Consumer Protection for Buildings
Consumer Protection for Buildings
As we approach the debate in the House of Lords, we are grateful to Daniel Greenberg CB (who drafted the polluter pays clauses before his new commissioner for standards role) and David Sawtell FCIArb for their enormously generous pro-bono legal work, advice and support for the buildingsafetyscheme.org clauses.
Over 50,000 people have signed a petition in just 25 days calling for the Earl of Lytton’s Building Safety Scheme Amendment to protect every leaseholder in the country.
The survey has even attracted the attention of a former state premier of Victoria, Australia and former co-chair of their Cladding Task force, who describes the Earl’s scheme as a global precedent for reform.
We appeal to the government to implement the Building Safety Remediation Scheme urgently. To protect the 1.7 million innocent flat owners currently excluded by the Building Safety Act.
The petition has also been featured in Today’s Conveyancer calling on the UK to sign:
Property Mark CEO backs the Earl of Lytton’s Building Safety Remediation Scheme, in a letter to Baroness Scott on 07 August 2023.
Read the full letter below:
The Earl of Lytton explains to the British Safety Council why his amendment is urgently needed:
1. Protect the 1.7 million excluded leaseholders with remediation costs funded by the construction industry.
2. Remove 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. Ensure 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.
4. Ensure that the rotten culture in construction ends with permanent joint and several liability on the developer or lead contractor or their parent companies.
Read the full article below:
Grateful to have the support of Propertymark who renewed their support on 28 July 2023 for the Earl of Lytton’s Building Safety Remediation Scheme. They join the Sunday Times, former state premier of Victoria Australia Ted Baillieu, the Mortgage Intermediary Association, the Association of Mortgage Intermediaries, the British Property Federation, ARMA and the National Landlords Association calling for this vital legislation to become law by Christmas 2023 as part of the Levelling Up Bill. Only by removing the unfair 3 tier flat market and protecting all homeowners from remediation costs can we begin to unblock the Housing market and prevent dangerous building in the future.
Read the full Propertymark press release here:
Building Safety Scheme to be Debated in the House of Lords on Monday September 18th 2023
Jeremy Hunt has been warned that the government could face a multi-billion pound bill to rescue up to 1.7 million potential victims of the post Grenfell building safety crisis. If nothing is done, the government faces the risk of large numbers of innocent people losing their homes and lenders facing heavy losses as leases are forfeited.
The crisis arises because the government’s leaseholder protection legislation introduced last year, with the aim of tackling the fall-out from the Grenfell fire in 2017, does 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 homeowners find themselves in an uncertain position until all buildings have been assessed for fire safety issues. 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 any Grenfell type cladding found on low-rise blocks. They may even be living in potentially dangerous flats that need to be urgently made safe.
The government implemented partial leaseholder protections last year, protecting only a proportion of homeowners from ruinous building safety remediation costs. However, this has created a problematic three tier flat market, of those fully protected, partially protected and not protected at all. This is causing difficulties for conveyancers obtaining professional indemnity insurance as 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.
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 seem to be 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.
The crisis is addressed by an amendment to the government’s bill tabled by the Earl of Lytton, a crossbench peer, scheduled for debate in the House Lords next Wednesday. It 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 all unsafe flats, protecting the 1.7 million currently excluded homeowners and removing the three tier flat market.
The amendment is widely supported by over 51,000 people, the National Residential Landlords Association and most recently by Property Mark who represent 17,500 property agents who wrote: “We believe that the amendments proposed by the Earl of Lytton provide greater protections for leaseholders, removing loopholes and establishing an independent body that would enforce liability, while also expanding the types of buildings where leaseholders would qualify for protections.“
It is also backed by former state premier of Victoria, Australia and former co-char of their cladding task force Ted Baillieu: “Lord Lytton’s [Building Safety Remediation Scheme] has the potential to change the Building Industry for the better, forever and across the world. It is the only comprehensive and equitable solution on the table. It is not just a one off remediation it is permanent.“
If this amendment is rejected next week, then the chancellor faces the difficult choice of residential valuation write downs and even people losing their homes with all the negative repercussions for the banking system or the government having to step in to bail out up to 1.7 million people and continue with the problematic three tier flat market.
To read more about the Earl of Lytton’s amendment, please visit www.buildingsafetyscheme.org
Notes to editors
According to the National Residential Landlords Association, there are approximately 1.3 million leaseholders of buildings less than 11 metres in height, along with 400,000 leaseholders of high-rise buildings who are non-qualifying due to other eligibility criteria.
Contact details
Stephen Day
(E) : [email protected]
House of Lords briefing on the Earl of Lytton’s consumer protection for buildings amendment to the Levelling up and Regeneration Bill. Filmed at the House of Lords on 4th July 2023.
Contains presentations from the Earl of Lytton, excluded leaseholder Amanda Walker and solicitors Alison Hills and Zahrah Aullybocus on the issues with the Building Safety Act and how they are addressed by the proposed scheme.
