What do I do if...my business is affected by the Building Safety Act?

00:00:05 David Lee, Host

Hello, my name is David Lee and welcome to 'Podcasts by Brodies’. In this series we take an in depth look at some common and not so common questions and scenarios that Brodies lawyers have faced over the years relating to English law.

In each episode we talk to experts to discover the insights and experiences that allow them to take the right approach when they're asked the deceptively simple sounding question, ‘What do I do if...?’.

Today we're looking at a specific piece of legislation emanating from the terrible events at Grenfell Tower in London in 2017, which is still very much resonating today. The specific question we're asking today is ‘What do I do if...my business is affected by the Building Safety Act?’.

I'm joined by two Brodies experts, Eric Johnstone, a senior associate, and Amy Pairman, who's an associate with Brodies. Welcome to you both.

To set the scene, first of all Eric, just tell us what is the Building Safety Act?

00:01:10 Eric Johnstone, Senior Associate

Simply put, the Building Safety Act is the UK Government’s legislative response to the Grenfell Tower tragedy and the review of building regulations that was carried out by Dame Judith Hackett. The Act became law in April of this year with its first provisions coming into effect in June. The Act is effectively a framework and the main changes are going to flow through secondary legislation, there are currently various government consultations on what exactly this is going to mean.

00:01:37 David Lee, Host

Amy, who needs to be aware of the Act and the changes that it's bringing in?

00:01:43 Amy Pairman, Associate

Anyone involved in the design, construction, management or ownership of residential properties in England, we'll come to look at it a bit later there are some wider changes in relation to the ability to make claims for defects, and they affect a broader category of properties, so not just residential. But I think the main changes in relation to design, construction and occupation are in relation to what the act terms, high risk buildings, and as Eric will come on to explain, these are buildings of a certain height with residential units.

00:02:12 David Lee, Host

Just coming back to you Eric, what are the main changes being proposed under the Act? Particularly with regards to the building safety regulator and what we classify as a higher risk building.

00:02:27 Eric Johnstone, Senior Associate

Well, the building safety regulator, or "BSR" is the acronym, it’s a new organisation who are going to sit within the Health & Safety Executive and they're going to have a role right through the life cycle of a building.

We will come on to discuss the role which is going to play during occupation later, but for now, concentrating on the design and construction stages, a majority of the changes which we'll see haven't come into force yet, and I do have to give a caveat that that means what we are currently talking about may be subject to change. Based on the position that the government had put forward in the recent consultation papers, we do have a bit of insight into what exactly is going to happen. Now, the primary function of the BSR is going to be to oversee the safety and performance of all buildings, as well as having a special focus on high rise buildings, it's going to promote competence and organisational capability within the building sector, including for building control professionals and various tradespeople.

The BSR is going to become the sole building control body for higher risk buildings in England. This means that people are no longer going to be able to choose who it is that they apply to, now, like I've said a couple of times already, there are various ongoing consultations and one of the things that that means is the exact definition of what a higher risk building is going to be, has still not been fully determined. The consultation on that point, closed in October of this year, however, one thing that we do know is that the intention is for any building which is taller than 18 metres or has more than 7 storeys and contains 2 or more residential units to be included within that definition.

00:04:20 David Lee, Host

Thanks very much Eric, there's a lot going on here. So Amy, what about planning and permissions during the design and construction phase? Also what information will need to be produced during the construction of a project and what changes is the new act bringing in?

00:04:41 Amy Pairman, Associate

I think the first major change, in relation to high-risk buildings, is that during the design and construction phase there's going to be certain hold points where the building safety regulators approval is going to be needed.

The intention is that at these hold points, the building safety regulator will try and ensure that the relevant building regulations are being complied with. This is going to be called the new gateway regime, and there's going to be 3 gateways and they're going to apply at different stages of the project.

So the first is gateway one, which is what people are calling the "planning gateway", and that's actually already up and running, and it came into effect in August 2021 through different legislation rather than under the Building Safety Act.

The two new gateways under the Building Safety Act that lead into the most questions from us are gateways two and three. So gateway two occurs before construction work begins and it's really designed to try and bolster the current deposit of full plan stage. It's different to the current regime because it will be a hard stop, what I mean by that is you'll need the building safety regulators approval before construction works can actually begin. That approval is only going to be given if the building safety regulators satisfied that design meets the relevant building regulations and doesn't create any unrealistic safety management expectations. To allow the building safety regulator to make this assessment, more information than is currently required at preconstruction stage will need to be produced.

Like Eric mentioned, the exact detail of what's going to be required is going to be provided through secondary legislation, but the consultation suggests an application is going to need to provide the full design intention and that's likely to include what's been referred to as a "design and build approach document," which will set out how the building regulations will be met, along with plans on the fire strategy for the building.

I think for us, one of the questions this raises is, how is this approval going to be factored into the contract structure and the programme for a project? Because at the moment the government are suggesting a minimum of 12 weeks for any building safety regulator approval and there's also a risk that if the building safety regulator thinks more information is needed or they aren't willing to approve the proposal, then that approval process is going to be a lot longer than the 12 weeks.

I suppose in your traditional design and build contracts, you're going to need to think about how is that going to impact the ultimate completion date and what rights of relief are there going to be for the contractor if the approval is delayed for a reason which isn't their fault?

