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Written Evidence submitted by Hilary Benn (MP for Leeds Central)
Thank you for giving me the opportunity to submit evidence to your inquiry.
I represent Leeds city centre in which there are a number of buildings that have been affected by cladding problems that were identified after the Grenfell Tower disaster, so I thought it might be helpful to describe the experience of my constituents.
The first wave were blocks with ACM cladding, and although not all of them have yet been remediated, there appears to be a programme in place to do so and, by and large, freeholders and/or developers have agreed to meet the cost.
The second group of buildings are those with non-ACM forms of unsafe cladding (HPL or other) that were identified last year following the issuing of new guidance.
The third group is flats in buildings, whether above or below 18 metres in height (following the change in Government fire safety guidance), where leaseholders are finding it very difficult or impossible to sell because mortgage lenders will not lend on a property unless it has a fire safety certificate to say that it meets the new standards.
In all three cases, as long as the buildings cannot be certified as safe, then the flats within those buildings have in effect been rendered worthless.
I will take each of these areas in turn, but before doing so I want to say that I agree with the Government that leaseholders should not have to bear the cost of replacing unsafe cladding. They bought their homes in good faith and had every reason to believe that they had been constructed in accordance with the fire safety regulations at the time, never mind the fact that since these leaseholders bought their homes ministers have, quite properly, changed the regulations retrospectively because of Grenfell. The stress and worry that these leaseholders are experiencing as a result of the circumstances they find themselves in, through no fault of their own, is considerable. A survey was recently carried out on the impact on the mental health of leaseholders. It makes stark and uncomfortable reading. A large part of the reason for the stress is that leaseholders are being asked for, or fear that they will be asked for, sums of money that they simply do not have to fix a problem that they did not create and for which they are not responsible. The fact that they are dependent on the actions of others to remedy the problem only adds to the stress. Furthermore, the cost of waking watches - see below - is a very considerable financial burden on leaseholders.
As buildings have been identified as a fire risk, local fire and rescue services have assessed the nature of the risk and in many cases have required that a waking watch is put in place. This is because these blocks have been deemed to require an evacuation policy rather than a stay put policy. The cost of such waking watches falls on leaseholders. In the case of Leeds, the West Yorkshire Fire and Rescue Service has said to building owners, managing agents and leaseholders that if a waking watch is not put in place then the building would need to be shut down and everyone would have to find somewhere else to live. The cost of such watches is, therefore, a cost that leaseholders have to meet on top of their mortgage payments and other bills (including higher insurance premiums because of the risk now identified) simply in order to be able to stay in their own homes.
A number of these blocks did not have fire alarms fitted but these are now being installed, and the hope of leaseholders is that this may result in a reduction in the cost of waking watches. I understand that the guidance in relation to this is currently being reviewed.
These waking watches can be very expensive and some leaseholders simply cannot afford the cost. I know of one case where a constituent of mine told me he was moving out of the flat he was buying because he could not afford the cost of the waking watch. He then planned to rent the flat out to raise the money to pay the waking watch bill even though he would still be servicing the mortgage on his flat which he could no longer afford to live in!
The cost of waking watches is currently particularly acute for the second group of non-ACM clad buildings including the St George’s Building, Franklin House and Timblebeck in Leeds where many leaseholders are finding it very hard to pay these bills.
To make matters more complicated, as the exterior of buildings has been inspected, it has become apparent that in addition to flammable cladding some buildings were not built according to the building regulations at the time; for example, they are missing fire breaks that should be there.
Those responsible for the construction of these buildings - the builders and developers – are in some cases no longer in existence so they cannot be asked for funds or sued. And even if legal action were to be commenced, it would probably drag on for many years and therefore will not provide a speedy remedy to ensure the removal of dangerous cladding.
