastructure projects across the UK Today’s investment commitments will create thousands of jobs and support major developments from Orkney to Southampton PM hails transformative investment which will help level up, boost quality housing stock and drive the green energy transition Leading Australian businesses have announced major new investments totalling £28.5 billion in projects across the United Kingdom, as the Prime Minister hosts a UK-Australia investment roundtable at Downing Street this evening [Wednesday 30th March].

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Full statement from Department of Levelling Up, Housing and Communities

Agreement with major developers to fund building safety repairs

The government has revealed a wide-ranging agreement that will see industry contribute £5 billion to address the building safety scandal.

• Major homebuilders accounting for half of new homes pledge to fix all unsafe tall buildings they have had a role in developing
• More than £2 billion committed by over 35 developers to make buildings safe
• Extension to the Building Safety Levy will raise a further estimated £3 billion forcing industry to pay and protecting innocent leaseholders

The government has today (13 April 2022) revealed a wide-ranging agreement that will see industry contribute £5 billion to address the building safety scandal.

In a victory for leaseholders, Levelling Up Secretary Michael Gove has agreed a solution with the housing industry that will see developers commit a minimum of £2 billion to fix their own buildings. Industry will also pay up to a further £3 billion through an expansion to the Building Safety Levy.

Under the new agreement, which will become legally enforceable, over 35 of the UK’s biggest homebuilders have pledged to fix all buildings 11 metres+ that they have played a role in developing in the last 30 years.

For the companies yet to make the pledge, the Secretary of State has also confirmed there is little time left for them to sign up, and that those who continue to refuse will face consequences if they fail to do so.

As set out in January, a new government scheme will also see industry pay to fix buildings where those responsible cannot be identified or forced to in law. This follows previous confirmation that plans for a 30-year loan scheme paid for by leaseholders would be scrapped.

The new scheme will be funded through an extension to the Building Safety Levy that will be chargeable on all new residential buildings in England. This is expected to raise up to an additional estimated £3 billion over ten years from developers and ensure no leaseholder in medium-rise buildings faces crippling bills, even when their developer cannot be traced.

New proposed laws, announced in February under the Building Safety Bill, will ensure qualifying leaseholders are protected from the costs of historical building safety defects, including total protection against cladding costs. Today’s deal establishes that the industry responsible – not innocent leaseholders – will pay.

Levelling Up Secretary Michael Gove said:

“Today marks a significant step towards protecting innocent leaseholders and ensuring those responsible pay to solve the crisis they helped to cause.

I welcome the move by many of the largest developers to do the right thing.

But this is just the beginning. We will do whatever it takes to hold industry to account, and under our new measures there will be nowhere to hide.”

The pledge published by government today commits developers who have signed up to legally binding contracts, and to implement their promises as soon as possible.

The detailed agreement confirms developers will:

• Act as quickly as possible to fix buildings
• Implement new proportionate guidance on building safety
• Regularly report to leaseholders and government on their progress
• Respect an independent dispute resolution process established by government; and
• Refund money already received from the taxpayer to fix their buildings.
• More information on how government plans to enforce the agreement in law will be released in due course.

The government is introducing new powers that could be enforced on a developer should they breach the agreement, as well as on any remaining companies who fail to sign up. These new powers would allow the Secretary of State to block those who refuse to sign from building and selling new homes.

The government is clear that building safety is an industry wide issue. Cladding and insulation manufacturers are yet to accept their share of responsibility and come forward with a proposal. The Secretary of State has also today written to the Construction Products Association and warned he will do whatever it takes to hold cladding and insulation manufacturers to account.

Today’s announcement follows a statement from Mr Gove in January, when he set out a 4-point plan to reset the approach to building safety and give leaseholders more protection against unfair costs.

Further Information

The Building Safety Levy will be chargeable on new residential buildings of all heights – see clause 57 in the Building Safety Bill.

Leaseholders will be contacted by their developer in due course to confirm whether their building is covered.

The Building Safety Bill includes far reaching provisions to protect qualifying leaseholders, in law, from the costs associated with historical building safety defects. Qualifying leaseholders are those living in their own homes or with up to three UK properties in total in medium and high-rise buildings.

The Building Safety Bill will also give government, regulators, and leaseholders and others new ways to hold to account companies that fail to do the right thing. More information is available here and further details on these measures will be announced in due course.

List of developers who have signed

Pledge letter

Letter to the Construction Products Association