Industry will pay for cladding crisis, announces Gove

Industry will pay for cladding crisis, announces Gove

The government has announced a new plan to protect leaseholders and make wealthy developers and companies pay to fix the cladding crisis.

Secretary of State for Levelling Up, Michael Gove, addressing parliament yesterday guaranteed that no leaseholder living in their own flat will have to pay a penny to fix unsafe cladding.

Following Mr Gove’s letter to industry, the old proposed loan scheme for leaseholders in medium-rise flats will be scrapped, with industry given two months to agree to a financial contributions scheme to fund the new plan, otherwise, if necessary, the government will impose a solution in law.

In addition, a new dedicated team is being established to pursue and expose companies at fault and to force them to shoulder the burden of making buildings safe.

Mr Gove yesterday revealed a 4-point plan to reset the government’s approach:

  • Opening up the next phase of the Building Safety Fund to drive forward taking dangerous cladding off high-rise buildings, prioritising the government’s £5.1 billion funding on the highest risk;
  • Those at fault will be held properly to account: a new team is being established to pursue and expose companies at fault, making them fix the buildings they built and face commercial consequences if they refuse;
  • Restoring common sense to building assessments: indemnifying building assessors from being sued; and withdrawing the old, misinterpreted government advice that prompted too many buildings being declared as unsafe; and
  • New protections for leaseholders living in their own flats: with no bills for fixing unsafe cladding and new statutory protections for leaseholders within the Building Safety Bill.

If industry is unable to agree a solution, one will be imposed by law using clauses in the Building Safety Bill, allowing government to introduce a levy on developers of high-rise buildings. This builds on the 4% tax on the largest, most profitable developers, announced in this year’s Budget and expected to raise at least £2 billion over the next 10 years to help pay for building safety remediation.

Secretary of State for Levelling Up, Michael Gove, said:

More than 4 years after the Grenfell Tower tragedy, the system is broken. Leaseholders are trapped, unable to sell their homes and facing vast bills. But the developers and cladding companies who caused the problem are dodging accountability and have made vast profits during the pandemic whilst hard working families have struggled.

From today, we are bringing this scandal to an end – protecting leaseholders and making industry pay.

 We will scrap proposals for loans and long-term debt for leaseholders in medium-rise buildings and give a guarantee that no leaseholder living in their own flat will pay a penny to fix dangerous cladding.

Working with members of both Houses, we will look to bring a raft of leaseholder protections into law through our Building Safety bill.

 And we will restore much needed common sense on building safety assessments, ending the practice of too many buildings being declared unsafe.”

Dame Judith Hackitt, who chaired the Independent Review of Building Regulations and Fire Safety said:

Today’s announcement by the Secretary of State is very welcome and should come as a great relief to the many leaseholders who have felt trapped by the prospect of having to pay for remediating defects to properties which they bought in good faith.

 Those who caused the problem now need to step up, take responsibility and show some leadership. This problem has gone on for too long and we need a rapid solution, not months of debate and negotiation leaving innocent leaseholders in further limbo.”

A series of rapid measures are expected to be introduced as part of the government’s plans to protect leaseholders in buildings over 11m from short-term enforcement of excessive bills and potential bankruptcy. These include the installation of fire alarms in all high-risk buildings and the scrapping of costly waking watch measures.

The government will also introduce amendments to the Building Safety Bill to retrospectively extend the legal right of building owners and leaseholders to demand compensation from their building’s developer for safety defects up to 30 years old. The Bill currently covers defects up to 15 years old and so this amendment will give thousands more leaseholders the right to challenge.

Finally, in a bid to provide more transparency, leaseholders will also be able to access a new portal showing the status of their building’s application to the Building Safety Fund.

Mr Gove also announced that “there must be fewer unnecessary surveys” and “an assumption that there is no risk to life in medium and low-rise buildings unless clear evidence of the contrary”. As such the government has withdraw its Consolidated Advice Note – interim guidance which it says has been “wrongly interpreted by the industry as requiring remediation of all cladding irrespective of building height”.

Instead, updated guidance, produced by the British Standard Institution, will be available to help fire risk assessors take a proportionate approach to the assessment of walls and avoid wholescale cladding replacement where safe to do so.

In cases where EWS1 forms are still deemed necessary, the government will introduce an indemnity scheme for building assessors to give them greater confidence to exercise professional judgement. New data from lenders, shows that EWS1s are requested by lenders for fewer than 1 in 10 mortgage valuations for flats.

Mark Chick, ALEP Director, said:

ALEP welcomes today’s announcement by the Housing Secretary, which will hopefully free leaseholders living in lower height buildings from the burden of paying to remove unsafe cladding materials. It is entirely appropriate that the companies responsible for installing defective materials should pay for any removal and remediation work, rather than the home owner. 

 However, many flat owners have been left in limbo, unable to sell or remortgage their property until any uncertainty concerning the exact type of cladding on their block has been resolved. Therefore, it is essential that Government now works with the wider construction industry to identify those blocks that are actually at risk.”

Jeremy Raj, national head of Residential Property at Irwin Mitchell said:

The sentiments and ambition of Mr Gove’s statement today were praiseworthy and long overdue. The realities of his proposals are, however, as yet of questionable efficacy and breadth.

 The idea that responsibility for resolving the cladding scandal – which has now widened to become a general building safety scandal – should be laid solely at the doors of developers asked to voluntarily cough up more cash, is likely to lead only to further delay and heartbreak for leaseholders caught in dangerous or un-sellable properties.”

David Alexander, the chief executive officer of DJ Alexander Scotland, commented:

While developers have largely insisted that their developments were built to regulations at the time and that therefore they are not liable this cannot be a tenable position in the long term. There is clearly much negotiation to be concluded but, hopefully, this is the first stage in the process to resolve this terrible issue.”

 

 

 

Today's Conveyancer

2 Comments

  • To speed the process should not house builders be required to grant the Government a mortgage over building land reserves? With quick release for homes that are safe and affordable

  • […] Secretary, Michael Gove, announced in January plans to hold developers and construction product manufacturers accountable for remediation works, through the introduction of a £4bn levy. An agreement was finally struck […]

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