Written evidence submitted by the British Property Federation [BSB 358]

Introduction

1. The British Property Federation very much welcomes the publication of the draft Bill and the engagement that various stakeholders have had with MHCLG colleagues on the new regime. We also welcome this opportunity for parliamentary scrutiny of the draft Bill.

2. Our interest in the draft Bill is as representatives of investors and developers. Many of them are investing on behalf of pensioners, who will ultimately bear some of the costs of greater regulation. It is therefore important the new regime is effective, and costs managed.

3. Not every clause is of the same relevance to our members and we have therefore focused in this response on a few key points, which we draw out in Section A, and then some specific clauses in Section B. Whilst we make suggestions on specific parts of the draft, overall we support the need for the new regime that Dame Judith Hackitt recommended, and much of how that has been translated into draft legislation.

Section A - Key points

Coverage

4. The Bill is written from a long leasehold perspective, with flat owners in mind. Some aspects of the new regime, such as tenant engagement, will need to take account of other building operation practices, for example purpose-built student accommodation or build-to-rent, where communication is already regular and often electronic.

Capacity and scope

5. A key concern of our members with the new regime is the consequences if there is a lack of capacity in the regulator or local authorities, which then leads to delays, and how that then impacts on the development and occupation of buildings. In the original design of the regime, Dame Judith Hackitt had recommended a threshold of 30m for buildings in scope, but that was reduced to 18m. We understand the safety reasons for that, but it will put more stress on the new system in its formative years.
6. To provide reassurance that the system of approvals will work the Government is committed to have prescribed timescales at Gateways 1, 2 and 3. So for example, at Gateway 1, the Building Safety Regulator might have same timescales to respond as other statutory consultees in the planning system – 21 days. It will be important that any prescribed timescales are supportive of development and are complied with. There should also be clear procedures put in place for non-compliance with prescribed timescales.
7. A similar concern is the added workload on local authorities and them having the resources to cope. The challenges of finding insurance may have also reduced the pool of Approved Inspectors, meaning more work falling on fewer people in the building control system overall.

Review and measurement (clause 34)

8. Allied to our remarks on capacity is the commitment in the Bill to review the new regime at least every five years. Whilst we welcome that commitment, we think in the first instance there should be an interim review after the second year. This need not be as comprehensive as a full review, but provide a useful check on how the new regime is bedding in. Leaving that for up to five years seems a long time to us.
9. We would also flag that any review should take account of the impact the new regime has on different forms of property development and ownership. The impacts of delay will hurt the sector, and will have different impacts, and averages may not give a full picture. For example, delay in the delivery of mixed-use developments could mean the commercial activities are not viable. At its most extreme, a delay in the delivery of a block of student accommodation, could potentially mean a year’s lost income.
10. There is a need for a defined transition period for older assets to address missing ‘Building Safety Case’ items, and guidance is required on how to reconstitute a safety case where records may be incomplete.  Examples are acquisitions of aged buildings or distressed assets whereby key Building Safety Case documents such as building control certificates and original fire strategy are missing.

Accountable person (clause 61)

11. A critical role in the new regime is the accountable person. We fully support the need for an accountable person, but know defining who that is, is not without its challenges, given the complexities of property ownership. We know that MHCLG colleagues have done a lot of work on this aspect of the draft Bill and the definition seeks to take account of the fact that there are often several long-term interests in a property with the freeholder essentially passing most control via a long lease. Such long leases have legitimate motivations behind them, for example they helped pay for post-war reconstruction. Sometimes they are also used by landowners to provide for affordable housing in city centres, with land on a long lease given to a council or housing association.

12. The definition should also capture situations where the leaseholders have taken control of building repairing obligations through a residents’ management company or having exercised their Right to Manage.

New roles and insurance (clause 65)

13. A significant concern for a variety of stakeholders has been the ability of new role holders to obtain Professional Indemnity insurance for their new roles. Specifically, the breadth of the responsibilities of Building Safety Managers may make it difficult for them to obtain viable PI.

