How We Live... Safely

Sue Ryan: As a firm Gowling WLG is at the forefront of all changing legislation and legal reforms so that we can quickly and effectively advise our clients on how to manage in an ever changing legal and regulatory landscape. This podcast forms part of our How We Live campaign where we will be delving into the topics that are affecting the living sectors.

In our How We Live Safely podcast we will be discussing today the new building safety act and what this means for those affected. My name is Sue Ryan and I am partner here at Gowling WLG in the construction team and I head up the building safety team. I am joined today by three of my colleagues, Gemma Whittaker, Helen Arthur and Sean Garbutt who are all in the Building Safety team here.

One of the biggest changes to not only real estate but our society as a whole is the Building Safety Act, which I will refer to as the Act, which received Royal Assent on 28 April 2022. The government's words when introducing the bill were that it would deliver the biggest improvements to building safety in nearly 40 years. The Act has been driven by the Grenfell Tower tragedy and the findings and recommendations stemming from the enquiry run by Dame Judith Hackett. It really is not an exaggeration to say that the implications of the Act introduce a monumental change for a number of sectors and it has wide ranging implications for any company which procures, constructs, owns or operates buildings, especially residential buildings.

The Act is also quite complex with parts of it applying only to England, some to England and Wales and some to England, Wales and Scotland, so be aware that not all parts may be relevant depending on where your buildings are.

It is safe to say that there is so much that we could cover in relation to the Building Safety Act and the government's new building safety regime more generally but in this podcast we wanted to cover three key questions:

1. Where are we now in terms of the Building Safety Act?
2. What are the most imminent changes being brought in by the Act and what should developers, contractors, building owners be doing about those changes? and
3. What else is coming down the tracks that we all need to be aware of?

So starting at the beginning, the Building Safety Act gained Royal Assent on 28 April this year. What does this mean in reality and do we now have a host of new obligations that parties need to be complying with immediately?  Helen?

Helen Arthur: Hi Sue.  Well there are some parts that I think we need to think about now but as you have mentioned in your introduction I think as a starting point it is good to understand where the Building Safety Act has really emanated from and that is, is that the Building Safety Act has really flowed from the Grenfell Tower tragedy in that the government commissioned an independent review which was led by Dame Judith Hackett who looked at the building regulations and fire safety with a real particular focus on high rise residential buildings and the Hackitt review published an interim report in December 2017 and then there was a final report in May 2018 and then in response to the Hackett review the government launched its building a safer future policy in December 2018 which then led to the draft building safety bill which is now the Building Safety Act.

So this has been going on for a number of years and as we can see what the Building Safety Act is really trying to do is help to ensure compliance across the whole building life cycle, so that is planning, construction and occupation stage. The Act is really focusing on ensuring that the right organisations and sectors are held accountable with respect to structural and fire safety aspects of a building.

Gemma Whittaker: That is right Helen and I think it is also worth noting that although the Hackitt review had a particular focus on high rise buildings and the Act does contain a really key new safety regime for those buildings that the government has considered to be higher risk, we are going to talk about that in a bit more detail later, there are also the wide range of provisions that are going to impact the industry in a much wider sense, particularly when it comes to improving competence. So for example there are going to be new duty holder obligations which will apply to all works that are caught by the building regulations. 

But coming back to Sue's initial question, where are we now, Royal Assent means that the Building Safety Act itself has finished its progression through parliament, it is now law but there are actually only a few provisions within the Act which came into force on day one, aren't there?

Helen: Yes there are which can be quite confusing. So there are provisions in the Act which came into force as you say from day one of Royal Assent, so that is 28 April 2022, but they primarily relate firstly to the nomination of the health and safety executive as the new building safety regulator and then secondly to the creation of powers to make further secondary legislation so it is really just the foundations that are being laid that came into force on 28 April for those further pieces of key legislation and implementation.

Gemma: And it is that secondary legislation really where a lot of the detail of this new regime is going to sit and this going to take a bit of time now to come into force isn't it?

