Victoria, one of Australia’s eight states/ territories, has put aside £330m to remediate Grenfell cladding: England has come up with £200m
By Sebastian O’Kelly
Mansfield College, Oxford, hosted a fascinating one-day conference yesterday into the Grenfell tragedy and its devastating repercussions to flat owners in blocks with similar cladding across the world.
Lawyers predominated, but there were also contributions from construction engineers, fire safety experts, an MP, an Australian lawyer and leaseholders caught up in this relentless misery.
The event was organised by Professor Susan Bright, who has spoken at the Westminster cladding meetings organised by LKP and hosted the All Party Parliamentary Group on leasehold. Indeed, she addressed the APPG on the subject last week. She was helped by Justin Bates, the barrister who is a controversial figure among leaseholders but who has concerned himself with the fire safety issues that emerged from Grenfell.
Professor Bright also wrote this in May:
The Government’s Rescue Plan and the Unanswered Questions
Readers of this blog will be familiar with the problems facing leaseholders in private blocks of flats with combustible cladding. The government’s announcement on 9 th May 2019 of the fund to assist with remediation, discussed in a previous post by David Sawtell, is most welcome.
The conference was held under Chatham House rules, which means that the identity of the participants cannot be revealed.
It quickly emerged that this was very sensible, although the agenda and speakers are, in fact, published by the Oxford law faculty here: https://www.law.ox.ac.uk/sites/files/oxlaw/legal_perspectives_on_putting_buildings_right_post_11.9.19_0.pdf
Several in the audience did not hesitate to describe government fire safety officials as “corrupt” and some were named: the corruption here being, one assumes, covering up errors and flawed regulations rather than bungs.
Some of the panel speakers were a little too forthright for the cold light of print, as well.
Then there were the leaseholders. Some were from New Capital Quay, the Galliard site in Greenwich, and others from Northpoint, in Bromley, where Taylor Wimpey is declining to pick up the bill (the site was built 20 years ago by a company it subsequently bought).
These sites are in the public domain, but others are not and this preference for discretion must be respected.
The message of the day was: the law might help, but it will require a legal action against developers, warranty providers or regulators that would probably end up after several years in the Supreme Court.
What group of leaseholders – given the strains of living in one of these blocks and the financial toll – is really going to stick together to face that?
The only possible answer is access to public money, through loans or grant. Although, hopefully some successful litigation will be initiated against the culpable.
But the day of the conference Inside Housing, which has been brilliant on this, reported:
Private cladding fund ‘starting to feel like a PR stunt’, say leaseholders
Inside Housing, news, analysis, and comment about the social housing sector in the UK.
The curious decision of ex-Communities Secretary James Brokenshire to make available £200 million for sites with AMC cladding – but not for sites with other cladding or fire safety defects – was not explored. Although we did learn that Victoria, one of Australia’s eight states/ territories, has put aside £330 million.
Victoria announces A$600m fund to replace combustible cladding
While the task force suggested that the state government could achieve this by requiring owners to transfer their legal rights to the state as a condition to receiving the rectification funding, we do not consider that this approach is likely given that it would transfer the cost and inconvenience of pursuing recovery onto the state.
Nor was the exceptional decision of his permanent secretary Melanie Dawes to make public her reservations about this political intervention.
Cladding crisis reveals why freeholders are an impediment to any solution
While LKP will be delighted for the recipients of this money, Mr Brokenshire’s decision has opened as many questions as it has answered: are blocks of flats covered in equally inadequate cladding material to be excluded simply because it is slightly different to the ACM on Grenfell?
There were plenty in the audience, apparently with some experience of decision-making at the MHCLG, who would have had views on this subject.
There was a general scepticism about the build quality of new UK apartments and houses from those qualified to know something about it.
But this was mainly a conference of lawyers who have to react to the law that is, not to what should be.
The below are some impressions of the day:
Why is my life to be ruined by a fault in the system, asks leaseholder
There was a powerful speech by a leaseholder in a 57-flat block built in 1999 by a company that was subsequently purchased by Taylor Wimpey (which is not paying out to remove the cladding).
S/he bought the flat in 2015. After the Grenfell disaster ion June 14 2017, which killed 72 people, a 24/7 waking watch was introduced at the insistence of fire safety experts, which the leaseholder initially welcomed.
But the fears were such that “I stopped inviting family and friends over.”
Only later did the leaseholders discover that this was costing them £6,000 a week. The cladding removal bill is £2.5 – £3.5 million.
Leaseholders, who have a residents’ management company, tried to reduce this by doing the waking watch themselves.
There was no prospect of the freeholder paying to remove the cladding in response to ministers’ ill-informed exhortations: the site paid out only £7,500pa in ground rent.
“As the leaseholder I am the last person responsible for this mess. I did not pass the regulations; I did not build the building; I do not own it. Yet I pay.”
