Written evidence submitted by Southampton Cladding Act Group [BSB 373]
This submission is on behalf of Southampton Cladding Act Group (SotonCAG). We set up the group after finding out that our building was affected by fire safety issues and subsequently, around 10 other blocks in Southampton have discovered they are also affected. We work with other leaseholder groups across the country.
How well does the Bill as drafted, meet the Government's own policy intentions?
1 As residents of a high-rise block, we support measures which help make buildings safer. However, we do not believe that the draft Bill will achieve the Government's stated policy aims.
2 As an initial point, much of the detail of the draft Bill is to be contained in separate secondary legislation. This means that the Bill is both unworkable and difficult to understand fully in its current state. It also leaves a significant amount of uncertainty for building owners, those responsible for building safety and leaseholders because secondary legislation can be amended or enacted without the same scrutiny that primary legislation is subject to. An example of this is the lack of definition of 'high risk building' in the draft Bill; it is likely that being classified as a high-risk building will affect the property valuation, insurance and mortgage terms so a change to the definition could have a significant adverse impact. Our view is that secondary legislation required to implement the regulations should be kept to an absolute minimum.
3 The Bill is drafted on the premise that third parties will largely continue to be responsible for validating the safety of buildings. This approach simply does not work, as evidenced by the significant fire safety defects, such as lack of appropriate fire breaks, compartmentation issues and balcony construction, which are being discovered in blocks constructed over the last few decades.
4 We support the requirement to keep information and documents which are relevant to building safety, providing that it is proportionate. There is inevitably a cost for maintaining these records, which does not go towards making the buildings any safer, but will be passed on to leaseholders. This should be a key consideration in drafting any future guidance on the requirement to keep records.
5 The requirement to keep records must also have a no more than marginal effect on the property and insurance markets for flats. Prior to issuing the statutory guidance on information that should be available, government must consult with insurance companies to ensure that they will not use the record keeping requirement as a way to justify increases in insurance premiums or to refuse insurance on existing blocks which may not be in a position to obtain all the necessary records. Many blocks affected by fire safety issues have experienced huge rises in premiums (with 10-fold increases not being uncommon) and even difficulty obtaining cover at all.
6 We are also concerned about the effect that the record keeping requirements could have on the market. It is vital that these records do not become a requirement for being able to sell properties because this will also cause problems for existing buildings. As we've seen with the introduction of EWS1 forms, which were not intended for use on all blocks, guidance can be misinterpreted and have a significant impact on the property market for flats due to mortgageability.
7 We do not believe that the Bill as drafted will meet the government's stated aim of speeding up remediation. Since the draft Bill was published, we have heard of some building owners questioning whether they can delay remediation projects until the Bill has passed to ensure remediation costs can be charged to leaseholders without consultation.
8 Another significant issue with the current draft Bill is that it passes costs of historic building safety works onto leaseholders. Many leaseholders simply cannot afford to pay costs in excess of those that they are already paying and this is likely to make living in flats unaffordable and unattractive, affecting the value of properties.
9 In addition, where the responsibility of deciding on the appropriate building safety measures sit with a third party who will not be responsible for the costs (such as a management company acting on behalf of the building owner or the building owner themselves) they will inevitably take a 'little to no risk' approach, which increases the costs to be passed to leaseholders.
10 In order to achieve the Government's aims, the focus of the Bill should be on ensuring the safety of buildings through practical and proportionate measures and appropriate cost-sharing between building owners, developers and leaseholders. The legislation should specifically take into account smaller developments, which are likely to be impacted by higher costs per leaseholder in the event that the requirements are not proportionate.
Does the Bill establish an appropriate scope for the new regulatory system?
11 We have serious concerns about the scope drawn for the new regulatory system. Firstly, the Bill fails to draw a distinction between the remediation of historic defects and future building safety works. We are deeply concerned that this will allow building owners to demand that costs for works on the remediation of fire safety defects be paid by leaseholders within 28 days. We have heard of some building owners already using the provisions of the draft legislation to justify passing costs on to leaseholders now and, as mentioned above, some owners have queried whether remediation can be delayed until the Bill is in force, because this would make it easier to recharge costs.
