‘Developers must pay’: plans for industry to foot the bill of the cladding crisis
31 January 2022
The Grenfell Tower disaster in June of 2017 shed light to one of the biggest crises in the housing and development sector to date. It highlighted that a number of buildings across the UK had been clad in highly combustible materials and/or lacked fire safety features such as exterior firebreaks. The cladding crisis has dominated mainstream news for the last four years and the most discussed issue is who should pay for the cost of making good these dangerously clad towers.
Michael Gove, Secretary of State for Levelling Up, Housing and Communities, recently announced that the Government plans to shift the onus for paying for the removal of dangerous cladding, on to the residential property development industry. Previously, leaseholders had found themselves trapped in their homes, unable to sell a property due to the dangers of the cladding, and where this cladding had been removed, they were often unable to pay the eye-watering cost of replacing the same.
In welcome news to impacted individuals, the Government’s fresh approach highlights that it will be holding the industry, who Gove states has been “dodging accountability and have made vast profits during the pandemic whilst hard working families have struggled”, to account.
In a letter to the industry, Gove states that, collectively, companies will be asked to make financial contributions to cover the remaining cost of making good all unsafe cladding on buildings between 11m and 18m tall (estimated to stand at £4bn). On an independent level, companies will also have to fund and complete all necessary remedial work to buildings over 11m that they have individual played a role in developing, in an endeavour to pinpoint responsibility and reduce the collective £4bn estimate above.
To encourage co-operation and should the “industry fail to take responsibility in the way I have set out”, Gove advised that the government is prepared to restrict access to Government funding and future procurements, to utilise planning powers, pursue companies via the courts and impose new laws (if required). Gove has asked for a public commitment by the industry, to the proposals, by March 2022.
For now, select aspects from the Government’s new approach include the following:
- Opening up the next phase of the Building Safety Fund, using the £5.1bn pot on high-rise buildings deemed most at risk.
- In a bid to “restore common sense to the market” the widely-criticised Consolidated Advice Note will be withdrawn.
- Updated guidance to be produced by the British Standard Institution will assist risk assessors in taking a proportionate stance to fire safety assessment.
- There will be enhanced protection for “blameless leaseholders” that will be introduced to ensure leaseholders are protected from forfeiture and eviction due to historic fire safety costs.
- The Building Safety Bill will be amended to retrospectively extend the legal right for building owners to demand compensation for safety defects from 15 years to 30 years.
However, the plans only apply to flat owners who have not yet paid to have cladding removed. Anyone who has already paid will not have their money refunded, the Department for Levelling Up, Housing & Communities has said.
What does this mean for our clients?
Clients who are social housing landlords may have already rectified stock impacted by dangerous cladding. Government advice passed in December 2018 called for landlords to inspect buildings over 18m and remove combustible materials if found.
Some of this cost may have been passed to lessees, and where those lessees have been unable to pay the same, landlords may see the enhanced protection promised by the government hinder the prospect of a full financial recoup.
However, if a client’s stock contains buildings that are still unsafely clad, so long as the cladding is less than 30 years old, the responsibility may fall to those responsible in the residential property development industry to make good, and no cost passed to the lessees.
What if landlords have recharged only part of the cost, or recovered only part? Can they then pursue the developer for the remainder?
As always, the devil will be in the detail.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2022.