House of Lords debate, Leaseholders and Building Safety, 25 November 2021

The LGA welcomes the introduction of the Building Safety Bill and the Fire Safety Act. We believe these important pieces of legislation will strengthen the building safety system in the UK, especially in relation to new buildings. It is, therefore, an important step in the right direction.


Key messages

  • The LGA welcomes the introduction of the Building Safety Bill and the Fire Safety Act. We believe these important pieces of legislation will strengthen the building safety system in the UK, especially in relation to new buildings. It is, therefore, an important step in the right direction.
  • As we set out in our  to the Public Bill Committee on the Building Safety Bill, the LGA has been calling for several years for the Government to fund remediation costs in the first instance and then seek to recoup those costs from those responsible. We echo the HCLG Select Committee’s recommendation that “These proposals should impose no costs on leaseholders and explicitly acknowledge that in the short term the Government must foot the bill, until such time as mechanisms for cost recovery have been developed.”
  • The Government has made large sums available to remediate dangerous cladding on buildings over 18 metres. However, this money is only available to social housing providers in the limited case of ACM cladding or to alleviate costs that would otherwise be passed on to leaseholders. This places an unsustainable burden on councils housing revenue account.
  • A significant proportion of the fire safety failures uncovered in the wake of the Grenfell Tower disaster are not related to cladding and the Government has refused to fund these. As a result, private sector leaseholders are facing the costs of interim measures, rising insurance charges and remediation bills that could bankrupt them in some cases, while thousands of flats are unsellable. As set out in our position statement on leaseholder costs, the LGA is concerned that the failure to protect leaseholders will leave councils to pick up the pieces as homeowners are made homeless
  • Leaseholders bought their property in good faith, unaware of the failure of the regulatory system for building safety, or the possibility that some product manufacturers were misrepresenting dangerous materials as safe. Unlike the product manufacturers, contractors, developers, and designers who had a responsibility to know what the building regulations required and to deliver buildings that complied with them, leaseholders are blameless.
  • In most cases freeholders are equally innocent, having also purchased freeholds in good faith, with no responsibility for compliance with the building regulations. In fact, often the freehold is owned by the leaseholders.
  • Any protection for leaseholders against remediation costs should also cover social housing providers.

Building Safety Bill

The Government has made large sums available to remediate dangerous cladding on buildings over 18m. However, this money is only available to social housing providers in the limited case of ACM cladding or to alleviate costs that would otherwise be passed on to leaseholders. The Grenfell fire tragedy revealed that cladding is not the sole cause of fire safety issues, and the Government must take further steps to address non-cladding related fire safety risks.

  • In the social sector this will prevent councils and housing associations from making a greater contribution to providing the housing the nation requires, improve the existing housing stock to modern standards, meet energy targets and maintaining safe buildings.
  • In the private sector leaseholders are facing the costs of interim measures, rising insurance charges and remediation bills that could bankrupt them in some cases, while thousands of flats are unsellable. As set out in our position statement on leaseholder costs, the LGA is concerned that the failure to protect leaseholders will leave councils to pick up the pieces as homeowners are made homeless and dangerous buildings left unfixed, a blight on our towns and cities.
  • The Bill seeks to alleviate this problem in three ways:
    1. Schedule 7 excludes remediation costs from the Building Safety Charge; however, it does not in itself prevent remediation costs being passed on.
    2. Sections 125 and 126 extend the scope and the duration of the Defective Premises Act (DPA). However, the DPA has seen relatively little use to date and the ability of contractors to go out of business to avoid being held to account for inadequate work means that it is unlikely to offer much assistance against smaller concerns, while large developers and contractors will be better able to afford lengthy litigation than leaseholders or most Accountable Persons.
    3. Section 124 (4) requires Accountable Persons to seek alternative sources of funding before imposing remediation costs on leaseholders. However, this  reflects existing practice under the Building Safety Fund and is not expected to benefit many leaseholders, although it may help in rare cases where owners have chosen to charge leaseholders rather than access Government funds. We understand it is the Government’s intention to allow Accountable Persons to charge leaseholders before seeking alternative funds and reimburse them if such funds are secured. As the works involved are often required by law, this raises the prospect of APs – including councils - being obliged to make leaseholders pay up front costs for works the AP is simultaneously claiming in court are the responsibility of a third party. This will put our members in an impossible position.
  • The Bill’s measures therefore provide insufficient protection to leaseholders from remediation costs.
  • The LGA has been calling for several years for the Government to fund remediation costs in the first instance and then seek to recoup those costs from those responsible.
  • We echo the HCLG Select Committee’s recommendation for proposals for funding all historical building safety remediation works, that “These proposals should impose no costs on leaseholders and explicitly acknowledge that in the short term the Government must foot the bill, until such time as mechanisms for cost recovery have been developed.”
  • The Bill should be amended to contain specific provision for a fund to cover the initial costs of remediating – through a proportionate approach - fire safety defects that are not the fault of leaseholders.
  • The Bill makes provision for a levy on developers. While we support this it should not apply to social housing providers

Contact

Jonah Munn, Public Affairs and Campaigns Adviser

jonah.munn@local.gov.uk