Everyone deserves to feel safe, whether that be in your home, at work, and financially. Following the dreadful events of the Grenfell tower fire and tragedy, safety has become a huge issue faced by leaseholders and the residential property market as a whole. The big argument over who must pay for things like cladding has been going on since 2017 when the disaster happened, but we might finally be getting the answer to this.
After years of fighting for some sort of change, the government has recently put out a plan to help solve the building safety crisis and increase protection of leaseholders, putting an end to huge bills and ending the discussion about who is responsible for cladding as well as historical works.
There are some serious changes being proposed that will affect the future of building properties and development requirements which should define the financial burden to protect innocent leaseholders. From our perspective as property lawyers, we are dealing with service charge disputes and contracts that now seem unclear and ambiguous to those without legal expertise or those who are embroiled in disputes owing to safety.
WHAT IS THE NEWS SURROUNDING WHO PAYS FOR DANGEROUS CLADDING OVERHAULS?
The government has classed external cladding materials and wall systems that contain any flammable materials as being a fire risk. Building safety regulations now require these materials to be removed from blocks of flats and other buildings to increase the protection and safety of everyone inside. These tough measures that were proposed on the 14 February 2022 protect leaseholders from the financial burden and will force industry to pay to remove cladding and any other flammable material.
The plan is to help remove as much of the burden from leaseholders as possible. The government is offering to pay £3.5billion towards the help of the removal of cladding on residential buildings that are 18m or higher in England. This only covers cladding however, so for other safety issues and defects that are not fire safe (including things like balconies, insulation issues etc.) developers and cladding manufacturers will be expected to pay, and in some cases freeholders.
The government is putting in a guarantee for law that no leaseholder living in medium or high-rise buildings will have to pay a penny for the removal of cladding.
WHAT IF A LEASEHOLDER HAS PAID FOR CLADDING FIXES ALREADY?
If payments have already been made by the leaseholder (which I know for many leaseholders that is the case) the payments will go towards the ‘cap’ that the government is talking about. If you’ve paid anything towards cladding removal in the last 5 years and are still expected to pay (due to the developers, cladding manufacturers, and freeholders unable to pay) then what you have already spent will be put towards the cap. This might mean that you, as a leaseholder, don’t have to pay anything more!
The next step in the plan is to see if the government are going to supply more accurate information about who is responsible to pay for non-cladding materials. But we’ll update you as soon as we know more!
BUILDING SAFETY UPDATE
Some great news is that the safety of buildings is also being improved, anyone in the industry who is not doing what they should be doing will be blocked from building and selling new properties. Planning permissions, building control sign-off on developments will be blocked to allow for trustworthy and safe properties to be built instead. This is great news and a huge step in the right direction. Can you imagine how much safer it is to know that responsible people are the ones building the future properties and developments? It shouldn’t be all about profits, if you work in residential property, the end user, the tenant, surely must be the one living in a safe home.
If you, like me, love detailed and technical law, then keeping abreast of the government’s new Bill and all that it entails can be found in this link: Building Safety Act
In its own “title”, the government call it the: “Bill to make provision about the safety of people in or about buildings and the standard of buildings, to amend the Architects Act 1997, and to amend provision about complaints made to a housing ombudsman”.
As property lawyers we understand the number of different companies invested in the development and management of a building and having the lease in place along with pure legalities on all management surrounding safety will ensure better communication between contractors and block managers, with watertight contracts.
WHAT ARE SPEAKERS SAYING IN PARLIAMENT AT PRESENT
Reading through Hansard via the government portal, there are a variety of speakers who have so much to say about leasehold law. These comments caught my attention from the Rt Hon Lord Blencathra, who was quoted in regards to this Bill, on 22 February 2022 saying the following:
“… I declare a personal interest in that I am a leaseholder in a block of flats near here which qualifies for remediation work; we may have wooden balconies and other bits and pieces not technically covered.
Quite simply, I have tabled these amendments because I believe that the penalties for big building corporations are ridiculously light. I accept that for the single trader plumber, electrician or brickie, the magistrates’ court might suffice, but I say to my noble friend the Minister that it is preposterous to permit the Persimmon or Berkeley Homes of this world to be taken to a magistrates’ court for breaches of the law and fined a mere £200 per day that the breach continues. Theoretically, a magistrates’ court could impose an unlimited fine for breaches of the amounts imposed, but those amounts are trivial. Contrast that to the Health and Safety Executive, where last year the average fine was £140,000 and it fined the National Grid £4 million. Not a single person was killed in that incident, but the HSE believed that the National Grid’s records were inadequate and fined it £4 million.”