Helen: Yes that is right. There are some provisions of the Act which will automatically come into force, so two months after Royal Assent is a key date and we are going to talk about that in a bit more detail in a moment with Sean but then there is a lot of secondary legislation which will bring into force or flesh out the new obligations that are expected to come in over the next 12 to 18 months from Royal Assent.  So we have got a bit of a period really of implementation.

So the key takeaway here is really that the majority of the provisions in the Act are not in force yet and it is really designed to be that way and interestingly as part of the bill stage the government provided what is referred to as a transition plan which looks as key potential dates for certain provisions and this is helpful really to a certain extent but it is only really an outline and is quite high level and it does come with a bit of a word of warning in that it was published in July 2021 and now we obviously are in April 2022 and so arguably some of the things have not quite been updated or brought into the same level of detail as we would expect. So we are definitely keeping a close eye to see what happens next as there is a little bit of uncertainty over timings and date or if indeed any parts of the Act will ever come into force.

Gemma: That is right and I think we should say here that we have already seen the first of what is likely to be many commencement regulations being made and that brought into force certain provisions of the Act, the most notable being the introduction of building liability orders, which is essentially to try and get round the potential for SPVs (special purpose vehicles) to be set up to avoid liabilities created by the Act and I think really is pre-empting the changes that are coming into force on 28 June which you are going to talk about a bit later.

We have also seen some draft regulations published by the government setting out some of the detail that the Act did not contain and these give us a really helpful guide on what the full final regime is going to look like but although we have seen those they are going to be subject to a consultation process which is only just beginning now in terms of the first set of regulations, so there is still quite a lot of room for things to change.

At the date of recording the draft regulations have also been removed from the government website so we are keeping an eye on that to see if they reappear and in what form but what this means is that while we can start to prepare for the regulations that might come into force in the next 12 to 18 months and think about how clients might factor in these new obligations into their procurement processes and policies, the final details are really yet to be confirmed.

But thinking about what we do know for certain, the government did bring in some legislation even prior to and in anticipation of the Building Safety act didn't it?

Helen: Yes, Gemma. Well there kind of two parts which are in force prior to the Royal Assent, so the 28 April 2022 date, and those are Gateway One and then also new taxation regime which is called the Residential Property Developer Tax. So, a key part of the Building Safety Act is this introduction of a new gateway process for higher risk buildings, and these gateways are described really as a bit of a "stop-go" point for any higher risk buildings ensuring that really, that it is built correctly and in accordance with these stages or these 'gateways'. So, there are three gateways; Gateway One, which is the planning gateway; and then Gateway Two which looks at pre-commencement, the building control approval stage; and then Gateway Three, which looks at the completion of the building control approval, ready for the occupation phase.

Gateway One is actually already in force and has been since August 2021 and it's done that through the Town and Country Planning (Development Management Procedure and Section 62A Applications) (England) (Amendment) Order 2021 – so nice and catchy title. It's relevant to buildings that contain two or more dwellings or educational accommodation and meet the height conditions of 18 metres or more in height or seven or more storeys. And there is two real elements to Gateway One; so that is the submission of a fire statement with the planning application and then this whole idea of establishing the Health and Safety Executive as a statutory consultee for relevant planning applications.

Gateway Two and Gateway Three are not yet in force and they will be subject to future regulations as we have already mentioned, so it's really just to make it clear that actually Gateway One is in force, and has been in force prior to Royal Assent.

And then the residential property developer tax is a new 4% tax which is applicable to companies with annual profits of at least £25million and it applies from 1 April 2022. The profits are arising from residential property development recognised in the accounting period ending on or after that date and really it is designed to contribute to the cost of the government's plan to help remove unsafe cladding from the leased residential buildings.

Sue: OK, that seems like a good point to jump in and move things onto our second key question.  So, you have mentioned some of the provisions of the Act which came into force prior to the Act. We have also talked about some which came into force automatically two months after Royal Assent on 28 June 2022. Now those provisions are really going to bring in some significant changes aren't they? Can you tell us what the effect of those will be?