The leaseholders decided last year to raise the matter with the media, including LKP.
“Then the £200 million was announced, but we still do not know whether it applies to us. If not, the freeholder will bill us for this.
“But ACM is just the tip of the iceberg: many other blocks have now come forward with fire safety problems. What about them?”
How Australia is dealing with the cladding scandal
One of the most interesting presentations of the day was from an Australian lawyer.
Australia with its fast growing population began building significant quantities of apartment blocks from the 1990s. These are owned with commonhold, or strata title, so there is no third party landlord as in England who nominally owns the building but in fact owns the income streams from it.
In 2014 there was a fire at the Lacrosse Apartment Tower, in Melbourne, Victoria, which was the first court case involving ACM cladding.
The ruling in April has awarded A$5.7 million against the builder.
Lacrosse fire ruling sends shudders through building industry consultants and governments
On the last day of summer for 2019, the Victorian Civil and Administrative Tribunal (VCAT) delivered a burst of sunshine to apartment owners at the high-rise Lacrosse building in the Melbourne Docklands precinct. Lacrosse suffered a serious cladding fire on November 24 2014, started by a single cigarette on a balcony.
No one died in the Lacrosse fire, attributed to a cigarette on a balcony, but then there was Grenfell.
“Then the complacency ended. We all thought good grief. We must do something more.”
Then there was the Opal Tower evacuation in December 2018:
Sydney Olympic Park Opal Tower evacuation: 51 units deemed unsafe
Residents from 51 units in a brand-new Sydney high rise were still unable to return to their homes on Wednesday following the block’s evacuation on Christmas Eve when cracks appeared on the 10th floor. Emergency services have said there are no longer fears the Opal Tower could collapse, after loud cracking was heard by residents in Sydney’s Olympic Park on Monday afternoon.
And in February 2019 the Neo 2000 Apartments fire. “It was supposed to be safe with minimal ACM. But the fire spread.”
Combustible cladding helps fire spread up Melbourne high-rise as 150 evacuate
The residents of a Melbourne apartment complex, which was damaged after a fire spread up the side of the high-rise building, will not be allowed to return to their homes until essential safety work is done, the City of Melbourne says.
And in June 2019 Mascot Apartments in Sydney:
Residents left homeless, crying in the street after Sydney high-rise evacuation
Updated June 16, 2019 00:35:28 A resident of a Sydney apartment block evacuated over structural concerns says he was left crying in the street and threatened with arrest after trying to re-enter the building to retrieve his pets.
And in August the Mordialloc Building evacuated:
Mordialloc building evacuated due to cladding
An emergency evacuation order was issued giving residents 48 hours to leave.
The Australian lawyer added:
“Fire alarms did not go off. Sprinklers had not been checked. The conversation moved from cladding to fire safety in general.”
There were particular issues at Mascot Apartments, which 10 years after being built are now “uninhabitable”.
The lawyer talked about the wide “field of opinion” among the experts deciding on building regulations. Each set is different in the eight Australian states and territories.
The lawyer addressed the speculative boom in housing and apartment building, which is no longer driven by owner occupation.
The lawyer raised an interesting point about the “global supply chain” of building materials: “which is nothing to do with quality [of these materials], but our risk appetite.”
In other words, some societies might be less bothered by a fire in an apartment block involving deaths than others. It was not a thought that was explored.
As it happened, I was in Italy when Grenfell occurred in June 2017, and it was extensively reported and discussed. Not only because of the desperately sad young Italian couple who phoned their parents before they died. Another consideration is that millions of Italians live in apartment blocks.
Grenfell was an astonishing event around the world, not least because British people are assumed to live in “little villas” rather than apartments.
Victoria, with Melbourne its capital, is the Australian state that is most pro-active on fire safety: it has identified 500 blocks in need of remediation with 360 at high risk.
But “New South Wales and Queensland are catching up”, with 500 sites needing rectification in Sydney.
Victoria has made available A$600 million (£330 million) “for rectification of high rise buildings”.
“There is no intention to ask for the money back. The intention is strata owners take action against the builders where they can.”
Victorian government announces $600 million package for cladding rectification works
We welcome today’s announcement by the Victorian government of a $600 million package to support cladding rectification works, to be overseen by a new agency, Cladding Safety Victoria, following a list of recommendations in the Victorian Cladding Taskforce’s final report.
UK regulations are ‘corrupt’
The conference heard from several in the audience, of apparent expertise, who claimed that the UK’s building regulatory regime is corrupt.
Officials were named and their decisions questioned.
One building engineer referenced the 1999 Garnock fire in Perthshire, which resulted in one death, as the source of modern regulations.
How 1999 tower fire led to rule change
Following the Grenfell Tower, 60 high-rise buildings in 25 local authorities in England have failed fire safety tests so far. But no local authority or housing association tower blocks in Scotland have been found to use the same kind of cladding.