I welcome the steps which the Government took to establish, firstly, the ACM cladding fund and secondly the non-ACM fund that was announced in the Budget. I think ministers eventually realised that simply exhorting freeholders and developers to do the right thing - so as to avoid leaseholders having to pay - wasn't enough. I do, however, recognise that the establishment of these funds, while certainly helping some leaseholders, may also benefit freeholders and developers who have not lived up to their responsibilities. There may also be some freeholders who simply do not have the money to replace the cladding, and in at least one case I am aware of the freeholder had granted a very long lease to a management company whose shareholders are the leaseholders which makes them responsible for all of the costs of fixing the problem.
There needs to be an assessment of the way in which money is being disbursed by those responsible for managing these two funds and of the timeliness of with which this is happening. I understand that the non-ACM fund is being run on a ‘first come, first served’ basis which will disadvantage leaseholders whose managing agents and/or freeholders do not get applications in on time. The fundamental problem, however, is it these funds are unlikely to be sufficient to fix the whole of the problem.
No one knows for sure what the total cost of remediation of all buildings with unsafe cladding is likely to be, but I suspect it is going to be quite a bit more than the funding that the Government has currently announced. In those circumstances, what will happen to the remaining buildings for which there is no longer any funding? Can it really be the case that these unlucky leaseholders will find themselves living in perpetuity in a building that is still classed as unsafe with waking watch bills that they cannot afford, and which may ultimately lead to bankruptcy and loss of a home? This cannot be allowed to happen, so someone other than the leaseholders is going to have to pay to make these homes safe.
On the question of whether other buildings are safe, the problem is as follows. Someone in a block wants to sell their flat and discovers that the mortgage company of the person who is interested in buying it says that without a certificate – an EWS1 form - they won't proceed with the purchase. The would-be seller has no idea whether their block complies, and it is only by employing a specialist surveyor that an answer can be provided. However, the cost of commissioning someone to do a survey can be very expensive because it may involve intrusive inspection of the building and individual sellers cannot possibly afford the cost. Surveyors will, of course, not sign off such a certificate without being 100% sure that the building complies with the new fire safety regulations.
My final concern relates to the capacity of freeholders and managing agents to handle this very complex process at a time when coronavirus has had a huge impact and has slowed things down. Those responsible have to get organised to undertake surveys, draw up specifications for the work and then make applications to the Government funds. Some will be well able and qualified to do so; others may not, and I think they will require support. There is also the question of who is going to pay for the cost of these surveys and the putting together of a bid to the relevant fund?
In terms of specific recommendations, I would make the following:
1) There needs to be a common assessment of the fire risk in blocks that have been identified as having flammable cladding in cases where fire alarm systems have subsequently been fitted. Anything that can be done to reduce the cost of waking watches to leaseholders should be pursued while of course ensuring that fire safety and evacuation procedures are rigorously maintained.
2) The Government should undertake an assessment of the full cost of remediating all buildings with unsafe cladding so that we get an understanding of what it is we're dealing with.
3) In the light of the above assessment, a programme and a timetable for the removal of all dangerous cladding should be drawn up and the necessary work overseen. Ultimately, the Government will have to stand behind the cost of making all these buildings safe.
4) In the event that freeholders and developers do not come up with a contribution, then ministers should consider taking an equity stake in the freehold in return for paying for the work. In some cases, this could be the entire freehold if the cost of the works required was more than the value of the building. If legal action is pursued to recover costs from those who should be liable, then any payments should come back to the Government to offset the cost of the work they have paid for to date.
5) To assist in managing this process, ministers should convene a task group, made up of representatives of leaseholders, freeholders, managing agents, mortgage lenders, fire and rescue authorities, insurance companies and MHCLG officials, to oversee the cladding replacement programme and deal with all of the interconnected issues affecting these blocks.
At heart, the task is very simple. A large number of people are currently living in homes that the Government says are unsafe. The dangerous cladding that makes these homes unsafe needs to be replaced. Funds will have to be found to make this happen. And we need to get on with it.
2 July 2020