Building safety crisis could result in multi-billion pound bill, Hunt warned

Chancellor Jeremy Hunt has been warned that the ongoing building safety crisis could leave the government with a “multi-billion pound bill” to rescue as many as 1.7 million financial victims.

Campaigners from buildingsafetyscheme.org stress that, if nothing is done, the government could face large numbers of innocent people losing their homes and lenders facing heavy losses as leases are forfeited.

This, they say, comes directly as a result of gaping holes in the current building safety legislation introduced in response to Grenfell, namely that it is not cover three groups of people: those living in low rise flats, those who have enfranchised, and those who own more than three flats.

“Unless this is put right, up to 1.7 million could find themselves in an impossible position until all buildings have been assessed for fire safety issues,” they said:

“Not all buildings will have issues, but the entire flat market has been hit as no one yet knows which buildings are affected.

Those in buildings found to be unsafe are either left with a flat they can’t sell or forced to pay for thousands or even tens of thousands of pounds of costs they can’t afford in order to remediate a range of building safety defects including Grenfell type cladding. They may even be living in potentially dangerous flats that need to be urgently made safe.”

It’s suggested that the government’s current offering has created “a problematic three-tier flat market”, of those fully protected, partially protected, and not protected at all.

The campaigners also cast light on the well-documented issues this creates for conveyancers:

“They have to determine a buyer’s potential liability by analysing complex information relating to the status of the seller and building owner.

This risks a significant percentage of conveyancers declining fresh instructions on flats, running the risk of stalling a significant part of the UK housing market.”

It has also been suggested that the crisis could deepen next year when new banking rules take effect. The Bank of England is due to say how it will implement “Basel 3.1” standards from the beginning of 2025. These will force lenders to revalue a loan if “an event occurs that results in a likely permanent reduction in the property’s value…” With the current legislation creating a three tier flat market, widespread revaluations could appear unavoidable.

“Leaseholders who are partially or wholly unprotected will suffer – and banks that have lent them money could find that their mortgages turn into bad debts that cannot be repaid,” added the buildingsafetyscheme.org campaigners.

One key aim of the campaign is to see the adoption of the Earl of Lytton’s amendment, which is scheduled for debate in the House of Lords on Wednesday. Its “polluter pays” principle seeks to make the developer or lead contractor permanently liable for building defects at the time of construction or recover from a wide building industry levy if the builder no longer exists.

“This amendment would work alongside the existing government schemes, but crucially aims to fund the remediation of every financial victim of the building safety crisis, protecting the 1.7 million currently excluded victims and removing the three tier flat market,” the campaigners said.

The amendment is gaining momentum ahead of the debate, with a petition for its adoption sitting at around 50,000 signatures.

To read more about the Earl of Lytton’s amendment, visit buildingsafetyscheme.org