Written evidence submitted by the Law Society [BSB 408]

Introduction

1. The Law Society of England and Wales is the independent professional body that works globally to support and represent 200,000 solicitors, promoting the highest professional standards and the rule of law. The Society represents a wide range of property practitioners, including members acting for buyers and sellers of leasehold properties, new build properties, and in the second-hand market; lessors, lessees, managing agents, residents’ associations, developers, investors and lenders.

2. The Society recognises the scale and importance of the ongoing building safety and cladding issues three years on from the Grenfell tragedy. We recommend that government:

1. assesses the scale of the issue and ensures that the necessary funding is invested to resolve building safety and cladding issues.  
    
2. collaborates with the Royal Institution of Chartered Surveyors (RICS) to set clearer regulations and standards in order to help surveyors decide whether an apartment block is safe (e.g. by exploring other forms of fire safety certificates and procedures), because at present surveyors may be concerned about liability claims.

3. ensures that from the very beginning of a development that safety is put at the heart of the project and that steps are taken in the design, construction, inspection and approval at every stage to ensure that health and safety is a paramount focus. We support the proposal to have a New Homes Ombudsman serve as a system of redress and develop a code of practice with developers to set standards on sales, marketing, and the standard and quality of workmanship. It is right that all developers of new homes will be required to join the ombudsman scheme.

4. establishes the new Building Safety Regulator under the Health and Safety Executive alongside building safety managers, a dutyholder system and advisory committees. It is important to ensure that residents are listened to and that their concerns are recorded, taken account of and actioned. We hope that the new Building Safety Regulator will lead to the introduction and enforcement of a better safety system with meaningful sanctions and regulations for badly performing building control bodies.

5. investigates whether a re-insurance scheme of some kind might provide a further pool of funding to replace inappropriate cladding.

3. It is important to consider the Bill alongside the other ongoing reviews of the leasehold process. Building safety and cladding issues should be equally important on the Government agenda given the number of long leaseholders affected. 

Is the Government right to propose a new Building Safety Charge? Does the bill introduce sufficient protections to ensure that leaseholders do not face excessive charges and that their funds are properly managed?

4. Whilst we support the new Building Safety Charge in principle, we do not want this to lead to onerous additional charges being placed on leaseholders. There has been some concern from leaseholders about sections 88 (higher-risk buildings: implied building safety terms) and 89 (building safety charges) of the Bill concerning the implied covenant [where not already expressed] by landlords to carry out prescribed building safety measures and implied covenant by leaseholder to pay the building safety charges incurred within 28 days[1]. We support that leaseholders will be permitted to refuse to pay the new Building Safety Charge if the charge is ‘unreasonable’ or the freeholder does not provide a clear breakdown of costs. We look forward to guidance being produced identifying what might qualify as ‘unreasonable’. The system should aim to provide some assurance for leaseholders covering the cost of building remediation that the appropriate work has been carried out to ensure there will not be problems arising later on - e.g. if they wish to sell.

Does the draft Bill establish an appropriate scope for the new regulatory system? 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?

5. We understand and sympathise with a feeling among many leaseholders that there is a lack of responsibility being taken at government level and that the £600 million fund for the removal and replacement of aluminium composite material (ACM) cladding and £1 billion for non-ACM cladding[2] is insufficient given the scale of the problem. Furthermore, it is only available on a first-come, first-served basis and not all landlords have applied to access these funds, which leaves a problem for long leaseholders, who are unable to apply.

6. The first-come, first-served nature of the funds, and the fact that long leaseholders are unable to apply, creates problems. It is crucial that government invests in ensuring that redress mechanisms are accessible and fit for purpose in granting leaseholders protection and access to justice.  

7. Government should ensure that from the very beginning of a development project that safety is put at the heart of the development and that steps are taken in the design, construction, inspection and approval at every stage to ensure that health and safety is a paramount focus.

