New measures on building safety remediation costs

The government has announced new measures to protect leaseholders from paying for building safety remediation costs and ensure that those responsible pay.

Housing associations have welcomed these measures and believe that no leaseholder should have to pay to fix cladding and other building safety issues caused by developers, contractors and manufacturers.

Initial measures announced on 10 January focused on the costs for remediating unsafe cladding on buildings between 11m and 18m.

Further measures announced on 14 February and on 23 March, in the form of amendments to the Building Safety Bill, focused on costs of wider safety issues on buildings between 11m and 18m.

Cladding cost measures

The government has set out an expectation that developers and contractors remediate buildings between 11m and 18m with unsafe cladding that they constructed. It also wants to set up a new £4bn fund to cover the cost of remediating unsafe cladding on these buildings where there is no original developer. The funding will be sourced from large developers, and the government is negotiating with the housebuilding sector about how this will work.

As social housing providers, housing associations will not be asked to contribute to this funding pot and the government has said they will be able to access it to pay for cladding remediation in eligible buildings.

We will be seeking clarification about how housing associations will be able to access this fund, which homes will be eligible and when it will be available.

The government has asked housing associations to recover remediation costs from responsible parties wherever possible and to absorb any costs for safety works which they are directly responsible for.

Non-cladding cost measures

The government has set out measures in the form of amendments to the Building Safety Bill to ensure that leaseholders will be protected from remediation costs, and is establishing routes to support landlords to recover costs from those who are responsible for defects.

The proposed amendments would do the following:

• Protect leaseholders from the costs of building safety works where a developer was responsible for them.
• Where the responsible developer no longer exists, protect leaseholders from costs if the freeholder can afford to pay.

Only under limited circumstances, such as where the original developer has gone bust, could leaseholders be charged up to a capped amount of £15,000 in London and £10,000 outside of London. Leaseholders in properties valued at less than £175,000 outside London or £325,000 in London will not have to pay anything.

A ‘developer’ is defined in the amendment as whoever built or commissioned a building.

We have raised concerns that this could be used by contractors who are being pursued for compensation to argue that the commissioning developer, not the contractor, is liable for broader costs of remedial works, even where there are no leaseholders in a building. In some cases, housing associations have told us that this is already happening.

The government has said that this is not the intention of the measures, and that the measures should not prevent a commissioning developer pursuing a responsible contractor to recover costs. The government is looking at how this can be publicly made clear.

We are also clarifying how the question of whether a freeholder can afford to pay would be determined and whether it would apply to providers of social housing.

Ensuring those responsible pay for works

The government proposed amendments to the Building Safety Bill to give a range of stakeholders additional legal routes to hold contractors and developers who built defective properties to account. These include an extension to the liability period under the Defective Premises Act to 30 years, and the ability to pursue a claim from a company associated with the original developer, such as a parent company.

The amendments would mean the new building safety regulator, local authorities and fire and rescue authorities can all apply for an order to require building owners to remediate buildings. They, together with leaseholders, can also apply for an order to require a landlord or an associated company to contribute to the cost of remediation. These orders will come with a time period within which works must be completed, and can compel the recipient to pay leaseholders back for costs already incurred.

The detail of these proposals is still to be confirmed. We are engaging closely with the government to ensure the new legal routes are as effective as possible for the sector and on the role of design and build contracts in pursuing claims. We are also highlighting that housing associations are carrying out remediation works as quickly as possible, but in many cases are dependent on the availability of external experts.

Risk assessments and building assessor capacity

The government also announced measures on 10 January to help ensure a risk-based approach to mitigating building safety risks and to increasing building assessor capacity:

• The Consolidated Advice Note on building safety has been withdrawn and replaced with a new Publicly Available Specification (PAS 9980). Find out more.
• Buildings between 11m and 18m in height will be considered safe unless there is evidence to the contrary.
• The Building Safety Fund will be reviewed to ensure it is in line with the government’s expectations of a risk-driven approach to remedial works, and information on the progress of applications to the funds will be made available to residents.
• A new scheme will be brought forward to provide professional indemnity insurance for building assessors, to help increase capacity in this field.