Civil servants in the building safety team of DLUHC were informed bluntly this afternoon by directors of residents management companies and right to manage companies that they would resign rather than accept the role of building safety director imposed upon them.
The initiative, which appears to have surprised the leasehold team of officials, is to ensure that there is an identifiable, responsible person for building safety. But it is not a requirement for freeholder owned sites, and it is estimated that it will cost another £70,000 cost to leaseholders.
The policy, which is at consultation phase, is explained here:
Title: Building Safety Directors Lead department or agency: Department for Levelling Up, Housing and Communities Date: 18/11/2022 Stage: Consultation Source of intervention: Domestic Type of measure: Secondary Legislation Under provisions in Part 4 of the Building Safety Act 2022, the ‘accountable person’ for a higher-risk building can be resident-led organisations with relevant repairing obligations such as Right to Manage Companies (RTM) and Resident Management Companies (RMC).
But well-known leaseholder leaders such as Martin Boyd, Baz Jafar, Jim Illingworth of BrumLAG (Birmingham Leasehold action Group) and Giles Grover, of EOCs, all told officials that they would resign their directorships rather than impose a building safety manager.
They believed that the role will make someone criminally liable for actions that will be inevitably those of the managing agent. In short, it is duplication that shows officials have given the matter some thought, with yet again punishing leaseholders – with the expense – for the mistakes of other people.
One of the directors of an RTM site made clear that if the RMC board resigned then management of the site would return to the interests of Vincent Tchenguiz.
Mr Boyd emphasized that the initiative “will destroy all the reforms of leasehold that the department wants to put through”.
Earlier Mr Jafar, writing on behalf of the RMC Highmead Management Company Limited in Edmonton, north London, said: “I would like to make clear how disappointed I am that the government is ham-fistedly foisting a ‘Building Safety Director’ upon leaseholders, and specifically RMC and RTM run blocks without any sort of leaseholder or RMC/RTM stakeholder engagement before this point.
“There has been no detailed consultation or work in tandem with the people this will most affect – ie the volunteer directors of RMC and RTM companies. We have seen a pattern of experts and government departments trying to fix issues with leasehold tenure and specifically around fire safety that have caused untold misery and chaos – eg EWS1 forms; cladding; waking watches etc – because the guidance/regulations are often far detached from reality and are based on a set of assumptions which do not hold up in reality.
“The only way to stop the situation from getting worse is to engage directly with people like me who live and breathe these issues every day and work with us to create new rules and regulations, not simply consult on plans once they have already been laid as seems to be the case here.”
Mr Jafar, who holds down a full-time job, works long hours into the evenings and weekends undertaking unpaid RMC work, and “I will also have to worry about criminal sanctions for getting it wrong”.
“It is disingenuous to somehow portray that employing a Building Safety Director is either a choice or optional for RTM/RMC companies. It is 100% an imposition by the government facilitated through the back door under threat of criminal sanctions.”
Some suggestions on LKP’s concerns about the building safety director role:
1) There is some doubt that any person qualified to take on the proposed building safety director role would be able to obtain the relevant professional indemnity insurance. Even if they could obtain cover it seems very likely that cover would include a number of restrictions and conditions. It might also be possible that a situation would arise where it was possible to obtain cover for some sites but not others – particularly those with ongoing remediation
2) Even if the BSD were able to obtain relevant PI cover it seems inevitable for the BSD to take an over cautious approach given the BSD face all the criminal liability but faces none of the costs they might impose on the leaseholders.
3) There is some doubt the rest of a board would be able to keep their D&O cover which would also need to cover the BSD
4) This BSD role seems even worse than that of the building safety manager, dropped from the main bill, in creating the risk of conflicting views with the property manager and the board.
5) The costs may well be onerous. Although the estimate is a cost of £66K pre year to oversee an unknown number of buildings that seems to fail to assume this is someone taking on responsibility at director level
6) The role fails to understand that for all boards with a professionally appointed managing agent they operate as a non executive rather than operational board
7) The proposal will impact the financial basis on which many RMC and RTM sites operate as dormant companies
8) The currently insured party which oversees these HRB sites is the appointed professional managing agent who holds the relevant PI cover. In turn they appoint relevant specialists with their own PI cover. It seems illogical to lift this responsibility from all of relevantly qualified professionals in the supply chain and impose as part of the volunteer leaseholder board functions
9) The BSD role will almost inevitably conflict with s20 procurement process in the circumstances where the BSD deems a more expensive option more relevant despite a lower priced tender meeting the specification criteria.
10) The BSD role may also conflict with the fire engineers views in the FRA and these in turn may differ from those that the fire authorities or the insurers may set.
11) The proposal does not explain what happens if the BSD resigns leaving a period where the position is not filled.
12) Although the impact assessment makes some assumptions about the number of hours a BSD might spend per building it does not consider this is a person appointed to a corporate board who would therefore be entitled to attend all board meetings and be consulted on all matters that every other board member would consider. The proposal suggests that the rest of the board will have no right to dispute any decisions the BSD may make and no means to hold them to account for the decisions they make
13) As the consultation accepts the BSD role gives rise to potential conflicts of interest – the risk of a PPE type contract with a friendly supplier seems almost inevitable. Our recommendation is that the current model of property management which has developed over many decades is developed to perform the role it has always done up to this point.
All managing agents are responsible for ensuring the safety of the buildings they oversee. They hold the relevant PI cover and in turn appoint either their own specialist staff or contract them to advise or carry out particular types of work. In turn those staff or contractors hold the relevant PI cover for their work.We would argue there should be statutory regulation of all managing agents and failure to properly manage should result in action being taken against them.
The current system which allows unregulated agents to oversee complex buildings is not compatible with any aspect of the golden thread.We would argue the only point at which an RMC or RTM board should face potential liability is IF they choose to ignore the advice of its appointed professional managing agent or their relevantly appointed experts.
As Dame Judith Hackitt and other experts have explained many times we must return to a proportionate approach. Giving RMC and RTM boards the choice of accepting criminal liability for issues they do not directly control or appointing a new third party to take on that liability is disproportionate and will not result in safer buildings.