I completely agree with the Rt Hon Michael Gove MP, the Secretary of State for the Department for Levelling Up, Housing and Communities (DLUHC) it is a basic requirement of a modern society that people should feel safe in their own homes. This is why the Government has worked since the Grenfell Tower tragedy to make buildings safe, protect leaseholders and to comprehensively reform the system so that such a tragedy never happens again.
This week the Government has announced measures which will make sure developers contribute to fixing buildings, building owners fix their buildings, wrong-doers are held to account and, at this difficult time, leaseholders get some relief from high buildings insurance premiums.
More details are available here .
The Developer Remediation Contract
In April, it was announced that the largest housebuilders had signed a pledge to fix all life-critical fire safety issues in buildings over 11 metres in England which they had developed or refurbished. This week the contract as been published that will legally commit developers to delivering on this pledge: a commitment worth more than £2 billion which will protect and give peace of mind to leaseholders in hundreds of buildings. Developers will be required to inform residents in affected buildings how they will meet their commitments. In addition, they will be required to reimburse the taxpayer where public money has been used to make their buildings safe.
Once developers have signed the contract, leaseholders and owners in affected buildings will benefit from a common framework of rights and responsibilities which will get buildings fixed without cost to leaseholders and this is a major step forward.
Developers are expected to sign the contract within the next six weeks, by 13 March. This includes every company that signed the pledge, as well as several companies that were invited to sign but regrettably failed to do so. In signing this contract, developers will be taking a big step towards providing much needed certainty to all affected parties. Accepting their responsibilities will allow developers, too, to plan for the future in the knowledge they understand the full extent of their legal obligations.
Responsible Actors Scheme
Using Building Safety Act powers, the Government will, in the Spring, bring into law a Responsible Actors Scheme in England. Developers will only be allowed to join and remain in the Scheme if they enter into and comply with the terms of the developer remediation contract published this week.
Any eligible developer who is not a member of the Scheme will suffer significant consequences: including that they will not be permitted to commence developments for which they have planning permission, and they will not be able to secure building control sign-off for buildings already under construction. Ultimately, the plan is for the Scheme to capture all those who built unsafe buildings over 11 metres and should be paying to fix them.
Holding wrongdoers to account
I am assured the Recovery Strategy Unit at DLUHC is dedicated to pursuing firms that have failed to do the right thing and pay to fix problems they have created. It has already spearheaded legal action against recalcitrant freeholders and is actively investigating the concerning conduct of various entities and individuals across the built environment, including contractors and construction product manufacturers. Every power at their disposal will be used to hold wrongdoers to account.
I have been advised that too many freeholders are holding back work to make buildings safe, even where the Government has made sufficient money directly available. It is positive that DLUHC have set high expectations about the need for freeholders to get on with fixing their buildings. Legal action has already started in some cases, and leaseholders have already secured the first successful Remediation Contribution Order. Leaseholders are encouraged to use these new powers to challenge bad behaviour and the Government are considering what further action is necessary to ensure homes are not held hostage by irresponsible asset managers.
DLUHC are also backing councils to boost their enforcement action against freeholders unacceptably delaying works to make their buildings safe with more than £8 million committed to support local authorities in the areas most affected by building safety issues.
Building Insurance
At the request of the Secretary of State for DLUHC the Financial Conduct Authority (FCA) have reviewed the buildings insurance market for multi-occupancy residential buildings. The FCA report highlighted serious issues relating to commissions and other payments being shared with property managing agents, landlords and freeholders by insurance firms, with such payments making up at least 30% of leaseholders’ insurance premiums on average and as high as 60%. The FCA also identified concerning obstacles faced by some leaseholders in trying to understand or challenge their insurance bills. This is not acceptable.
The Government will take action to ban managing agents, landlords and freeholders from taking commissions and other payments when they take out buildings’ insurance, replacing these payments with more transparent fees. Over the coming year insurance brokers, managing agents and freeholders will be pressed to change these practices. As part of this leaseholders will be armed with more information, enabling them to better scrutinise costs, and also ensure they are not subject to unjustified legal costs and can claim their legal costs back from their landlord. These steps will ensure leaseholder insurance costs are fairer and more transparent and will rebalance the legal costs regime to give leaseholders greater confidence to challenge their costs.
I am pleased to read that the FCA have committed to investigating broker practices and consulting on regulatory changes to further protect and empower leaseholders. While this is a positive first step, I am fully aware leaseholders require meaningful change to ensure that they are better protected in the future. Added to this, leaseholders also need insurance premiums to reduce significantly and urgently, but it is clear that the quality of data in the insurance sector must improve to make this possible.
The FCA will be expected to ensure that industry implements its new data collection code for fire safety, to report on what actions it will take to ensure a fairer and more competitive market by the summer and to continue monitoring this sector. Alongside this it is welcome news that work by the insurance industry on launching a UK-wide scheme to reduce the most severe premiums for leaseholders in buildings with significant fire safety issues is underway.
Transforming the built environment
As part of the creation of this culture of high standards which will transform the sector and ultimately the built environment, the Government will be taking forward an ambitious programme of secondary legislation over the next year to set the Building Safety Regulator on firm foundations. It will also be working closely with the Regulator to ensure implementation of a world-leading regime that residents and leaseholders deserve, with the first Strategic Plan expected in the coming months.
Mortgage lenders are also playing their part and have confirmed, from earlier in January, they will once again consider mortgage applications in England on properties that are covered by the leaseholder protections in the Building Safety Act, or where the building is eligible for a government or developer remediation scheme.