The proposed plan is trying to make amends for historic failures too, protecting those who live in dangerous properties and making the right people pay to fix the problems. It should be fair and reasonable. Grenfell has seen some awful downfalls in residential safety and communication thereafter, and we hope this is the start of new, better comprehensive legislation.
CLADDING – WHAT HAPPENS NOW
If this new plan gets passed in parliament, then these new rules will be brought into law, and we could see some really positive changes with building safety and protection of leaseholders.
The Secretary of State for Levelling Up, Michael Gove, said that it is time to end the “scandal”. It’s important to protect the leaseholders and get the industry to work together to make it safe. The measures being brought in will stop building owners passing the financial burden onto the leaseholders. The discussion about who needs to pay for cladding removal has gone on for too long and the government are finally doing something about it!
“All industry must play a part, instead of continuing to profit whilst hardworking families struggle”
Secretary of State for Levelling Up Michael Gove.
We’ve finally been given the answer to who pays for the cost of removing cladding. Hopefully, if you are a leaseholder yourself, or if you are coming from a property manager or block manager angle, this new plan should give you some definitive answers and give some clarity and relief from the stress that has lasted since 2017! Amongst the other proposed amendments, the answer has been made fairly simple and that is that developers and cladding manufacturers are expected to pay. If they can’t then the burden falls onto freeholders. You are only expected to pay as a leaseholder if all these other payment routes fail and even then you are protected by the cap!
We now must wait for these rules to become part of the law and this is set to happen in spring this year. Talks are going on currently in parliament to see if all of these rules will be made official but for now we can just accept the win and know that the future of building safety is finally being prioritised and that leaseholders are being protected.
So not everything is fixed and sorted, but we can breathe a big sigh of relief now that we know who is responsible who pays for the cladding removal! And we can see how building safety is changing which is a great step forward for the future of residential block living. If you are concerned in any way or still unsure of contracts between management, contractor, freeholder or developer, do get in touch and we can work through the legal process with you.
The debate about this plan started on the 21st of February and is still ongoing. The team and I are always around to help if you have any questions, worries, or simply want to know a bit more about what’s going in! Please feel free to get in touch at any time.
THE LATEST UPDATE ON WHO PAYS WHAT WHEN IT COMES TO CLADDING AND BUILDING SAFETY
Cost contribution orders will be placed on manufacturers who have been successfully prosecuted under construction products regulations, requiring them to pay their fair share on buildings needing remediation.
When it comes to private landlords who are buy-to-let, there is still some light required and the National Residential Landlords Association (NRLA) has said,
“The NRLA does not feel the amendments tabled by the government to the Bill properly address the problem that buy-to-let landlords who are leaseholders are being treated so much more differently to others.”
Under Michael Gove’s plans, the government could block planning permission and building control sign-off on developments for non-compliant companies. Who is it to check compliance in this regard though? We will be watching and reading avidly.
There has been an amendment asked of the Bill in that firms are to pay to fix historical problems instead of leaseholders – waiting for approval from parliament.
Cost contribution orders will be placed on manufacturers who have been successfully prosecuted under construction products regulations, requiring them to pay their fair share on buildings needing remediation.
Courts will be given new powers to allow developers to be sued where they have used shell companies to manage specific developments, so they can avoid taking responsibility for their actions. Although shell companies are not illegal in this regard the courts will come down heavily on developers who use this form of business. If you’re not aware of a “shell” company, it’s a company that has no employees and are not publicly traded, and they don’t deliver any goods or services to earn revenue. They’re generally created solely to hold and move assets on behalf of individuals or other businesses. This might scream money laundering to you, as they’ve been used in the past for bank accounts for financial transactions, however they are a legal entity in the UK and there are many legitimate reasons why these companies are used for. Law is getting tighter….
THE NEXT INSTALMENT FOR LEASEHOLDERS AND BUILDING SAFETY ISSUES
This bill and property law surrounding all avenues, is vastly extensive and there are going to be so many layers that need fine tuning.
The next instalment is March and beyond awaits us and I shall update you soon. The Bill has passed through from the House of Commons and is in the House of Lords now. For your info, we are now at the Committee Stage of the Process which involves detailed line by line examination of the separate parts (clauses and schedules) of a Bill. Starting from the front of the Bill, members work through to the end. Any member of the Lords can take part.
This, albeit frustratingly lengthy process, is worth the battle for leasehold law change and I advise anyone seeking legal advice to get in touch.
Laura