14. There needs to be a definition of a Fire Risk Assessor competence under the new regime for high rise buildings.  Current Chief Fire Officers Association (CFOA) guidance was produced in May 2012 and does not reflect the new regime. The spectrum of Fire Risk Assessment quality experienced across the industry since 2005 suggests this is an important aspect of the new regime to get right.

Implied terms and charges (clauses 88 and 89)

15. These two clauses run to about 15 pages and did not feature in the consultation on “Building a Safer Future”. They have not had the same input or scrutiny as much of the rest of the draft Bill. We support the broad aims of the clauses, which are to protect landlords in the performance of their duties and ensure that any charges of leaseholders are fair. The content they cover seems broadly correct.

16. We have concerns over the Secretary of State’s powers to limit the Building Safety Charge, however. Leaseholders already have protections against excessive service charges in legislation and can act via the Property Tribunal. It is not clear why building safety charges should be treated differently from other services incurred. It is very difficult to see how a central set cap can take account of the huge variety of different building circumstances. There is also a significant inconsistency in that leaseholders will in effect be protected twice, through existing mechanisms and the cap, whereas other forms of tenant will not. It will also raise the prospect of building owners, including other leaseholders, being left with costs they cannot recover. Without regular updating, there is also the challenge of ensuring the cap reflects market realities.
17. We think a better policy would be to have transparency on costs, through regular communication of costs for typical building safety services, so that leaseholders can judge whether they are being treated fairly, perhaps via the Leasehold Advisory Service, and a fast track to the Tribunal on disputed building safety charges.

Cost and incentivisation

18. The requirements of the new regime will come with significant additional costs for residents. The Government has sought to recognise that costs can be recovered in clauses 88 and 89 of the Bill, whilst providing some protections. In private renting and student accommodation blocks, however, such costs will simply have to be absorbed into greater operational costs and could end up in higher rents. Keeping costs reasonable therefore should be a balancing consideration in design of the new regime.

19. The Bill is naturally about regulation, but it is also important that behaviours are incentivised and disincentivised in other ways, if the culture change that the Hackitt Review envisaged is to be delivered. That will mean using all the other levers at the Government’s disposal (e.g. education, tax and spend) in a co-ordinated way.

Context of wider Government reforms

20. The Government has a far broader leasehold reform agenda and needs to properly assess and fully understand how these reforms fit with some of that broader leasehold reform agenda.

Section B - Clauses

3              The regulator’s objectives

As noted in our key points we would stress that the regulator must be resourced appropriately to meet their objectives and we would like to see regular parliamentary scrutiny of that committed to the draft Bill.

7              Proposals and consultation relating to regulations

We broadly support the emphasis on consultation and welcome this clause. As we have set out under our key points it will be important the regulator builds up an appropriate consultation database, given this is a very different role to much of the HSE’s existing work As an executive non-departmental public body, sponsored by the Department for Work and Pensions, the regulator will also need to build up sufficient links and protocols with other parts of Government and local government. In respect of the constituency we represent, they will need to also take account of the different drivers and approaches to management in residential leasehold, build-to-rent and student accommodation.

33               Fees and charges

We would like to see some reference in this clause to the regulator and Secretary of State also taking account of the cumulative cost, as well as individual fees and charges, and ensuring that is reasonable.

34              Review of regulatory regime

We support the broad objective of this clause, but as we have set out in our key points we feel that during the first five-year period there should be n interim review, perhaps as soon as two years after introduction, to ensure that the new regime is bedding in as intended.

44              Regulation of building control profession

We agree with the objective of this clauses, but would flag the concerns we raised in our key points about the potential loss of approved inspectors that has already taken place, impact that might have on capacity, and fears that capacity may be further reduced by the inability of approved inspectors to obtain competitive professional indemnity insurance.

46              Functions exercisable only with advice of registered building inspectors

We support this clause. We would only note that the additional burden on local authorities will need to be resourced.

48              Higher-risk building work: registered building control approvers

We very much support the intent of this clauses to prevent developers choosing their own building approvers.