8. In light of the above points, we are supportive of the proposal to have a New Homes Ombudsman serve as a system of redress and develop a code of practice with developers to set standards on sales, marketing, and the standard and quality of workmanship. It is right that all developers of new homes will be required to join the ombudsman scheme.

Will the Bill provide strong mechanisms to ensure residents are listened to when they have concerns about their building’s safety? Is it right that the new Building Safety Regulator be established under the Health and Safety Executive, and how should it be funded?

9. We are supportive of establishing a new Building Safety Regulator under the Health and Safety Executive alongside building safety managers, a dutyholder system and advisory committees. It is important to ensure that residents are listened to and that their concerns are recorded, taken account of and actioned. We hope that the new Building Safety Regulator will lead to the introduction and enforcement of a better safety system with meaningful sanctions and regulations for badly performing building control bodies.

10. In relation to social housing, we agree with the Bill’s proposal to remove the democratic filter to allow direct access to the Housing Ombudsman’s service. This would ensure that social housing residents have unrestricted access to an Ombudsman, rather than having to wait 8 weeks before being referred by a designated person as is currently the case.

Other comments

Refused mortgages and unsaleable homes

11. Following the guidance introduced by the Ministry of Housing, Communities and Local Government (MHCLG) in January[3], some lenders are refusing mortgages if a property does not have a fire certificate EWS1 Form. This has occurred regardless of size and building materials and even if the building has undergone other fire risk assessments. Leaseholders are subsequently being informed by building management companies that if their building is under 18m the freeholder is under no legal obligation to act. We submit that leaseholders need more guidance as to what can be done when their building is under 18m and does not qualify for government support. People need to know as early on in the conveyancing process as possible if a transaction is likely to fail as a result of not meeting of Government standards or not having the updated EWS1 (issued by RICS and required by lenders).

12. Properties affected by cladding issues can create delays in the buying and selling of properties, especially across chains of linked transactions.

13. We understand that there may need to be a training scheme to create suitably qualified engineers who can provide the assurance to buyers and lenders that is required in terms of building safety.

14. Some surveyors are giving temporary valuations at £0.00 which is preventing the market from operating openly and trapping leaseholders in unsaleable homes. The proposals for replacing the EWS1s in this Bill and the Fire Safety Bill need to be interrogated to see whether they will make any major improvement to the operation of the market. The Government and RICS could collaborate to set clearer regulations and standards in order to help surveyors decide whether an apartment block is safe (e.g. by exploring other forms of fire safety certificates and procedures) because at present surveyors may be concerned about liability claims.

15. We have been contacted by a number of leaseholders who have told us about the following issues in particular:

1. Even in scenarios where landlords do agree to conduct the EWS1, the process for obtaining it can take months or even years and once completed, there are cases of leaseholders being asked to cover the costs of remedial works. This is leaving some leaseholders fearing bankruptcy. We believe it is for Government to regulate from the top and ensure that leaseholders are protected.

2. Reports of limited assistance from building management companies and housing associations.

3. Little guidance for leaseholders as to cost, who will pay for them, when works will start and how long they will take when the outcome of an EWS1 is that a building requires remediation.

4. Leaseholders living in these buildings being told that neither the NHBC warranty nor buildings insurance policy cover them. Some solicitors are of the view that the privatisation of the Building Safety Industry by the removal of the requirement for such to be undertaken impartially by Local Authority Building Control (LABC) has created problems. The Building Regulations Approval and Inspection industry now seem to be dealt with largely by insurance companies and warranty providers and it needs to be ensured that safety is the primary focus.

16. These issues could particularly impact on those who are wanting to benefit from the Stamp Duty Land Tax holiday which ends on 31 March 2021.

17. Furthermore, there is evidence of fraudsters forging the names and signatures of real chartered surveyors to issue fake cladding inspection forms. The fake forms could be used to tender millions of pounds worth of construction work and fire safety measures to linked companies with vested interests[4]. We understand that RICS are looking into the situation, but the risks are immediate and urgent action is required.

September 2020