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More action is needed to afford leaseholders protection in the Building Safety Bill

More action is needed to afford leaseholders protection in the Building Safety Bill
4 min read

The gulf between the government’s rhetoric that developers must pay, and actions to ensure they do pay, remains too wide. Parliamentarians from both Houses must find ways to bridge that gap.

The government’s Building Safety Bill is a welcome step in improving the construction standards of  our homes. The primary aim of the Bill is to ‘future-proof’ the construction industry to ensure that safety is paramount. A vital part of this is the creation of a new Building Safety Regulator to hold developers to account.

Whilst the main focus of the Bill is on buildings yet to be constructed, the immediate concern is whether it will protect leaseholders from unaffordable bills for fire safety remediation on existing developments.

At first glance, it is not the long-anticipated solution that many leaseholders had hoped for. The government’s selling points to leaseholders are clauses 124, requiring landlords to take “reasonable steps” to recover money before billing leaseholders for specific works; and clauses 125 and 126, creating a new fifteen year retrospective limitation period to claim for substandard work.  Whilst this is an improvement on the existing framework (with its six year limitation period), will it provide sufficient help for leaseholders?

Entirely omitted from the Bill is any reference to the forced loan scheme for buildings under eighteen metres

One of the problems with the Bill is that the works outlined in clause 124 are currently unspecified. Hence, landlords will not be able to take action against developers until these are known. Assuming the Bill and subsequent regulations are in statute by 2023, residents in developments built prior to 2008 will be excluded from taking legal action. The Secretary of State for HCLG, Robert Jenrick, admitted that the majority of developments with defective cladding were built between 2000  and 2017, so the current proposals could exclude around a third of developments where there are problems.

This issue, however, is dwarfed by the question of the feasibility of taking legal action, which is costly and has no guarantee of success. Landlords may be reluctant to divert significant resources to sue developers for compensation and opt instead for half-hearted legal action, knowing it is cheaper to pass on bills to leaseholders.

Leaseholder associations will be free to take legal action but will find themselves pitted against the financial might of developers, who will employ their vastly superior resources to avoid paying out compensation. This is coupled with the possibility that some developers may attempt to get cases dismissed by arguing that the retrospective increase in the limitation period from six to fifteen years prejudices their human rights.

Another problem is that developers sometimes build housing using a special purpose vehicle (SPV) which is closed once a project is complete. The result is that, in some cases, there is no legally liable body for the leaseholders to sue.

Entirely omitted from the Bill is any reference to the forced loan scheme for buildings under eighteen metres, another promise made during the passage of the Fire Safety Bill. The forced loan scheme of £50 a month for cladding remediation remains inadequate, as it will not cover other historic fire safety defects. It is also morally dubious, as it excuses developers from their responsibilities. Despite these weaknesses, it is an improvement on the existing situation whereby leaseholders are simply handed unaffordable bills which are payable within a short time frame.

There is a better solution – the ‘polluter pays’ principle. This would create a process for determining whether regulations were complied with and would apportion remediation costs to the responsible party. Most crucially, it would protect leaseholders from paying for remediation costs they had had no hand in creating.

Unfortunately, the gulf between the government’s rhetoric that developers must pay, and actions to ensure they do pay, remains too wide. It is now the role of parliamentarians from both Houses to find ways to bridge that gap, to afford leaseholders proper redress and protection.

 

Lord Bishop of St Albans is a non-affiliated peer.

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