Sean Garbutt: Yes sure, so there really is a wide range of changes brought in through the Building Safety Act both in terms of the routes of recourse for individuals, developers and owners of residential accommodation such as social housing providers and also the period of time in which those claims can be brought.

There are significant changes or these changes are brought in through changes to existing legislation and as I mentioned some new causes of action which will be brought into force on 28th but in terms of existing legislation perhaps one of the major changes is initially to the Defective Premises Act, Helen.

Helen: Yes you are right Sean. The Defective Premises Act is a real key change and it is a bit of a misconception I guess to believe that the changes on 28 June are limited to the high rise buildings and fire safety considerations because the Defective Premises Act has far wider implications as I will explain now.

So at the moment, the Defective Premises Act requires those involved in constructing a dwelling to ensure that the dwelling is fit for habitation when it is complete. If following completion of the works a dwelling is not fit for habitation a claim for compensation from people via the person who originally commissioned the dwelling or any person who subsequently acquired a legal equitable interest in the dwelling, so that would be freeholders of a block, a homeowner or a leaseholder.

So at the moment a claim can only be brought to the extent it relates to the provision of a dwelling so this is really limited to the original construction or conversion works and any claim at the moment under the Defective Premises Act needs to be brought within six years of completion of the work. So that is the law at the moment.

The Building Safety Act brings in a couple of monumental changes and one of those is it creates a wider duty so it achieves this by inserting a new Section 2A into the Defective Premises Act and this change is significant because Section 1 of the Defective Premises Act at the moment only permits claims connected with the provision of a dwelling, like I said earlier, so it is the original construction or conversion works.  But the new section expands this right to claim under the Defective Premises Act to any work undertaken on an existing dwelling provided that work is done in the course of a business.

So it is not just cladding or fire related works but any work on an existing dwelling could potentially be caught if it is done in the course of a business.

And then the second big change is around the extensions of the limitation period for claims under the Defective Premises Act so we are moving from six years to 15 years prospectively for claims under Sections 1 and 2A and from six to 30 years retrospectively for claims under Section 1 and I think actually it is quite interesting to just pause and think about that because when the Building Safety Act was first introduced to parliament it was originally proposed that it would be a 15 year retrospective limitation period for Section 1 claims but then it became amended and it is now at 30 years, so it is a really significant change to the culpability and liability under this Act. And, what is even more is the fact that you cannot contract out of it, it is a statutory duty so it will be really interesting to see what happens in terms of drafting, which I am sure Gemma, we can touch on a bit later.

But I think Sean you were going to mention now around Section 38 Building Act weren't you?

Sean: Yes, thanks Helen. Yes, Section 38 is probably quite an interesting beast within the UK legislation statute book in as far as it has been on the statute book for the best part of 40 years but has never actually been in force. Under Section 38 it gives a right to a person who has suffered damage, be that personal injury or damage to property as a result of a breach of building regulations and that is quite an interesting point to pick apart.

Obviously the wider context of the Building Safety Act was a focus on residential properties and in particular high rise residential properties, but Section 38 applies in principle to any damage caused by breach of building regulations and building regulations apply to any building work undertaken so it is not just residential property, be that high rise or low rise, but also to commercial premises or any other properties for that matter.

So, under the Building Safety Act the Section 38 is going to brought into force which is obviously quite a seismic change but what is probably even more seismic and it echoes the limitation periods that Helen touched on previously with the Defective Premises Act is that it will prospectively allow claims for 15 years.

Now it is probably important to note that there is no retrospective element to the bringing in force of Section 38 so it will only be for any works completed after 28 June 2022 but in principle claims can be made for breaches of building regulations that cause damage up until 2037 and onwards, obviously depending on when those works were completed so it is a significant change within the legislative landscape.