12 There is nothing to prevent costs being passed to leaseholders where there has been a failure by third parties, such as a lack of clarity or a change in government regulations, failure in building control or developers breaching regulations. In the absence of any requirement for building owners to seek repayment from third parties where there have been failures, it's likely that they will take the easiest option to recharge costs. As the Bill removes the protections for leaseholders in respect of building safety measures (expanded on below), the easiest option will mostly likely be demanding costs from leaseholders.
13 The Bill fails to draw a distinction between 'safety measures' and 'improvements'. This would allow building owners to recharge any costs which could be linked to building safety; this could include works such as installing sprinklers, which are generally understood to be an improvement. In the majority of leases, the costs of improvements are the responsibility of the building owner and the provisions of the Bill would, therefore, override these terms.
14 In relation to changes to ground rents, it has been argued by building owners that changing the terms of leases in favour of leaseholder retrospectively would be a breach of building owners' human rights. The changes proposed by the draft Bill must also be a breach of the human rights of leaseholders.
15 We're very concerned about the gradual roll-out of the Bill which the government acknowledges could take years and possibly decades. During this time, buildings will need to be able to insure, sell and remortgage their properties but are likely to face significant problems in doing so. This will predominantly affect buildings 11-18m in height, which are neither the highest nor lowest risk.
16 The Bill includes a power for the Secretary of State to bring more buildings into scope via secondary legislation in the future. This causes significant uncertainty and would allow additional defects to be charged under the Bill.
17 There are key changes that must be included in the Bill, as follows:
Will the Bill provide for a robust – and realistic – system of accountability for those responsible for building safety? Are the sanctions on those who do not meet their responsibilities strong enough?
18 We believe that the focus of the Bill should be to establish a proportionate system of accountability. It should impose realistic standards on those responsible for building safety but ensure that these measures are not so onerous that these measures become costly for leaseholders. Every pound that leaseholders spend on the administration of building safety measures is money that cannot then be spent on building safety measures themselves and will not make the building any safer. As currently drafted, we do not believe the Bill makes this focus clear and believe that the onerous duties placed on the accountable person will inevitably lead to increased building safety costs.
19 We are concerned that the responsibility placed on the accountable person will prevent leaseholders from feasibly being able to manage blocks themselves. Although many buildings managed by leaseholders have a high level of competence, it is likely that the costs of obtaining insurance will be prohibitive or, at least, will discourage residents from managing blocks themselves. We are already aware of a number of RTM/RMC blocks that have been unable to obtain professional indemnity insurance as a result of building safety defects being identified in their building.
20 The Bill doesn’t place any responsibility for building safety costs on developers, who have taken advantage of, and profited from, the current unsatisfactory regulatory regime.
21 Whilst the Bill extends the time limit for contravention of building regulations to 10 years, this does not give sufficient protection to leaseholders. Leaseholders are often left in a situation where they cannot seek any legal redress because the original developer no longer exists or the limitation period for available claims is too short. For further detail on this point, please refer to the Society of Labour Lawyers' submission to the Select Committee.
22 We believe that the following changes should be made to the Bill:
Will the Bill provide strong mechanism to ensure residents are listened to when they have concerns about their building's safety?
23 We support the introduction of a statutory obligation to engage with residents and the introduction of a mechanism to make and escalate complaints where necessary. However, we believe the provisions in the draft Bill do not go far enough in the following respects:
24 As residents, we have experienced first-hand a lack of willingness on the part of building owners and management companies to engage with residents. We have also heard of many other residents who have face similar issues when trying to engage constructively with their building owners. In our view, it is clear there is a general reluctance from building owners, housing associations and management companies to either provide meaningful information or seek residents' views on important issues. In some cases, as was seen in the Grenfell enquiry, residents who wish to engage with building owners are seen as difficult. As such, unless specific, wide-ranging and clear obligations are imposed on these entities, there will be no meaningful engagement with residents.
