When the UK Government initially announced its plans to tackle the 'unsafe cladding' issue with its £5.1bn Building Safety Fund (BSF), a sizable proportion of 'unsafe' buildings were left behind. This was met with criticism that many home-owners in buildings with ACM (Aluminium Composite Material) cladding under 18m would be left unprotected, exposed to remediation costs – and potentially in homes they could not sell.

Then on 10 January 2022 the UK Government announced its plans to broaden the scope of the buildings where remedial works will be funded from only those above 18m to include any above 11m.

As has been widely reported, the UK government intends to fund the BSF through levies on property developers (although it has also indicated that it will look to others involved in the process including product manufacturers) , with requirements that they:

  1.  Agree to make financial contributions (expected to total £4 billion) to a dedicated fund that will cover the full cost to remediate cladding on buildings between 11-18 metres.
  2. Fund and carry out the necessary works to remediate all buildings that they have played a part in developing.
  3. Provide comprehensive information on all buildings over 11m that they have been involved in constructing in the last 30 years, and which have issues with fire safety.

Since then the Building Safety Bill has continued its progress the parliament. This has already seen the introduction of an extension to the period for claims under the Defective Premises Act from 15 to 30 years. The Bill is now passing through the House of Lords with two new amendments proposed to force property developers to meet the costs of remediation. These are:

  • A 'Fire Hazard Remediation Scheme' that would see Assessors with the power to make determinations as to the responsibility for a defective building. A government levy - funded by the construction industry – will act as the backstop where no corporate body can be identified to meet the costs; or
  • A proposal that would allow local authorities to either compel remediation, or allow either local authorities or building managers to carry out remedial works, then seek to recover costs from the responsible party. This scheme would be backed with penalties for non-compliance and a technical committee to determine disputes relating to a building's compliance with regulations in force at the time of construction.

The Bill is currently in the House of Lords committee stage following which it will receive of further reading before returning to the Commons. Further amendments seem likely to follow.

In Scotland, where the stock of residential housing above 11m is smaller, the issues being experienced are less acute. That too is partly the result of historically stricter regulations north of the border. That is not to say however that issues are non-existent - in some cases other safety problems exist, such as missing, defective or inadequate fire breaks, flammable balconies and insulation defects. In addition, many developers will have operations north and south of the border, meaning even if their existing Scottish housing portfolios are not directly affected, the impacts of any levies south of the border may have knock on effects for new developments in Scotland.

The flip side to this is that under the Barnett formula Scotland would be due to receive its share of funds levied as part of the BSF – a number that could be as high as £500m. It is unclear how this money would be spent but conceivably it could be targeted towards remediation of some of the wider fire safety issues.

For a housebuilding industry already battered by Brexit related issues, supply chain problems and Covid this continued uncertainty will clearly be unhelpful. Given the 'mission creep' already seen in the draft bill, it seems unlikely that this bill will be the last word on either.

Contributors

Andrew Groom

Senior Associate

Eric Johnstone

Legal Director