Unsafe Cladding – Government invitation to Developers to voluntarily provide additional £4bn of funding

5 minute read
10 January 2022

In the early part of 2021, we reported on the progress of the Fire Safety Bill as it passed through Parliament. The Fire Safety Bill related to the remediation costs associated with the replacement of the dangerous cladding panels and became law in April 2021.

Since the passing of the Fire Safety Act, the Government has issued a draft of the Building Safety Bill which promises to make the biggest change in the laws surrounding building safety in a generation. Amongst the many issues which the Building Safety Bill intends to address is the question of funding remedial works to existing buildings and of compelling developers to contribute to that funding.

Window of opportunity to the residential property development industry

Whilst the Building Safety Bill is now in the committee stage, it is not expected to become law until 2023. The Department for Levelling Up, Housing and Communities (which has taken over responsibility for the Government's response to the ongoing cladding crisis) has sought to progress the question of funding from developers in an attempt to expedite remedial works to existing properties.

On 10 January 2021, the Secretary of State, Michael Gove wrote to residential developers seeking:

  1. A consensual financial contribution to a dedicated fund over this and coming years totalling £4 billion to meet the costs of unsafe cladding on properties between 11m – 18m in height;
  2. For developers to self-fund and undertake all necessary remediation works on all buildings above 11m (i.e. 11m-18m and >18m+) which those developers played a role in constructing; and
  3. Provide comprehensive information on all buildings above 11m which have fire safety defects and which the developer had a role in constructing over the last 30 years.

The letter to developers describes a "window of opportunity" for the industry to work with the Government to address the ongoing cladding crisis, and seeks responses by early March 2023. Failing that, Mr Gove states that he is willing to take "all steps necessary" to achieve a fully funded "plan of action" that can be presented to the public and affected leaseholders.

What next?

Following publication of the letter, Michael Gove addressed the House of Commons yesterday to confirm the basis of the approach the Government is intending to take in respect of addressing the building safety crisis. In that statement Mr Gove confirmed that:

  • The "Consolidated Advice Note[1]" will be immediately withdrawn. Further, a new set of "proportionate" guidance on assessment for building risk will be produced by the British Standards Institution leading to a "common sense" assessment of risk, with an emphasis on measures such as sprinklers and fire alarms in place of costly wholesale remediation work;
  • The next phase of the Building Safety Fund will be brought forward early this year;
  • The current drafting of the Building Safety Bill will be amended to provide "statutory protection" to leaseholders to pay for all remedial works related to fire safety issues (i.e. not limited to "cladding" only) in buildings above 11m in height and to increase the limitation period for claims relating to building safety to 30 years from construction;
  • Conversations will additionally be had with lenders and insurers to seek to address issues faced by leaseholders in obtaining mortgages and insurance on leasehold properties; and
  • A Government backed indemnity scheme will be offer to building surveyors to encourage a "balanced approach" to remediation is adopted, and those surveys will be audited to ensure that the advice to adopt a full remediation is only given in those buildings which strictly require it.

What is not clear at present (and may not be for a number of weeks at least), is what the detailed outcome of this invitation will be. Moreover, it is not clear what "all steps necessary" may involve, albeit there is a reference to restricting access to Government funding for individual developers (for example access to the Help to Buy scheme) or pursuing those developers through the Courts. The final "threat" to the industry is the imposition of a "solution in law", but it is not clear precisely what is envisaged by this.

As with previous announcements, we expect that the "devil will be in the detail" so we will continue to keep you appraised of the details as they become available.

If you have queries on this alert or any construction issue, please contact Sue Ryan.

Footnote

[1] Building safety advice for building owners, including fire doors, 20th January 2020


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