The Earl of Lytton addressed the House of Lords on 01 May 2024 giving the government two options to resolve the chaos in the UK flat market caused by the flawed Building Safety Act. It provides full funding from the construction industry to protect all 1.7 million excluded leaseholders, removes the permanently high insurance risk due to the sub standard developer contracts and removes the three tier market causing conveyancers to refuse work on mid and high rise blocks of flats. It offers true consumer protection for blocks of flats with no excluded leaseholders for both historic defects and defects found going forward and it achieves this without the need to go through the courts.
Building Safety Address to the Lords – 01 May 2024
Grateful to the National Residential Landlords Association for renewing their backing for the Earl of Lytton’s Building Safety Remediation Scheme tabled in the Leasehold and Freehold Reform Bill.
They write:
“A key change that the NRLA is seeking to achieve concerns building safety. The Earl of Lytton has re-tabled his amendment to introduce a Building Safety Remediation Scheme which would ensure that building safety failures are fixed, irrespective of a building’s ownership or height.
The scheme would overcome the shortcomings of the Building Safety Act (and mitigate the issues linked to any ground ban) to fix historic safety defects via grants funded either by the developer responsible for the building works or through a levy on the construction industry where the developer is dissolved or insolvent.“
An investigation by The Sunday Times found that since the Grenfell Fire of 2017 more than 15,000 residents have been forced to leave homes due to fire or fire safety defects. The Earl’s amendments are needed now as a matter of urgency.
The Earl of Lytton has tabled a set of amendments to the Leasehold and Freehold Reform Bill aimed at protecting all leaseholders from building safety remediation costs, ending service charge abuses in leasehold and introducing the concept of a building trustee to improve leasehold and ensure the transition to enfranchisement and commonhold works in practice.
Currently 1.7 million leaseholders are excluded by the Building Safety Act leaseholder protections and are liable to pay all costs of fixing building safety defects if found in their blocks of flats. We believe these innocent homeowners and also the taxpayer should not have to bail out the construction industry for bad practice. However the required extra funding has got to come from somewhere. We say the money has to come from the industry that built the defective buildings in the first place, the construction industry.
Other issues introduced by the Building Safety Act include:
stalling conveyancing by creating a three tier flat market and needless complixity
substandard developer contracts condemning some leaseholders to permanently high insurance
disregarding freeholder insolvency risk (by recent group rent cap proposals) putting the leaseholder protections under the Building Safety Act also at risk and leaving leaseholders in limbo
ignoring Basel 3.1 (new banking standards coming in 2025) extra lending cost risk due to permanent impairment caused by the Building Safety Act (partial and no protections).
ignoring the need for consumer protection against Building Safety defects without the need of going through the courts.
The building trustee would be appointed for higher-risk buildings and large mixed-use developments. He or she would be an impartial figure whose role would be to ensure that the interests, rights, responsibilities of the landlord (if any) and leaseholders are balanced and, more importantly, that the building is properly maintained and the service charge provides value for money. In this way, the concerns raised in relation to leaseholder management of larger mixed use estates can be mitigated.
In the event of insolvency of the landlord, the building trustee would step in to ensure the ongoing management of the building. Provision is made in the relevant amendment to prevent the termination of service contracts or insurance policies if a landlord becomes insolvent.
This group of amendments are wholly in line with existing provisions in the Bill to increase the transparency of costs passed on to leaseholders and to protect them from exploitative behaviour by landlords.
In this group there are amendments to:
define when a landlord incurs costs to prevent manipulation of the 18 month rule under which costs incurred before then cannot be charged unless leaseholders have been given notice;
a new tighter test of “value for money” to replace current test of “reasonably incurred” in relation to service charge costs;
go further than the Government on the automatic provision of information to leaseholders;
prevent landlords from placing contracts with related parties or connected persons;
limit the duration of contracts that a landlord may enter into;
provide a definition of “cosmetic works” that may be undertaken without the consent of a landlord, and
measures to prevent the assignment or payment of insurance payouts by landlords to third parties, such as their lenders or bondholders.
These amendments are consistent with the overarching aims of consumer protection in leasehold matters and which would be applicable whatever form of legal construct emerges as between block control and management and unit ownership and occupation.
The Building Safety Remediation Scheme (BSRS) envisaged under the amendment establishes a statutory scheme that covers all leaseholders. If a building did not comply with regulations in force at the time of construction, joint and several liability for remediation of all material building safety defects is placed on the developer and principal contractor. If neither are able to pay (or the building met the relevant regulations in force at the time of construction but is now, with later information, seen as unsafe), remediation funding would come from a levy on the construction industry rather than just developers as is currently proposed.
The BSRS provides leaseholders and their lenders with certainty that their homes will be fully remediated. But it does not just deal with the present crisis as it enshrines in law a low-cost mechanism to deal with similar situations in the future. With the Government, rightly, encouraging leaseholders to take greater control over the management of their buildings and seeking to reinvigorate commonhold, the BSRS provides a necessary layer of protection as the Building Safety Act, 2022 specifically excludes enfranchised leaseholders and commonhold unit owners from all its protections.
An alternative to the Building Safety Remediation Scheme to give the government another way of protecting all leaseholders.
1) Removes leaseholder exclusions and protects ALL leaseholders from building safety remediation costs with funding from a construction industry levy.
2) Fix the flawed developer remediation contracts to cover all building safety defects and not just life safety critical, so no one is condemned to permanently high insurance due to the remediations not eliminating all building safety risks.
DEBATE TIMINGS
Due for debate week commencing 29/01/2024 (Monday and Wednesday) at Committee.
The Earl of Lytton has tabled amendments to the Leasehold and Freehold Reform Bill to end service charge abuse, prevent insurance assignments and introduce the concept of a Building Trustee to ensure leasehold abuse ends and commonholdthrives.
