£1bn Building Safety Fund for non-ACM cladding remediation is launched

02 June 2020

It is little more than one year since the Secretary of State announced - on 9 May 2019 - that the Government intended to fully fund the removal and replacement of unsafe ACM cladding on private sector residential buildings 18 metres or over, with costs to the Government estimated at £200 million.[1]

Since then, following numerous consultations within the industry, the Government has had to react quickly to increasing pressure to make finance available to remediate high-rise residential buildings that have unsafe non-ACM cladding systems (such as non-aluminium metal composite panels, HPL (high pressure laminate) panels, render and timber wall systems where these do not meet fire safety standards).

The concept of a fund to support the remediation of such non-ACM cladding systems was first announced by the Government on 11 March 2020 (following the budget announcement that there would be a new £1 billion Non-ACM Cladding Systems Remediation Fund ("Fund")). Some 11 weeks later, the Ministry of Housing, Communities & Local Government (the MHCLG) announced the official launch of the Fund and is now asking potential applicants to register their interest by completing a detailed fund registration prospectus[2]. Following the registration process, the Fund aims to launch its detailed application process by the end of July 2020 with a detailed scrutiny process likely to take until the end of the year.



What does the Fund cover?

Where eligible, the Fund will meet the capital costs of removing and replacing unsafe non-ACM cladding systems on high rise residential buildings which may otherwise be passed on to leaseholders (through an increase to service charges where permissible under the lease), where building owners (or other entities legally responsible for making buildings safe) are otherwise unable or have refused to do so. In that respect, one of the Fund's key aims is to provide comfort to those tenants, leaseholders and residents who reside within buildings clad in unsafe non-ACM cladding systems, such that they no longer have to live in the knowledge that their buildings are unsafe, whilst faced with little prospect of remedial works being undertaken.

Of course, building owners operating in accordance with their statutory duties to ensure the safety of their buildings (and its occupants) should and many already have taken action, but the Fund will address some of the barriers to remediation being carried out quickly (i.e. access to funding) that previously existed.

Those non-ACM claddings systems that are covered by the Fund are listed within Annex A to the prospectus.[3]

Once the registration prospectus is completed (and successfully evaluated by the MHCLG), the building owners will then be required to engage in any technical assessments necessary to determine overall eligibility. These are detailed at Annex B of the prospectus and run to some 50 questions.[4]

What is not covered?

The Fund does not cover any systems other than those listed in Annex A to the prospectus including, for example, ACM systems (although – if an application was made prior to 31 December 2019 – funding should have been obtainable through the separate ACM fund introduced by the Government in May 2019[5]).

Second, it does not cover other necessary fire safety works (not related to an unsafe non-ACM cladding system which may come to light following intrusive investigations or general maintenance, window replacement etc. even if undertaken at the same time).

It also does not cover the cost of any interim safety measures put in place to ensure the ongoing safety of buildings (for example, the costs of waking watches), which may still be passed on to leaseholders through increased service charges. The Fund does aim to ensure that the requirement for any such cost increases is eliminated as quickly as possible.

Finally, and perhaps most importantly, the Fund does not cover works which have either been committed to or where the work has already started before 11 March 2020.

Who is eligible to apply?

The Fund is available to both the private and social sectors.

In the private sector, residents should not be submitting applications to the Fund – and any such applications will be rejected. It is the MHCLG's intention that the building owner (in the first instance), freeholder or 'responsible entity' should make the application (where they have not already taken steps to remediate unsafe buildings prior to the Fund's launch) where the building within scope:

  • has or may have an unsafe non-ACM cladding system as part of the external wall system;
  • has relevant works that had been committed to, or where work had started on site, after the budget announcement on 11 March 2020; and/or
  • where there are leaseholders who would otherwise be obliged to pay for the cost of remediation through their service charge.

Notably, other non-residential buildings, for example hotels, hospitals and buildings where there are no residential leaseholders are not within the scope of the Fund.

Further detail on materials in scope of the Fund can be found in Annex A. There is also a 30cm tolerance on the 18m minimum height threshold, meaning that owners of some buildings under 18m in height may be eligible to receive financial assistance from the Fund. In these respects, the Fund differs from the earlier May 2019 ACM-cladding fund.

In the social sector, registered providers of social housing may register through the online prospectus process (although there are more detailed financial tests (beyond the scope of this note) that must be passed in order for social sector providers to demonstrate that they qualify for funding), including claiming a contribution towards the remediation costs equivalent to that which would otherwise be passed on to leaseholders through their service charge.

Social housing units held in blocks owned in the private sector (i.e. mixed use) will be eligible as part of the relevant application for that building.

When should applications be made?

The registration process opened on 1 June 2020 and closes on 31 July 2020 and funding will only be made available to applicants who:

  1. have applied within this window.
  2. meet the registration criteria; AND
  3. go on to pass the full application process (that will be launched by the end of July 2020 and is anticipated to close by December 2020). Registration will not guarantee that a building will receive funding, but it will assist in identifying whether unsafe materials are present in the cladding system and the extent of any necessary remedial works.

A safety net for leaseholders?

Although introduction of the Fund is seen as a very positive step for building safety in the industry, much will depend on the efficiency of the detailed scrutiny of applications to determine how quickly funds flow to contractor-level. As the application process is for building owners/managing agents (and not individual leaseholders) to make, there is no absolute guarantee that buildings clad in unsafe non-ACM cladding systems will be rectified. However, there is certainly pressure that leaseholders can apply to ensure that the appropriate steps are being taken.

Where – having exhausted correspondence channels with the building owner – any leaseholder/resident has a concern that their building owner or managing agent is not taking appropriate steps, they should contact the MHCLG using the relevant contact form[6], alongside making contact with their local Fire and Rescue Service or Local Authority.

Much will also depend on how quickly the construction industry returns to its feet following the COVID-19 pandemic. Whilst, at the time of writing, most of the construction industry has returned towards some sense of 'business as usual', with detailed surveys and tenders being required during the second stage technical review phase, ease of access to buildings and the availability of workforce at both ends of the application process may present challenges in terms of complying with the application process timetable.

If you have any queries, please contact Sue Ryan or Tom George.

Footnotes

[1] Private sector ACM cladding remediation fund: prospectus
[2] Building Safety Fund for the remediation of non-ACM Cladding Systems (England only)
[3] Prospectus annex A: technical annex
[4] Prospectus annex B: registration questions
[5] Private Sector ACM Cladding Remediation Fund - Full Fund Application Guidance
[6] Remediation of non-ACM buildings


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