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:
Building safety directors: economic impact assessment
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.
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4 resident directors out of many thousands is hardly a “mass resignation”. Your headline seems rather misleading in my humble opinion.
Please don’t be silly Bernie. The meeting was organised at very short notice and I took 5 directors along – all said they would resign. One asked not to be named. We know many more directors who have said the same.
The proposal has many flaws as I’m sure you would understand. What I still don’t understand is who on earth told officials this proposal was a good idea.
I’m a director of an RTM, and I too would resign if these rules are enforced. It’s absurd.
I am a RTM director, one of four, 32 flats in the block. Agree with all that is written here and the comments. Very badly thought out proposal, I and my fellow directors would likely resign if the building safety director requirement happens. It is hard to understand how such bad policy sees the light of day without thinking of the consequences in the real world.
Government seems intent on perpetuating its own chaos.
Blair’s deregulation measures in 2004 thru to 2006 were the catalyst for negligence in fire safety planning and implementation
Now, 5 years post-Grenfell, inky-fingered civil servants are looking for fixes instead of using proper Consultation to arrive at sensible outcomes
Presumably the latest fixes were visualised by civil servants working from home in their pants
As a Director of a 400 flat unit: I would resign if I was forced to accept criminal responsibility where the actions of a managing agent, engaged as a qualified professional adviser, were deemed insufficient, and where I have no personal expertise to judge whether they are performing those duties correctly.
The more I read about appointing a Building Safety Director the more confused I get. Whilst the Building Safety Act had a last minute amendment to the requirement of an ‘accountable person’ to that of allowing the hiring of external Directors, it’s my understanding that doing so is not mandatory.
So, the questions are:
1; If leaseholders do take the route of hiring a Building Safety Director (who is only responsible for acting under certain parts of the Building Safety Act and removing such liability for any failures away from RMC/RTM Directors as I understand it) ) how do leaseholders know they are getting the right person for the job?
2: How is renumeration to be determined? Nigel Glenn, Executive Chair of the Property Institution says the market will determine this but my question would be how?
3: A building Safety Director is not required to be a leaseholder so is there the potential for conflict between paid external Directors and those current unpaid Directors who know their buildings well, want to hold onto their role but may find themselves having to assist the paid Director?
Fortunately my build is a 1930’s open plan build with no cladding and minimal fire risk but this is a major issue facing so many RMC’s and RTM’s that it’s important for EVERYBODY involved in block management to understand and contribute views and opinions where they can.
Sharon
You are right. In answer to your questions
1) Leaseholders won’t know if they’re getting the right person. In one of the meetings of the group promoting what was the building safety manager role one person said at a recorded meeting they did not think there was a single person with all the relevant skills. The idea safety is the responsibility of one person is a bad idea. We have always had specialists in particular areas with the relevant qualifications and relevant insurance to ensure that things like lifts and the AOV and the alarm systems are safe not a single person. There has also been plenty of legislation to help ensure things are kept safe and action that can be taken if the rules not followed.
2) Since these people do not exist and will not be able to get insurance then the market rate will be very high
3) You hit the nail on the head with this one. There is no work in any block of flats does not have some sort of safety aspect so does that mean the safety director has a veto on every issue. Lots of decisions any board takes are not binary and the board would normally look at a range of strategic options and their thoughts are guided by the managing agent who is in turn guided by their specialists. Most importantly why on earth should all the unpaid directors take the risks on their head – the act may absolve the unpaid board of responsibility under the building safety act but it does not remove their liabilities under the companies act. In the past RMC and RTM boards have always know they face potential liability but mitigate that risk by employing professional managing agents and their specialist staff. There is of course one more major issue under this heading. All the unpaid directors are working in the interests of their building and their homes – the third party paid director is not liable for any of the costs and has NO interest in the building other than to avoid making any decision that might have the remotest possibly of some sort of action being taken against them if they do not take the most risk averse option on even low risk issues.
Thank you very much for your detailed response.
I note that a key function of the Building Safety Act 2022 is, and I quote “”to create a clear, proportionate framework for the design, construction, and management of safer, high-quality homes in the years to come”.
What a crying shame that instead of this having always being the norm, Government, developers, freeholders, councils etc thought that cost cutting, knowingly using defective materials to create buildings not fit for purpose and giving backhanders to each other was more important than safe homes and people’s lives!
I’m an RTM director despite no longer being a leaseholder — staying on for now to the help the board. Although we have director’s insurance I think criminal liability is too much. Not just would I resign, as I think would others (we haven’t discussed this), the chances of any future directors stepping forward would, I am certain, be nil.
Perhaps we could take a leaf from the crooked landlord’s book and appoint nominee directors in the British Virgin Islands?