By Harry Scoffin
The government’s post-Grenfell building safety reforms risk making flat living in England more costly and more complicated for all involved, MPs were told on Monday.
The Communities Select Committee heard that plans to introduce a building safety manager role would have “a tremendous effect” on how managing agents operate, while loading up freeholders “with an extra layer of activity” and administration.
The building safety charge also failed to win over the hearts and minds of leading industry figures.
In an unexpected pro-consumer move, Richard Silva, executive director of the £1.8 billion residential freehold fund manager Long Harbour, teamed up with Nigel Glen, CEO of the Association of Residential Managing Agents, to discredit the government’s flagship proposal of a building safety charge:
“I actually have some sympathy with Nigel’s view as well that it could just be a separate element or line item within the service charge budget,” said Mr Silva.
The rule change would controversially allow landlords to force through new bills under the guise of block safety up to every three months, with leaseholders – who would have fewer rights than if they were a standard service charge – given just 28 days to settle the demands.
“It doesn’t make sense to me to have the building safety charge, apart from transparency, outside of the service charge. I think that enters a whole new regime of cost we don’t need, that are not necessary, so you have to have separate bank accounts, separate accounts, separate debt recovery, separate everything. That is double the amount of administration,” said Mr Glen.
What constitutes a reasonable building safety charge would then be subject to “years” of litigation, he warned, with test cases brought by aggrieved leaseholders and managing agents “dragged into” the tribunal process.
The new charge also threatens the predictability of existing service charge arrangements for leaseholders being billed on a six-monthly basis, Mr Glen added.
Earlier in the session, LKP chair Martin Boyd said that not only would a separate charge create more cost, but that the “mad” mechanism would also make leaseholders perpetually vulnerable:
“The concept that you can send out one of these demands at 28 days’ notice at any point seems mad. You go away on your summer holidays, you arrive back and then take a couple of days to get sorted. You are arriving with a bill that you have got to settle within a week or so.”
In comments to the Financial Times in July, Mr Boyd raised fears that the discrete building safety charge and the light touch regulation underpinning it could represent another revenue raiser for investors in the freeholds to blocks of flats.
Leaseholders have attacked a bill designed to make buildings more than 18 metres high in England safer following the fire at Grenfell tower, saying it will add to their costs and leave them in unsellable homes.
But freeholders, as the self-proclaimed long-term custodians of apartment buildings, never seek to make money out of people’s homes as it is, and would not be tempted to do so with any new statutory charge, said Mr Silva to the committee:
“Let’s not forget, building safety charges or service charges even are not profit centres. They’re basically there, designed ideally to match to the penny the costs of running a block.”
Despite claiming that Long Harbour already fulfils the Bill’s accountable person role in around one-third of its developments because the leases give it management control, Mr Silva conceded that the fire last year at De Pass Gardens on Barking Riverside, where “thankfully nobody died”, taught the company, whose subsidiary owns the headlease, that residents need a single point of authority and “strong leadership”.
He suggested that the confusion came about solely because of it being a “multi-tenure block” – and had nothing to do with its secretive ownership nor the legal maze that is leasehold, of course:
“It’s interesting also in the previous panel, Victoria Moffett [head of building safety and fire programmes, National Housing Federation] mentioned about the fire in Barking – that’s one of our blocks – where one of the issues there from the accountable person’s perspective we found, and one of the big lessons we learnt from that awful event, thankfully nobody died, was that actually, because it’s a multi-tenure block and in the understandable emotion of the event happening there’s a lot of people running around not really knowing where to turn.
“I think strong leadership in that environment is important, but also making sure it’s very clear who the residents need to go to in a complicated situation like that.”
In June, BBC Radio 4’s You and Yours programme reported that Barking fire leaseholders had met with the company to demand it forfeit the freehold and leave the site.
Speaking for England’s housing associations, Victoria Moffett, head of building safety and fire programmes at the National Housing Federation, doubted whether the Bill would “deliver a whole-building approach”, saying its wording implies residents in a complex block could have the misfortune of having to deal with more than one accountable person.
ARMA’s Mr Glen questioned the merit in “bringing all sorts of administrative issues in” by having a potential rival source of management on a development, with a property manager having to keep referring to the building safety manager over contractors and major works projects.
The building safety manager would be empowered to deal with leaseholders through a separate complaints procedure, although it is unclear whether they would have the customer service expertise or the time required to handle resident complaints on a daily basis.
Citing the ministry of housing’s estimate that the average annual salary would be £60,000 for work across no more than a dozen blocks, Mr Glen suggested the policy assumption underpinning the building safety manager role was flawed.
A seemingly simple complaint flagging a bicycle parked in the corridor is “never a one letter, that’s a whole range of things that can crack out of that”, he countered.
Instead of “introduc[ing] legislation that requires us to employ people that don’t exist”, there should be a “building safety function” introduced to allow managing agents to deal with leaseholders as opposed to a highly paid specialist fire engineer, Mr Glen told the committee.
Long Harbour’s Mr Silva was similarly downbeat, saying that while he recognised the need for effective resident complaint processes, he was “unconvinced” that the “highly skilled, highly trained building safety manager” should spend their time assessing occupier concerns.
He cautioned that where a managing agent could not handle complaints “across the piste”, which would be the case on lower risk self-managed blocks, the residents’ management company or commonhold association can be responsible.
Mr Silva also argued that all flat owners, irrespective of whether the managing agent has been imposed upon them by “the freeholder to protect its interests”, will be out of pocket due to the compulsory building safety manager:
“… the cost and capacity of employing the building safety manager, whether that is by the managing agent on behalf of a resident-led management structure or by the freeholder to protect its interests, will inevitably result in greater costs to the consumer.”