25 We are aware of and support the suggestion that has been made by the Leasehold Knowledge Partnership that a residents group should be established in each development, which should be consulted by the building owner on relevant matters.
Is the government right to propose a new Building Safety Charge? Does the Bill introduce sufficient protection to ensure that leaseholders do not face excessive charges and that their funds are properly managed?
26 When reading the draft Bill, our first thought was the many times that the government have stated that "leaseholders should not pay" for the historic failures on the part of developers and building regulation. The Bill contains nothing to protect leaseholders from paying and, in fact, provides a mechanism to ensure that they have no choice but to pay or risk forfeiture of their lease.
27 Whilst we believe that it is a positive step for building safety charges to be accounted for separately, we are also of the view that building owners are likely to pass down excessive charges to leaseholders, which they will be able to do under the current draft Bill.
28 Our main concern in relation to the provisions relating to the building safety charge is that the Bill allows building owners to circumvent current protections in the form of s.20 consultations with leaseholders in order to recover the building safety charges within 28 days. There is no cap on the amount that can be charged to residents with the threat of forfeiture if the sums are not paid within that timescale and the examples given in Table 36 of the Impact Assessment gives an estimated cost per leaseholder of £78,000 and a weighted average of £9,000. This does not take into account the costs of moving to the new regulatory regime.
29 The reality is that many leaseholders would simply be unable to pay any substantial bill within this timescale; in the main, residents of flats are likely to be first-time buyers, those downsizing for retirement or lower income households. As a leaseholder myself, if this Bill were to pass as currently drafted, I would live in fear of a building safety invoice that I couldn't pay.
30 There is also nothing in the draft Bill to prevent management companies, housing associations or building owners from making a profit from building safety charges. We have heard of numerous cases in which significant costs have been added to building safety works. Whilst we understand that there will inevitably be a fee for these services, if these are charged on building safety costs, they should be capped.
31 Previous decisions made by the First Tier Tribunal show that leaseholders are likely to be unsuccessful in any challenges to these costs meaning that leaseholder are left without any effective recourse.
32 In order for the building safety charge to operate at all fairly, we believe the following changes will need to be made:
Is it right that the new Building Safety Regulator be established under the Health & Safety Executive and how should it be funded?
33 We believe that the Building Safety Regulator should be funded by developers and, if necessary, government in the short term. In the event that building owners and management companies are required to fund the Regulator, this would only be acceptable if measures were put in place to avoid these costs being passed down to leaseholders.
Does the Bill present an opportunity to address other building safety issues such as requirements for sprinkler systems?
34 Requiring consideration to be given to additional building safety measures is welcome. However, the need to install these systems has arisen because buildings were not constructed safely when they were original built and they should, therefore, be classified as 'improvements' and be paid for by building owners, developers or government.
35 We believe the Bill should not indiscriminately mandate the requirement of any specific building safety measure, including sprinklers. Whether building safety measures are appropriate or feasible in particular block should be assessed individually. To mandate installation of any particular systems would make buildings in which this is impossible, worthless and unsaleable.
Additional points
36 Prior to implementing any legislation, the government must engage with fire engineers and assessors to ensure that there is a sufficient number of qualified assessors and engineers to complete the checks needed to implement the new building safety regime. They should ensure that Professional Indemnity cover for these individuals is widely available at a reasonable price. Failure to do this will likely create a repeat of the situation we are currently seeing with the EWS regime, in which many buildings are unable to obtain an EWS1 certificate for many years.
37 We are gravely concerned about the effect that the Bill in its current form would have on the property market. The uncertainty of uncapped and unpredictable costs will make buying a leasehold flat unattractive and, for many potentially buyers, entirely unfeasible. Properties which were once classified as affordable homes will become entirely unaffordable, trapping current residents and preventing any movement on the property ladder.
38 The Bill should include a specific requirement for building owners of management companies to provide fire safety reports to all leaseholders (without them requesting these documents) within a specified timescale of them being obtained (14 or 21 days).