51               Insurance

We would only stress the importance of insurance to the function of this whole new regime and the challenges that various roles may face obtaining viable professional indemnity insurance.

52              Information

This seems a positive proposal. There will be devil in the detail in terms of keeping the information secure and the burdens on information providers proportionate. However, in principle, the benefit of a portal may be some standardisation of information provision and we welcome that.

A further concern, is whilst information may be provided, are information receivers – including the Fire and Rescue Service - suitably resourced to review and act on the information. Without this, there risks an illusion of control that more information exchanged will result in better decision making.

61              Accountable person

As we set out in our key points, we think the definition the Government has landed on is one that broadly reflects the complexities of property ownership and captures the intent of the regime that Dame Judith Hackitt designed in the draft legislation. The definition should also capture situations where the leaseholders have taken control of building repairing obligations through a residents’ management company or having exercised their Right to Manage.

65              Building assurance certificate

We support the intent of this clause, which encapsulates the process at Gateway 3 and it quite right that is reflected in some sort of public display to provide assurance to the users of buildings. As we set out in our key points it is imperative the certification process is swift and adheres to prescribed timescales. It will also be important that prospective owners are prepared for these new requirements. One concern to flag is the interaction between the certification process and insurance for the building. It will be important that refusal of a certificate does not invalidate insurance, only the occupation of the building until certification is achieved.

69              Terms of appointment

We support the creation of the Building Safety Manager (BSM) role, but as expressed in our key points have concerns about the wide scope of the role and therefore ability of BSMs to obtain viable professional indemnity insurance. It will be vital to the whole regime that adequate insurance is available for the BSM role. The insurance industry thus far has not been able to provide a definitive answer to that question because the regime and role was still being defined. We would like to see a clause in the Bill, which defines the availability of adequate insurance cover and regularly tests whether that is being met.

78               Mandatory Reporting Requirements (MRR)

The reporting criteria and timescales will need clear guidance along with the powers and expectations that the regulator will then have on building owners to remediate and implement interim mitigation measures.  Examples – to what extent compartmentation breaches become reportable (when safe egress from a building is compromised might be logical); the extent of fire alarm system components being in fault need reporting.  There could also be situations where interim mitigation (and remediation) attracts disproportion costs due to the regulator (and building owner) misinterpretation.

There are likely to be significant instances of under and over reporting of the MRR system.  There is a question on resource and capacity of the regulator responding to MRR reports effectively, both to investigate and to advise actions promptly and sensibly where required.

86              Duties on residents

This is a key aspect of the new regime for our members. If they, or their property managers, are to fulfil some of their duties. they will require the co-operation of all residents. Most residents are co-operative, and it is their homes we are talking about. Dialogue will resolve a lot of situations, but for a minority it is important there is a backstop, so that our members can ensure all residents are safe. We know MHCLG colleagues have given careful thought to this part of the bill. The process the draft Bill sets out, with the backstop of the County Court, is we think proportionate and we support this clause.

There should also be an onus on the regulator to communicate duties direct to residents at large i.e. regular nationwide communications exercises.

The range of residents, and their expectations, is huge from student for a year, through supported housing occupier with learning difficulties to part-time resident of £10m luxury apartment.

88/89              Higher-risk buildings: implied building safety terms/Building safety charges

As flagged in our key points, we agree with the intent of clauses 88 and 89. It is important landlords are able to perform building safety functions and recover charges for them, and that leaseholders should expect them to be fair and collected in a professional manner  However, these clauses have not had the same scrutiny thus far as other aspects of the draft Bill. Both clauses generally cover the right subjects from our review of them.

Some residents will resist payment and execution of additional inspection and maintenance routines and for the protection of other residents it is important such charges can be collected.

We have flagged various problems with the proposed cap on building safety charges. We propose a better policy would be to have transparency on costs, through regular communication of costs for typical building safety services, so that leaseholders can judge whether they are being treated fairly, perhaps via the Leasehold Advisory Service, and a fast track to the Tribunal on disputed building safety charges.

September 2020