The building trustee concept is designed as a backstop in relation to the expansion of enfranchisement rights in the Bill and the possibility of the insolvency of a major landlord group.
The government assumes good management will automatically follow enfranchisement or resident management. Leaseholders are not necessarily equipped to direct the management of their blocks especially those with up to 50% non-residential floorspace.
The Government is yet to announce its proposals to abolish or restrict ground rent. However, if recent press speculation is correct then, as you can see from the following table, a 20-year rundown period runs the risk of some of the UK’s largest landlord groups becoming insolvent as their liabilities extend well beyond that period.
The building trustee would be appointed for higher-risk buildings and large mixed-use developments. He or she would be an impartial figure whose role would be to ensure that the interests, rights, responsibilities of the landlord (if any) and leaseholders are balanced and, more importantly that the building is properly maintained and the service charge provides value for money. In this way, the concerns raised in relation to leaseholder management of larger mixed use estates can be mitigated.
In the event of insolvency of the landlord, the building trustee would step in to ensure the ongoing management of the building. Provision is made in the relevant amendment to prevent the termination of service contracts or insurance policies if a landlord becomes insolvent.
SERVICE CHARGEAMENDMENTS
This group of amendments are wholly in line with existing provisions in the Bill to increase the transparency of costs passed on to leaseholders and to protect them from exploitative behaviour by landlords.
In this group there are amendments to:
define when a landlord incurs costs to prevent manipulation of the 18 month rule under which costs incurred before then cannot be charged unless leaseholders have been given notice;
a new tighter test of “value for money” to replace current test of “reasonably incurred” in relation to service charge costs;
go further than the Government on the automatic provision of information to leaseholders;
prevent landlords from placing contracts with related parties or connected persons;
limit the duration of contracts that a landlord may enter into;
provide a definition of “cosmetic works” that may be undertaken without the consent of a landlord, and
measures to prevent the assignment or payment of insurance payouts by landlords to third parties, such as their lenders or bondholders.
These amendments are consistent with the overarching aims of consumer protection in leasehold matters and which would be applicable whatever form of legal construct emerges as between block control and management and unit ownership and occupation.
The case for consumer protection for building safety defects (fire safety and structural) as well as against leasehold abuse is made by the Earl of Lytton to the House of Lords at the Second Reading of the Leasehold and Freehold Reform Bill, Wed 27 March, 2024.
Amendments coming soon to the House of Lords for Grand Committee.
Former parliamentary counsel Daniel Greenberg CB drafted the Polluter Pays clauses of the Earl of Lytton’s consumer protection legislation, before he took on his new role as current Parliamentary Standards Commissioner. The scheme is also backed by Grenfell inquiry construction lawyer David Sawtell as well as many other experts and organisations.
In 2021, Daniel describes at a conference in parliament, how effective the scheme will be at making builders and lead developers pay for Building Safety defects without the need of taking them to court.
The scheme delivers the following badly needed remedies to the flawed Building Safety Act and is urgently needed in 2024:
1. Protects the 1.7 million excluded leaseholders with remediation costs funded by the construction industry.
2. Removes the 3 tiers of ‘protection’ status (needlessly introduced by the Building Safety Act) blighting the UK flat market and causing conveyancers to reject this work due to lack of insurance cover.
3. Ensures the construction industry is the backstop for remediation costs, as many of the landlords are thinly capitalised so making them the backstop could result in many qualifying leaseholders being left in legal limbo due to freeholder insolvency. Freeholder insolvency is increasingly likely in 2024 as indicated in the government’s own impact assessment on ground rent caps.
4. Ensures that the rotten culture in construction ends with permanent joint and several liability on the developer or lead contractor or their parent companies. True consumer protection for blocks of flats. No need to take a party to court to get justice.
5. Removes the risk of more expensive mortgages due to extra capital being required under the new Basel 3.1 standards for dealing with permanently impaired mortgage securities blighted by building safety defects with no complete route to funding.
Over 62,000 people are now calling for consumer protection for blocks of flats (without the need to go to court) with the Earl of Lytton’s buildingsafetyscheme.org legislation.
With the Building Safety Act, 2022 freeholder leaseholder protections back stop now at serious risk of freeholder insolvencies with recent legislative proposals, even qualifying leaseholders could find a lack of funding available to cover ruinous remediation costs. Then of course there is the 1.7 million unqualified leaseholders who are still at risk. All because the government hasn’t got enough money.
A tower block in Bristol is being evacuated after a structural issue was discovered today (Nov 14, 2023).
The only way out of this crisis is the Earl of Lytton’s Building Safety Scheme to make those responsible for building defective blocks of flats (that cause evacuations) permanently liable without the need for homeowners to take them to court.
Consumer protection legislation for blocks of flats is needed as a matter of urgency in the UK. The Earl’s amendment is coming back to the House of Lords in due course.
This adds to our large list of evacuations due to dangerous building below – it’s time for a fully comprehensive solution in law to ensure dangerous building due to value engineering ends.
We were thrilled Deepa Mistry, one of the key team members of the Earl of Lytton’s consumer protection amendment team and CEO of the Building Safety Crisis organisation opened the #VisionConstruct2023 conference earlier last week and gave the keynote address for Day 1 at Wembley Stadium
Deepa candidly and personally explains the serious challenges the Building Safety Crisis presents on the human level to all caught up in the crisis and the need for the Earl of Lytton’s consumer protection amendment for blocks of flats.
The Earl of Lytton debated the Building Safety Scheme in the House of Lords, please see statement and speech below. Our campaign for a full comprehensive solution to the Building Safety Crisis continues.
Statement from the Earl of Lytton
Levelling Up and Regeneration Bill debate 18 Sep 2023