Another present decried the widespread use of single concrete staircases in UK apartment blocks as a source of danger.
The audience was told that Grenfell cladding “was not cheap: you find it on six-star hotels in Dubai”. And that Grenfell was inspected “16 or 17 times” by building control.
One deplored the warranty provider NHBC signing off the cladding site New Capital Quay in Greenwich; another blamed “neo-liberalism” and the relaxing of regulations, particularly the privatisation of the British Research Establishment, now funded by house builders.
Can the leaseholders litigate to put things right?
The short answer to this is: very unlikely.
The longer answer involved lawyers giving a very considered and thoughtful analysis of the options available to leaseholders.
It is a bleak picture, with many of the original developers having gone bust or the site having been built more than six or even nine years ago.
It is good that Barratt is paying out at Citiscape, in Croydon, but no one suggested it had to. But it is bad that it has evacuated the building this week after discovering structural flaws:
Can landlord and tenant law help? No, is the answer. Although one barrister spent a lot of time suggesting right to manage or enfranchisement might be an idea for affected sites. It was the weakest offering of the day.
Later, however, a QC did raise the issue of the absence of “safety” in the wording of leases, which is curious and something to ponder.
Does leasehold hinder consumers’ rights? This was a question asked by lawyers from foreign jurisdictions. It was not well answered.
LKP has argued that the cladding scandal shows the utter pointlessness of third party landlords, who have simply speculated (private equity these days, not pension funds) in an apartment block’s income streams.
The idea that they are the “responsible long-term custodians” of this infrastructure has been exploded. And none answered ministers’ call that they “do the right thing” and pay to remove the cladding from “their” buildings.
Sadly, the issue of Glasgow Harbour, where Taylor Wimpey is paying to remove ACM in a direct arrangement with the flat owners – for they are real owners not long term tenants in Scotland – was not explored.
Nor were a couple of other things.
The warranty provider NHBC is apparently stumping up £40 million at New Capital Quay, in Greenwich, but does anyone think that it is not being subsidised by Galliard, the family owned Irish developer which owns the freehold, the management company and the on-site estate agency (not that that is likely to be a very remunerative business at present)?
Second, why on earth did Slough council decide to buy the freehold to Nova House off ground rent punter Robert Steinhouse? And how might this be used to the advantage of leaseholders (without disadvantaging the people of Slough)?
Ground rent speculator Robert Steinhouse cuts and runs from Nova House, but who pays £4m Grenfell bill?
These were questions that did not have their opportunity to be raised.
One QC compared the cladding scandal to Equitable Life, with the government desperate to pass the buck. It was another example of the complete failure of regulation. For many pensioners, it was never resolved.
Equitable Life to shut down with surprise £1.8bn policyholder windfall
Equitable Life, the scandal-hit pension company that came close to collapse in 2000, is finally shutting down with a surprise £6,900-a-head windfall for the last remaining policyholders. Around 261,000 people will share in a £1.8bn payout after Equitable said it would transfer its business to a separate insurer, Reliance Life, and unlock the capital tied up in funds.
Pension exposure to the leasehold sector would be a fascinating subject for further study.
Especially: who is doing it; how much are they paying themselves to do so; are ground rents really a triple A investment; have we a pension crisis as well as a leasehold housing one?
Holding the government to account
This was about the most interesting but also one of the weakest discussions of the day.
One academic gave a talk on “Neo-liberalism, financialisation and housing”, which is an interesting subject and goes to the core of everything that is wrong with modern leasehold (as well as the UK public’s own unseemly stampede into house price inflation).
It was a bit jargon-encrusted – which political economy really does not need to be – but it had gems like “housing became an ATM machine for global financial markets”.
It discussed accountability and responsibility, two quaint virtues in very short supply these days.
What was missing in this section, was very much practical advice.
One did suggest that Andy Burnham’s Public Authority Accountability Bill, which never became law, be given a dusting down and reconsidered.
But this was not a conference to discuss how to apply pressure to force government change. That is more of a bare-knuckled political-media fight, rather than a polite chat in an Oxford college.
Will litigation help leaseholders caught up in the cladding scandal? Almost certainly not.
We are back with politics.
If a single state in Australia can put aside £330 million to remove cladding then England can put aside more than £200 million.
When something like a government forms, this is a point that will need pressing.
The cladding issue, the abysmal quality of building in the UK, regulations that will result in destitution and homelessness, the utter pointlessness of third-party freeholders … these will all come to the fore when something like normality returns to politics.
The Government Housing Minister should put those all freeholder companies which refuse to replace the cladding on the tower blocks into bankruptcy ( including their directors ) for being insolvent and Government take legal ownership of the buildings.
Then the Government demands the developer companies to replace the cladding which they can claim cost against their business insurance. If any developer refuses , then put the company and its directors into bankruptcy as well.