The Ministry for Housing, Communities and Local Government (MHCLG) presented the amended Building Safety Bill on 5 July 2021.
The headlines included a new regulator with the power to prosecute property developers that do not meet safety standards, and an extended 15-year window for leaseholders in ‘higher risk buildings’ to challenge defective building work.
Higher risk buildings are defined as being at least 18 metres in height, or with at least seven stories and two or more residential units.
Headlines aside however, the bill does little to practically resolve the conflict over who pays for remediating residential buildings with combustible cladding, as Brady Solicitors explain.
More time to challenge developers over unsafe cladding
The extension to 15 years of the limitation period to challenge defective work sounds generous. It’s currently set at six years. However, the well-recognised issue is that most developers build through SPVs (special purpose vehicles) that are then wound up two- or three-years post development.
How do you pursue an entity that no longer exists? It’s fair to say that the Building Safety Bill will do little to stop developers using these types of structure.
Where the developer does still exist, who will take on the work? Leaseholders are very unlikely to have the funds to bring what could be a very expensive case, so it will need law firms willing to work on a contingency fee basis in difficult and unchartered waters.
So, a nice headline but, in reality, a solution that will be available to very few blocks.
New responsibilities for building owners
The bill sets out that building owners (freeholders, RMCs and RTM companies) will need to demonstrate that they have effective, proportionate measures in place to manage fire safety risks.
Those who don’t meet their obligations may face prosecution by the HSE’s proposed new independent Building Safety Regulator.
As part of the new requirements around building safety, higher risk developments must appoint a ‘principal accountable person’ to ensure ongoing fire and structural safety. This is likely to be the freeholder or RMC / RTM co. If the principal accountable person cannot run the building safely on a day-to-day basis, they must appoint a building safety manager.
This is likely to be the reality for many developments, and particularly for self-managed buildings (albeit that many in the block management sector have challenged the ability and efficacy of a part-time, non-expert manager to deal with the increasing complexities of large blocks).
Many commentators have also noted that building safety managers will be neither cheap nor easy roles to fill.
Building safety charge – a new costs regime
To cover the cost of all of this, leaseholders will be liable for a new building safety charge for ongoing expenses – this will be separate to the service charge and payable within 28 days of the demand being issued.
For freeholders, RMCs and their managing agents this introduces a whole new layer of administration with separate budgeting, bank accounts, demands processes and arrears recovery required. It is also not yet clear if consultation will be required for building safety charges in excess of £250 per leaseholders or what options there are for dealing the inevitable slow payers
‘All reasonable steps’
The bill also protects the ability to recover the cost of remediation works from leaseholders, provided that ‘all reasonable steps to seek alternative ways to meet the cost of remediation works’ are taken first. So, leaseholders remain on the hook – and freeholders, RMCs and their managing agents remain at the same impasse for funding remediation works, with leaseholders unable to pay and no accessible form of redress.
Much to be digested but few crumbs of comfort.
The Building Safety Bill offers little cheer for any party, except the developers. The 15-year redress window will only be accessible to blocks where the developer still exists (and is solvent!) and a case can be funded. Outside of this handful of cases, leaseholders remain liable for the costs of remediation work.
We know from our managing agent clients that fire safety works are stressful and all-consuming. This bill brings yet more layers of accountability, administration, and complexity.