The scheme has received legal backing from construction counsel David Sawtell, former parliamentary counsel Daniel Greenberg CB and planning silk Morag Ellis KC. It has also been backed by organisations such as the NRLA, Property Mark, the Sunday Times, ARMA, the Association of Mortgage Intermediaries and the British Property Federation. It also has the backing of Ted Baillieu, former premier of Victoria and former co-chair of their Cladding task force.
Youtube link to full conference: https://www.youtube.com/watch?v=734jdwQY16c
Earl of Lytton – Introduces the Building Safety Remediation Scheme
Zahrah Aullybocus – Chaos caused to the Conveyancing Industry by the Building Safety Act
Amanda Walker – The personal impact of being excluded from the Building Safety Act protections
Alison Hills – How the Building Remediation Scheme will provide consumer protection for flats
16th June 2023 – The Earl of Lytton has tabled a new version of his consumer protection amendment for buildings in the House of Lords. It protects ALL homeowners from the costs of remediating historic Building Safety Defects (cladding and non cladding) as well as new defects discovered going forward.
This latest legal text clears up issues raised around judicial review risk and applies not just to England. Funding remediations is via an efficient out of court quasi judicial process or from a wide construction industry levy where a freeholder/developer can’t/won’t pay.
The amendment could be put to a vote in the upcoming Report stage of the Levelling Up and Regeneration Bill in the House of Lords September/November 2023.
Amendment text is at the following link: https://bills.parliament.uk/publications/52302/documents/3823
Previous House of Lords vote on earlier version of the amendment at Building Safety Bill Report stage:
It is hoped on the 6th Anniversary of the Grenfell tragedy that the government will implement this 6th tabling of this amendment, which protects all leaseholders from the costs of the #BuildingSafetyCrisis and also protects the future.
The problem (Building Safety Act, 2022 and Developer Remediation Contracts
The Grenfell fire in 2017 exposed a catastrophic failure in fire safety regulation that has left tens of thousands of people living in unsafe buildings. Leaseholders—through no fault of their own—were facing facing bills running into the tens, or even hundreds, of thousands of pounds for the remediation of fire safety defects. The Building Safety Act 2022 provides leaseholders with varying degrees of statutory protection from the costs of cladding and non-cladding remediation costs and interim safety measures (such as waking watches), with funding coming from the taxpayer (Building Safety Fund), developers (Building Safety Levy), and landlords. The UK’s largest developers are being pressed to agree to “voluntarily” fix “life-critical fire-safety defects” affecting buildings they were responsible for, on pain of having planning permission and building control sign-off revoked.
However, significant numbers of leaseholders receive little or no protection from non-cladding remediation costs—buy-to-let (BtL) owners with more than three properties, enfranchised leaseholders and those living in blocks below 11m. Statutory liability for remediation is placed on landlords whose financial interest in a building is generally relatively low, rather than developers. The significant number of unprotected leaseholders and a reliance on, in some cases, thinly capitalised or significantly indebted landlord groups creates a range of new credit risks for ground rent investors (often pension funds) and lenders.
Banks and building societies face increased credit risks, particularly in relation to their BtL portfolios. The threat of lease forfeiture, which has historically been a very rare event, could become a far more common outcome for many BtL and enfranchised owners, wiping out an entire lenders security unless further capital is provided. Pension funds that invested in ground rent funds face significant unanticipated costs. In the worst case a thinly capitalised or significantly indebted landlord group could fail with unknown consequences and costs for hundreds of thousands of people if unsalable freeholds escheat to the Crown.
Also for ‘protected leaseholders’ landlords that do not meet the contribution condition (net wealth below a set threshold) may charge leaseholders up to the £10,000/£15,000 caps before they need to contribute to remediation costs. However, to benefit from this exemption, they need to provide a landlord certificate to leaseholders setting out their net wealth calculation and supporting documents within tight timescales. There is considerable anecdotal evidence that landlords are failing to meet these deadlines or are basing their net worth on a group structure defined on an accounting basis rather than the definition set out in the BSA and secondary legislation. Any error in a landlord certificate means that landlords automatically become liable for remediation costs irrespective of their net wealth, increasing the likelihood of insolvency.
Unless all leaseholders are protected and the correct industry is made to pay for breaking building law, the rotten culture in the construction industry will continue. Full liability is the only way to ensure buildings of all heights are built to the required standards and future Grenfell’s are prevented.
Building a better future (Building Safety Remediation Scheme)
There is an alternative proposal that would substantially reduce the financial stability and public finance risks. An amendment, based on drafting by Daniel Greenberg (former parliamentary counsel and currently Parliamentary Commissioner for Standards) provides for an alternative comprehensive solution to the building safety crisis has already been tabled by the Earl of Lytton for discussion in the House of Lords. The proposed 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 contactor. 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 BSA specifically excludes enfranchised leaseholders and commonhold unit owners from all its protections.
How the BSRS Protects Homeowners
How the BSRS is Funded
Practical operation of the Building Safety Remediation Scheme
1. Block(s) of flats built after 1992, or where building work has occurred after 1992, requires remediation (cladding or non-cladding defects)
2. Freeholder/Building Owner applies to the Building Safety Remediation Scheme for a determination on (a) work required to remediate the building; and (b) whether the building was built to regulations in force at time of construction c) for a grant to remediate the defects identified and pay for waking watch.