Sue: So it is really unusual for a piece of legislation to operate retrospectively so that really is a monumental change. So, what we know from that is that there are going to be additional ways of bringing claims against companies who have designed and constructed buildings, but does the Act provide for any other additional ways to bring a claim?

Sean: Yes it does, so as I mentioned there is also an entirely new cause of action that has been brought in by the Building Safety Act and this is focused at the manufacturers of construction products. In terms of limitation the claims against the manufacturers of construction products echo the limitation periods we've discussed so for those that manufacture what is termed within the Act as cladding products, that will have a retrospective liability period of 30 years to echo the changes made to the Defective Premises Act and then prospectively for all building and construction products for 15 years again echoing the Defective Premises Act and Section 38 of the Building Act.

It is not, however, just a claim against the manufacturers because they have got a, what could be loosely termed as a poor product. There is specific elements that have to be proven in bringing such a claim and I will briefly swift through those now. So the rights will only accrue to bringing a claim against a construction product manufacturer if the product in question fails to comply with the regulations at the time, whether the manufacturer makes a misleading statement in relation to the capabilities of that product or whether the product is determined to be inherently defective and given this is a new cause of action obviously there is going to be a bit of wiggle room in discussion there in the courts as to what precisely those terms mean, but generally speaking it opens another avenue for those that may be affected by building safety issues.

Helen: Yes it is really interesting actually isn't it because I guess where we get to is at the crux of this is what do clients need to do now that they understand this difference and change and I guess probably from our perspective if you are a contractor or a developer you perhaps want to consider what works might be caught by all of these changes, particularly the retrospective limitation extension in the Defective Premises Act. I wonder whether organisations are looking at risk assessments and just ensuring that they have got documents wherever possible and are having a look at where their liabilities might extend to.

Sean: Absolutely. As with all of these matters document retention will be key but also of importance will be trying to ascertain what the contractual relationships were at that time and whether there is any routes for contribution for any, for example, a developer that is caught by this, whether there is any claims against sub-consultants or subcontractors but again it will be a case of documents will be king.

Helen: Yes I agree and I think also it would be interesting to see what the market does really because we will insurers and support an increase in kind of the limitation period or will we find that there is gaps in coverage and I don't know Gemma, you might want to chip in here, but definitely seems like there might be some issues in that regard. I don't know, as a contract drafter Gemma do you have any other thoughts around that kind of area?

Gemma: Yes Helen, I think you mentioned earlier that you cannot contract out of the Defective Premises Act liability but with that in mind parties really do need to be considering at least whether they need to be making changes to their contracts to reflect these longer limitation periods and certainly talking to their advisers about that. It again will be interesting to see where the market gets to on this and whether any of the standard form publishers start to propose any changes to their forms of contract because that is something that often drives market practice on this so that might help to start consolidating a market position, I think, on what is going to happen in contracts in relation to these limitation periods and new causes of action.

Sue: Thanks all for that, so there is an awful lot for any company involved in the living sector to be thinking about and a raft of new protocols and procedures to be put in place based on what we already know is going to happen or is about to happen and we have looked at that, but looking ahead what else should our clients be looking out for? What is coming down the tracks so to speak?

Gemma: Yes thanks, Sue. As we have mentioned the Act really lays the groundwork for a range of further regulations and they are going to be enacted primarily over the next 12 to 18 months. The centrepiece for those is going to be the higher risk building regulations which will create a new building control regime for the design and construction of higher risk buildings and this really aims to stop the reoccurrence of the issues that led to the Grenfell tragedy.

This regime is going to deal with buildings that are considered to be higher risk which both are at least 18 metres high or seven storeys and contain at least two residential units and for the design and construction phases that also captures care homes and hospitals but importantly that does not cover those buildings for the occupation phase. The government is currently consulting on regulations that are going to set out more detail on that definition and that consultation will be coming to an end fairly soon.

