What You Need To Know About Michael Gove's Post-Grenfell Cladding Crackdown
The new contracts will force developers to pay for works (Alamy)
Housing Secretary Michael Gove has announced tough new plans to hold developers responsible for funding repair works to buildings with fire safety issues, and warned those who fail to comply could be blacklisted from the market.
Hundreds of properties were found to be unsafe following a widespread probe in the wake of the 2017 Grenfell Tower disaster, in which 72 people were killed, leading to debate about who should be responsible for remediation work, and prompting the overhaul.
The government's new Developer Remediation Contracts deliver a firm commitment to tackle the UK's cladding scandal, but what does the new plan mean for developers, tenants and taxpayers?
What Has Prompted The Change?
In the summer of 2017, a fire at Grenfell Tower, a residential block of flats in West London, rapidly escalated as a result of highly flammable cladding that covered its exterior. Many residents became trapped while trying to flee the burning building and 72 were killed.
After the Grenfell fire, a large number of high rise buildings were identified as also being a potential fire risk, either because they were covered with the same ACM cladding as Grenfell, or had been built with other defects, including unsafe insulation.
Shortly after the disaster, remediation works were carried out on many buildings over 18 metres, but hundreds of other buildings between 11 and 18 metres were left in limbo, with leaseholders left facing bills worth hundreds of thousands to carry out the work. Those unable to pay the bills have largely unable to sell their properties, either because the value has plummeted or because they were told they were legally unable to sell until the remediation work was completed.
While some developers have voluntarily agreed to carry out the works, other urgent projects have been funded directly by the government due to pressing safety concerns.
In a significant statement on Sunday, Housing Secretary Michael Gove admitted that "faulty and ambiguous" regulation had allowed the crisis to balloon. He placed much of the blame on developers who claimed they had used materials which were known to have poor fire safety standards.
What Does The New Building Safety Act Mean For Developers?
Gove is essentially pushing the cost for remediation works directly onto building owners and developers responsible for constructing unsafe properties, including those in the 11 to 18 metres bracket.
While the government has previously taken steps to hold developers responsible, the new legally binding remediation contracts set a hard deadline of 13 March for firms to agree to fund the works or face "significant consequences".
Setting out the details of the plan on Sunday, Gove said he intended to make public the names of any developer who failed to sign the contract by the end of the six week deadline.
Further legislation will be put in motion to ban non-compliers from the market entirely, including pulling planning permission for future projects, and stopping work on developments that have already broken ground.
Gove's letter also confirmed his department would "take steps to inform investors and customers of the risks arising from continuing their commercial relationships" with non-compliant firms.
There would be "nowhere to hide" for firms that "fail to step up to their responsibilities," he added.
The new contracts are expected to secure commitments worth around £2bn to fix defects on properties with identified fire safety issues, and comes on top of the £3bn already being raised through the Building Safety Levy to fund remediation works.
The Department of Levelling Up, Housing and Communities said the change will protect leaseholders from "extortionate cladding repair bills" and insisted cash from the £3bn levy would be made available to fund works on buildings where the developer cannot be traced or held responsible for carrying out the works themselves.
In a statement launching the changes, Gove said he believed the commitment from housebuilders to "right the wrongs" of the cladding scandal would help rebuild trust in the sector while also reducing the burden on leaseholders left responsible for funding the works.
"Too many developers, along with product manufacturers and freeholders, have profited from these unsafe buildings and have a moral duty to do the right thing and pay for their repair," he said.
"In signing this contract, developers will be taking a big step towards restoring confidence in the sector and providing much needed certainty to all concerned."
What Has Been The Response From The Industry?
The plans have been drawn up in conjunction with industry groups and some of the major developers to ensure they were not blindsided by the announcement, especially for those big enough to be listed on the stock exchange and who will have to make significant budget decisions in response to the move.
Almost 50 firms have already signed up to the contracts, with other large developers expected to deliver the agreements back to the department in the coming days.
One of those, Persimmon, was happy to be included in the Department's documents announcing the move. The group's Chief Executive Dean Finch said the new contracts were the "culmination of many months of hard work on all sides".
"The terms of the contract are entirely consistent with our existing commitment to protect leaseholders in multi-storey buildings we constructed from the costs of remediating cladding and life-critical fire-related safety issues," he added.
But other firms have warned the contracts could bind them into expensive repair works that don't meet the "life critical" threshold.
Steve Turner of the Home Builders Federation criticised the government's failure to target developers based abroad. "The government has made zero progress on securing contributions from international builders or cladding manufacturers," he said.
"They need to stop knocking at the housebuilders’ door repeatedly and try going for others who also have a role to play. Constantly aiming at just the housebuilders has serious implications for businesses and housing supply."
The industry group leader also said it was "concerning" that firms were essentially being threatened with being put out of business if they refused to sign up to the contracts and warned the financial impacts on complaint firms could harm ambitions to ramp up the construction of new homes.
"In the current climate, repeatedly targeting UK business will cut housing supply, widen generational inequalities, damage investment, hit GDP and threaten hundreds of thousands of jobs," he added.
But the announcement has been broadly welcomed by cladding campaign groups who have been calling on the government to hold developers directly responsible for the cost of remediation works.
In a statement following the announcement, a spokesperson for the End Our Cladding Scandal group said it was a "positive step forward but there is still much more to do".
"Over the last five and a half years, leaseholders have endured an unrelenting scandal that has not only risked their safety, but cost thousands their mental health, harmed their relationships, damaged their livelihoods and, in some cases, cost them their homes," they said.
"Since day one, we have campaigned for those who are responsible for causing this crisis to be the ones to pay to fix it. The government must back up its warm words with decisive action by robustly enforcing the terms of the developer contract."
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