3. Building Safety Remediation Scheme determines if the identified defects contravened the stated route to compliance at building control approval (ie BBA Certificates/Approved Document B/Bespoke routes to compliance) looking at basic installation defects such as missing cavity barriers, missing fire breaks, installation defects and internal fire stopping breaches.
4. If building regulation breaches at the time of construction are established then the Building Safety Remediation Scheme makes the developer/principal contractor joint and severally liable (or their parent companies) and the defects are published on a government public register of determinations website.
5. There is an appeals route via the FTT for building regulation breach and funding amount decisions, however as these are egregious cases, appeal risk will be low after a few initial test cases. No builder is going to be able to argue that missing firebreaks met regulations.
6. If building regulation breaches are difficult to prove or the developer/lead contractor group doesn’t exist or the defects are a result of regulatory failure then a wide construction industry levy including the cladding manufacturers funds the remediation and waking watch costs.
7. The Freeholder/Building Owner receives the funding to start the remediation without lengthy court proceedings.
Details
For further information on the Building Safety Remediation Scheme, the Earl of Lytton can be contacted at: [email protected]
Call to Action
If you are caught up in the Building Safety Crisis or want to help build political support for the cause please write to your MP and members of the House of Lords to ensure this once in a generation legislation makes it onto the statute book.
1) National Residential Landlords Association
“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.“
Full article here: https://www.nrla.org.uk/news/here-today-not-to-stay-copy
2) Former Chief Executive of the CIOB Mr Blythe
“If this amendment went through it would change the culture of the construction and property industry in the UK and set a precedent for the rest of the world. Time for the UK to do the right thing and lead the world.”
3) Former State Premier of Victoria, Australia and Co-Chair of Cladding Taskforce Mr Baillieu
“This amendment’s going to cover off everything – not just cladding but all defects and all other costs and establish a principle that if you don’t build according to the regulations, it doesn’t matter how long ago you did it, you’ll have to pay to fix it. If that happened, that’s a massive cultural change worldwide… … We urgent every Member of the British Parliament to get behind the only comprehensive and equitable solution – the Polluter Pays amendments being advanced by the Earl of Lytton.”
4) Property Mark
“Current UK Government policy does not go far enough to support leaseholder protections which limits leaseholders by the size of buildings and the property that they own. Fundamentally, individuals who are not responsible for making buildings unsafe should not be charged with remediation costs. Proposals for a Building Safety Remediation Scheme would help lead to greater confidence in the buying and selling of property in high-rise buildings. In order to ensure that impacted property can continue to be bought, sold and rented it is vital that we have a system that holds those directly responsible to account.”
https://www.propertymark.co.uk/resource/greater-support-needed-for-leaseholders.html
5) British Property Federation “We are strongly supportive of the amendment proposed by the Rt Hon Dr Liam Fox MP [Polluter Pays Amendment].. This is to protect individuals, avoid bankrupting companies, risking the ability of insurers and pension funds to meet their obligations, or seriously affecting charitable institutions.”
https://publications.parliament.uk/pa/cm5802/cmpublic/BuildingSafety/memo/BSB14.htm
6) The Sunday Times “The polluter pays scheme answers a key aim of a Sunday Times campaign to make those responsible pay for the building safety scandal — not innocent homeowners. If an amendment is added … it could be life-changing for the hundreds of thousands of leaseholders who have been trapped for the past four years.”
7) Association of Mortgage Intermediaries “This proposal to resolve the issues on funding the remediation of buildings with unsafe cladding would be a significant step forward to resolving the problems facing residents.”
8) Intermediary Mortgage Lenders Association “By shifting the balance and making developers front building remediation costs, we can hold those who failed to properly construct these dwellings to account, remove the cost burden currently unfairly placed on individual homeowners, and speed up the process of remedying unsafe homes…it would be a step in the right direction. Any initiative that helps to ease the immediate dilemma for borrowers and gives mortgage providers the reassurance to lend on safe properties, should be welcomed”
9) Association of Residential Managing Agents “Allowing the Government to identify those works and place the responsibility of remediation costs on those who failed to make the grade in terms of materials, workmanship, or construction standards – rather than on leaseholders – is a sensible and practical solution to the current crisis.”
10) Daniel Greenberg CB (Parliamentary Counsel and Parliamentary Standards Commissioner)
https://www.danielgreenberg.co.uk/building-safety-bill/
11) Grenfell Inquiry Construction Counsel Dr David Sawtell
Press, awards and backers:
Support from the Church to protect leaseholders from Building Safety Remediation Costs
Support from MPs, former Government Minister of State for Housing and Peers in Parliament:
Solicitor Alison Hills Explains how the Building Safety Remediation Scheme amendment works
Solicitor Alison Hills fields a Q&A session on the amendment
Daniel Greenberg CB explains legal drafting of amendment
Earl of Lytton’s Grand Committee Presentation of the Amendment (24 Apr 2023)
House of Lords Conference December 2021