Helen has already mentioned the gateway process and the fact that Gateway one, the planning gateway, is already in force, so it is the higher risk buildings regulations that are going to introduce Gateways Two and Three acting as the stop go point for higher risk buildings at the point of works commencement and completion and to pass through these gateways approval is going to be required from the building safety regulator. That is going to, itself, require a demonstration of compliance with building regulations, demonstration that appropriate consideration has been given to building safety and appropriate strategies being demonstrated just for compliance and minimisation of risk and the building control authority for this process for higher risk buildings is going to be the new building safety regulator which is the health and safety executive.

So the draft regulations that we have seen actually sets out specific lists of documents that have got to be submitted to the building safety regulator and importantly that is going to include making clear what arrangements are in place to develop and maintain what you might have heard referred to as this electronic golden thread of information.

Sean: So it is quite interesting that golden thread of information. Obviously, as Gemma has mentioned, we have seen the draft regulations which touch on the sorts of documents that will be included within that but in terms of what it is the easiest thing to takeaway will be it will be a complete pack of information which details the journey of a building from design and construction through to occupation with all the information that you might expect to need to be in there to keep the occupants of those properties safe.

You also mentioned there Gemma the stop go element of the gateway scheme and I think at this point it is probably just helpful just to highlight the Gateway Two levy which again we have got scant detail on at the moment in terms of how much that levy will be or who it is paid to but it is fairly easy to ascertain that it will be an element of the stop go process. So what we do know about the Gateway Two levy is that it is intended to raise somewhere in the region of £2 billion over the next ten years and what is again similar to the residential developer's tax, it is a way of government clawing back some money that it has already had to spend on remediation of buildings to date.

So as I said it is not difficult to imagine that you could tick all the boxes for a gateway two but unless you pay the levy then you are not going to get the authority to go and then at that point you cannot put the spade in the ground and it is probably going to be quite difficult to legislate for that within contractual arrangements but I am sure you might have a few thoughts on that Gemma?

Gemma: Yes although we have got the regulations only in draft at the moment we can already see that there are going to be some really interesting conversations about timing and who is bearing the risk of delays within this approval process and there is also going to be a new change management process as part of this building control regime under which major changes will require approval from the building safety regulator and more minor changes need to be notified and will not be able to be implemented for the next 14 days so if that remains as it is there is obviously various different points of which delay could be built into the process and I think one of the most important points to note as well is that the gateway three approval is going to be required before a higher risk building can be registered with the building safety regulator and that that registration is required before the building can be occupied.  Failure to do that will be an offence punishable by imprisonment or a fine or both, so it is really important that people get to grips with this gateway process and understand what is required as part of it and it is also, I think really important, we have just mentioned the occupation phase, to remember that the Act does not just cover design and construction. It also contains a range of provisions covering the occupation phase for higher risk buildings. 

We have noted that there is a slightly different definition for higher risk buildings for the occupation phase but there are still a range of obligations that are imposed in relation to those buildings that are classed as higher risk and these are anticipated to be brought into force in the next again 12 to 18 months from royal asset and it is also really key to understand that once it is brought into force this occupation regime is going to be for all higher risk buildings not just newly constructed ones.  The main features of it are that there is a requirement for an accountable person who is going to take responsibility for safety during the occupation phase of a higher risk building. That can be a corporate entity but it is not possible to simply choose or nominate who is going to be the accountable person.  That is going to be decided by the definition within the Act based on who owns and has responsibility for the repair of the common parts of a higher risk building, so that is ultimately going to be determined by the overall ownership structure and there have already been some concerns raised in the House of Lords about what that means for resident owned management companies.

The accountable person will have to work together with the responsible person under the existing Fire Safety Order 2005 and they will have various statutory obligations to carry out things like building assessment, assessing the safety, maintaining the golden thread of information about the building which is to be handed over on occupation and making sure that there is a resident engagement strategy.

Sue: Thanks Gemma, so there is an awful lot to think about there and are there any other things Sean that we ought to be looking out for?

