Building Safety Act 2022: Next Steps for Cladding Remediation

Building Safety Fund

Often the first port of call for many building owners, the government announced the Building Safety Fund in March 2020 to meet the cost of addressing life-safety fire risks associated with cladding in high-rise residential buildings, where the building owner or developer can’t afford to do so. A slightly amended fund then opened for new applications on 28 July 2022.

The fund is open for applications from responsible entities of private or social sector buildings that meet the following criteria:

• Buildings that are 18 metres or above (with 30cm tolerance);
• Buildings have at least one qualifying residential leaseholder (with the exception of social-sector landlords applying due to financial viability concerns);
• The building must have cladding, as defined in the PAS 9980:2022 code of practice;
• Buildings have a Fire Risk Appraisal of External Wall construction (FRAEW) following the PAS 9980:2022 methodology, which recommends actions to address fire risks to life safety presented by the external wall system;

Our experience to date has been that the BSF are applying this criteria strictly, sometimes without detailed reasoning as to their decisions.  Whilst this is probably to be expected given the volume of applications, this can be frustrating and may leave owners/occupiers slightly adrift.

Running parallel to this is the building safety pledge, in which developers have committed to remediate life critical fire safety works in buildings over 11 metres.  These developers have also agreed to reimburse any funding received from government remediation programmes (e.g. the BSF) in relation to buildings they had a role in developing or refurbishing.  Each developer will be expected shortly to sign a legally binding contract reflecting these pledges and inform leaseholders in affected buildings how they will be meeting their commitments.  Unfortunately, it appears there is still a large amount of disagreement between the Home Builders Federation (acting on behalf of the developers) and the Department for Levelling Up, Housing and Communities as to what the wording of the contract should say, with Michael Gove apparently having now reversed compromises negotiated by his predecessors.  This is, therefore still very much a “watch this space” situation.

Claims in the Courts

In the absence of or in parallel to an application to the BSF, there are a number of avenues which owner/occupier can seek remediation of defective cladding against those involved in the cladding works.

As touched on in our previous article, where high-rise blocks have been built by a developer who is no longer the owner of the building, the current owner/occupiers can bring a claim under the Defective Premises Act 1972 (“DPA”)against the developer/builder on the basis that the premises are “unfit for habitation”.  Historically, the time period under the DPA for bringing such a claim would only be six years from practical completion.  However, the BSA has now extended this to 30 years for works completed before the BSA came into force and 15 years for works completed after the BSA came into force.  The BSA also extends the potential liability to refurbishment works rather than just new buildings.  The BSA has, therefore significantly increased the scope of claims that would previously have been written off; provided of course that all the records are still around to actually be able to cobble a claim together.

Fortunately, it doesn’t necessarily matter if the original developer entity isn’t around anymore or if it doesn’t have any assets.  The government introduced building liability orders in the BSA to address the possibility that developers might escape liability for safety defects because they had carried out projects through shell companies or special purpose vehicles, which may then be wound down after the build is complete.  The High Court can, therefore now grant a building liability order to an associated company (i.e. one company controls the other or both companies are controlled by a third company) if it considers it “just and equitable” to do so.

Landlord Certificates

One of the main drivers of the BSA was to regulate responsibility for the cost of cladding remedial works in order to protect leaseholders and instead shift that burden onto owners and developers.  As part of this, landlords are required to produce a landlord’s certificate for each leaseholder, specifying whether or not the relevant landlord was responsible for a relevant defect (or associated with someone who was), what the status of the remedial works are, the financial information about the landlord and its corporate group and whether or not the leaseholder will be required to contribute to the works.  The prescribed form for the certificate is in Schedule 1 to the Leaseholder Protection Regulations 2022.

The landlord certificate must be provided:

• When making a demand for payment of a remediation service charge;
• Within four weeks of receiving notice that the leasehold is to be sold;
• Within four weeks of becoming aware of a relevant defect not covered in a previous certificate; or
• Within four weeks of a request from a leaseholder.

It may be that the certificates are issued en masse, for example after the third trigger, but otherwise they may be requested on an ad hoc basis and so the landlord will need to ensure that the information is up to date on every occasion. This will be to take account not only of costs paid on the remedial works, which will evolve over time, but also of any corporate re-organisation, acquisition or disposal affecting the landlord’s net worth calculation. Producing the same standard form each time is therefore unlikely to be sufficient.

Ultimately if a relevant landlord fails to provide a compliant certificate, it is presumed to be responsible for the defect and to meet the contribution condition itself, so it can’t make any service charge for the costs of fire safety remediation works.

Our construction team are currently acting for a number of building owners/landlords who are negotiating this tricky path and trying to do their best by their leaseholders.  If you are in a similar situation and require any assistance, please do not hesitate to get in touch with our highly experienced team.