Making industry pay - proposed amendments to Building Safety Bill

The Building Safety Bill is a huge piece of draft legislation, currently making its way through the House of Lords and subject to further scrutiny at committee stage this week. We have previously blogged on the contents of the bill (here and here), and the sweeping changes that it envisages with regards to the building safety regime. However, the government have now announced some further amendments to the bill in a press release entitled "Government to protect leaseholders with new laws to make industry pay for building safety".

These proposals follow on from the government's ongoing discussions with the residential development industry to try and resolve the issue of covering the cost of remediating unsafe cladding and associated risks. The intention is to seek a resolution without the need to resort to legislative action, but if no common ground can be found, these proposed amendments would allow the government to take the action it feels is necessary to ensure the removal of faulty cladding and/or to require developers to pay for the costs of any such remediation, whilst also protecting leaseholders from having to cover these costs. The proposed amendments are numerous, but we have highlighted a few of the most material suggestions below:

Remediation Orders and Remediation Contribution Orders

Proposed new clauses in the Bill would allow the Secretary of State to make provision for Remediation Orders to be served on landlords to remedy defects in a building for which they are responsible for the repair and maintenance. Defects are classified as something that arises as a result of works done to the building that caused a building safety risk and were carried out before completion of construction (if completion occurred in the period of 30 years before commencement of this provision) or, by or on behalf of a landlord or management company after completion and within that 30 year period. These Orders would apply to residential buildings of at least 11 metres in height and that have at least five storeys, meaning the obligation to remediate such defects would apply to a wider class of building than those classified as "higher-risk" under the existing draft Bill.

A related concept of a Remediation Contribution Order would also require specified persons that are associated with landlords of such buildings to make payments in order to meet the costs incurred in remedying relevant defects. To be associated with a landlord, an individual must have been a director of the landlord in the period of five years before 14 February 2022, or if a corporate, have shared a common director or be controlled by the same third party corporate as at 14 February 2022.

Prohibitions on development and building control approval for prescribed persons

In a move which could potentially have far-reaching consequences, a proposal has been made to allow the Secretary of State to make regulations which prohibit a person of a prescribed description (so not yet specified in any detail) from carrying out development (as defined in the Town and Country Planning Act 1990) of land in England in order to secure the safety of people in or about buildings in relation to risks arising from them, or improving the standard of buildings. The prohibition would apply despite planning permission having been granted. There is little detail provided at present around who could be caught by this provision, but at first sight, this seems to be an incredibly broad power. The reference to "improving the standard of buildings" is very widely drafted, and could cover all manner of things.

On a similar note, another new clause is proposed which would allow the Secretary of State to make regulations imposing a building control prohibition for the same safety-related reasons. This would prohibit the person from applying for building control approval, being granted building control approval and other related restrictions.

Removal or alteration of offending work in contravention of Fire Safety Regulations

Amendments to the Building Act 1984 are proposed which would allow the building control authority to serve notice on a person responsible for commissioning, erecting or refurbishing works that contravene fire safety requirements in building regulations.to remove or alter such works in order to make it compliant with the fire safety requirements. If that person cannot carry out the works themselves because they have no power to do so, then they can instead be ordered to pay the costs of the works. Note that the notice can also be served on any parent undertaking of the responsible person. Neither the costs of complying with the notice nor any penalties imposed if the works is not carried out in accordance with the notice can be passed on to tenants who hold long leases of the building.

Building Safety Indemnity Scheme

A new clause shall be introduced to the Bill governing the Building Safety Indemnity Scheme (the Scheme) which will hold, manage and apply a system of levies to raise contributions to a fund which will disburse grants to leaseholders to pay remediation costs in respect of defects resulting in a fire risk in any type of building, whether or not higher-risk and whether or not first occupied before the Bill is passed.

The Scheme must create and maintain a public register of persons liable to make levy payments, including (amongst others):

• Any person seeking building control approval in respect of a higher-risk building; and
• Any prescribed supplier of construction products subject to the construction products regulations to be made pursuant to the Bill;

A building control authority must not give building control approval to any person required to be a member of the Scheme unless they are a registered levy payer and have actually paid any levies due under the Scheme.

Building Liability Orders

A building liability order could be made by the High Court where just and equitable, and would provide that any relevant liability of a body corporate (being a liability that relates to a building and is incurred under the Defective Premises Act 1972 or section 38 of the Building Act 1984, or as a result of a building safety risk) is also a liability of an associated body corporate. The Court can also order that any such liability is a joint and several liability of two or more corporate entities. A body corporate can be regarded as being associated if it is, or has at any time in the relevant period been, an associate of the original body corporate, ie. One is controlled by the other or a third entity controls them both. The "relevant period" for the purposes of this provision means the period that starts with the beginning of the carrying out of the relevant works and ending with the making of the order.

Remediation Costs under Qualifying Leases

A new schedule to the Bill is proposed which would mean that no service charge is payable by tenants under a qualifying lease in respect of measures taken to remedy a defect, prevent a risk from materialising or reduce the severity of any incident resulting from such a risk materialising if the landlord is responsible for it or has at any time been associated with a person responsible for a relevant defect. Responsibility falls on such a person if, in the case of an initial defect, the person was the developer or carried out works relating to the defect, and in any other case, they carried out works relating to the defect. The definition of a relevant landlord includes the landlord under the lease or any superior landlord.

In cases where the service charge is payable, it will be limited to a permitted maximum of £15,000 for a lease of property in Greater London, and otherwise, £10,000. These maximum figures will include sums paid by the tenant relating to measures taken in the period beginning five years before commencement of these provisions, or if later, the day on which they became the tenant under the lease and ending on commencement.

The common theme in all of these proposals is a widening of the net. Not only do these provisions expand the class of those who can be asked to remediate any defects, or to pay for such works, but they also broaden the classification of the buildings that can benefit from such measures, and the liability period in which a claim can be brought or action pursued. Of particular concern is the prohibition on development that can be imposed even when planning permission has already been granted. The ability to implement an absolute restriction of this nature on a developer entity outside the usual planning regime is concerning and, if used with any frequency, will undermine the fundamentals of our planning system that makes real estate in this country so attractive to owners, occupiers, investors and developers. Whilst protecting the innocent leaseholder from having to bear the brunt of these costs is an admirable aim on the part of the government, the sheer size of the hammer that they are suggesting is used to crack this nut is perhaps questionable, and debate over these proposals will be closely watched by residential property developers.

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