Sean: Yes, so there are a couple of additional bits that are raised in the Building Safety Act which sounds a bit like a broken record here but a lot of it is out for consultation or we are awaiting the regulations but we do know in principle what is coming in. The first one of these is a statutory obligation on developers to provide a new home warranty. Now at present there are obviously a number of sort of market leaders in warranties on the market and they tend to provide cover for a ten year period, albeit there is a stepped liability at two years and then for the balance of the ten years for the coverage period.

We do know that the new new homes warranties will have to be in force for a period of 15 years and this obviously reflects the limitation periods that we discussed earlier but it is also interesting to see that this is a statutory obligation to provide those warranties and at present there is no obligation to provide those warranties albeit in practice mortgage lenders do require them so there is almost a de facto requirement to provide these. To go alongside the new home warranties there has also been the establishment of a new homes ombudsman who will be able to provide a route of redress for residential purchasers in the event that they have effectively got complaints or concerns about the construction of their homes.

Again we do not have an awful lot of detail yet albeit it is thought that there will be a compensatory element of the ombudsman's powers up to £75,000 and that will be on top of any recommendations in terms of remediation of any defects or anything to that effect. So obviously that is something to keep an eye out on and could be an additional element of risk that will need to be factored in.

Finally aside from the new homes warranty and the new homes ombudsman there will also be the establishment of a building construction product regulator and construction product regulations and again we do not have an awful lot of detail yet as to the content of those regulations but in principle it will be a way of tightening up and centralising the testing of construction products before they go on the market and then to have the 'teeth' as it were of a regulator sort of standing behind that and enforcing those regulations to ensure standards are kept up.

Gemma: I think before we end this section we also really need to mention the proposed duty holder regulations and once they are in force those are intended to place new formal duties on parties involved in commissioning, design, construction and refurbishment of buildings and this relates to all buildings again to which the building regulations apply not just high rise residential and the aim here is to fix what the Hackitt review described as an industry approach to confidence which is broken and fragmented.  For people used to the CDM regulations the terminology used here is going to be quite familiar so there are duties on clients, designers, contractors, principal designers, principal contractors and fairly familiar requirements relating to cooperation between the parties, communication, information sharing and really very importantly making sure the right people with the right competence are appointed to carry out works.

But the focus here in these regulations is ensuring that once the buildings are complete they are safe and compliant with the building regulations as opposed to focusing on onsite safety which the CDM regulations really do. So clients are going to need to build this into their procurement processes, contractors and designers will need to think about how they can show that they have got and can demonstrate the competence requirements.

I think the draft regulations that we have got so far do assist again with understanding what these roles and requirements are likely to look like and we have started to see some British standards published to assist with this but they are not yet complete. We are expecting final standards at some point during the summer this year.

Sean: It sounds like a bit of a repeated theme here but there is a lot of information still to come. I suppose it is quite difficult at this stage but is there anything sort of practical that our clients can be thinking about or doing at the moment?

Gemma: In relation to all of this what we would say is watch this space, keep your eye on government publications, make sure that you are speaking to your advisers and working out what sensibly you can start to be planning for now with the information that we have got, but do bear in mind that a lot of the detail is still to come. We are expecting there to be further guidance from the government, the health and safety executive and also I mentioned earlier some British standards that are currently in consultation and in time those things are all going to help us to fully understand what the obligations are likely to be and what can be done to ensure compliance with those obligations across the board.  So the key thing is keeping up to date as more and more information is published and working out how and when to refine your policies and procedures as time goes on so that you are alive to and make sure you work to mitigate those risks.

Sue: Thanks Gemma. That seems like a good point to end on. I think we all know it has been a bit of a whirlwind but I think there is definitely scope for further podcasts on this subject as and when further information comes to light over the coming months. As we have discussed the devil really is in the detail on this and a lot of the detail remains to be finalised.

So if you would like to keep up to date with key changes as they happen please do sign up for our mailing list via our website and all remains is to thank you all for joining me this afternoon to discuss the current status of the Building Safety Act on our How We Live Safely podcast.