00:07:17 David Lee, Host

Is there concern in the industry over these timescales? Is that something that is causing some consternation? The potential elongation of the whole process?

00:07:29 Amy Pairman, Associate

Yeah, one of the main questions we're getting about the gateway regime is, how it is going to be managed? How long are the time periods going to be? Because we know that the government is struggling to get enough people into the building safety regulator so it's saying 12 weeks, but is that 12 weeks based on how many actual inspectors and how many people in the building safety regulator? So, then when you're thinking about a contractual point of view, how is that going to impact my obligations under the contract? Because construction contracts are all about completing the works by a certain time period. So if you're then having to try and build in an unknown approval period by another third-party body, how does that work with the current contract structure?

00:08:07 David Lee, Host

What you just mentioned there about the staffing of the building safety regulator, that's an issue as well, that's a challenge in terms of getting the bodies in there to physically carry out inspections.

00:08:20 Eric Johnstone, Senior Associate

Yes, the problem is that the building safety regulator are going to look not only at new buildings, but they're also going to be responsible for the safety of existing high-rise buildings. So any tower block which is currently in occupation is going to fall within the building safety regulators control.

The number we have been quoted is that there's roughly 12,000 existing buildings, all of which are going to have to be considered, inspected and checked to ensure that they have the appropriate fire safety regimes in place and there just aren't currently enough employees.

The building safety regulator is an entirely new organisation, it's going to need to get what will be known as ‘approved inspectors’ on board and as we've said, one of their key goals is to ensure that there's a higher standard maintained here. So they're going to need to ensure that these people are appropriately trained, Now there will be existing professionals whose experience they can call upon, but all of that depends on those people being willing to take on this new role with the building safety regulator.

Obviously, if a building is already occupied, that's going to have to take priority over a project which is on plans or where there are some spades in the ground, but building hasn't come along very far and that means that like the ambition to hit a 12 week turn around is going to be challenging whilst there are other focuses for the regulator.

00:10:10 David Lee, Host

There's clearly a tension there, because while everybody wants to get on and do projects, a lot of this legislation, as you say, has come out of Grenfell and there's no sense that there's an ability to cut corners here, because of all the sensitivities about Grenfell. Everything has got to be done correctly and there is that tension with moving quickly, so it's a tough situation for developers of high rise and higher risk buildings.

00:10:39 Amy Pairman, Associate

Yeah, I think it's going to be a couple of years till we properly get to grips with how this is actually going to impact the construction industry and what it is going to mean for the development of high-risk buildings.

00:10:52 David Lee, Host

So, you were talking us through the gateways, Amy, we talked about gateways one, two and three, I think you were just going to kind of wrap up on, you know some general points on gateways and what might happen there.

00:11:09 Amy Pairman, Associate

We talked about gateway one and gateway two, we touched on gateway three. Gateway three is actually the one that's causing quite a lot of concern because that's the final stage gateway and the idea is this occurs when the works are complete and it then requires the building safety regulator to confirm the constructions being carried out in accordance with the building regulations, but the key point is; until the building safety regulator does this, it will be illegal to occupy the building.

So currently in construction contracts there is usually certify practical completion when the works are complete and that ends the contractors liability for liquidated damages. But the real question is, how is that going to work with this new gateway approval? Will an employer want to contractually certify practical completion before they've got the building safety regulators approval? Because what if the building safety regulator comes back and says he's not going to give approval? Then more work is needed, so they won't actually be able to occupy the building they've paid for.

But then on the flip side your contractors going to be thinking, ‘well if it's not certified for a reason, then I'm not responsible for it, there needs to be some relief mechanism in the contract that gives me relief from liquidated damages.' So I think that's something we're really going to have to try and get to grips with as an industry; how is it going to work? Can we use the existing mechanisms and construction contracts with a few tweaks? Or is it going to be something that's going to have to sit outside in a separate contract? Will you certify practical completion and then will there be a separate contract between the parties that deals with how we're going to deal with a gateway approval?

Just in terms of some of the key takeaway points to think about in relation to the gateway, it's going to be how are people going to deal with delays arising in relation to the approval process? Then from a practical perspective, who's going to be responsible for producing and collecting all the necessary information for the gateway approval?

00:12:56 David Lee, Host

Amy, there's also another change coming in about information requirements, so can you tell us a little bit about that please?

00:13:04 Amy Pairman, Associate

Yeah, so the Building Safety Act is going to impose a duty to create, collate and share prescribed documents to ensure there is what's going to be known as, "a golden thread" of information running through the life cycle of every high-risk building.

This was something the review by Dame Judith Hackett recommended, the idea being that by having this golden thread it would ensure the right people at the right time would have the information they needed to make sure there was compliance with the building regulations and support the overall building safety.

So what the Building Safety Act is going to do is impose a duty on certain people, at certain stages to collate this information, make sure it's up to date and make sure it's accessible. The key point is that it's going to have to be held digitally, so that is going to mean all people are going to have the infrastructure in place and it's going to be a key part of the gateway procedures so if you don't have the information, for example at gateway three, it might be a reason why your gateway three approval is rejected.

As Eric touched on before the idea is, long term, all this information will be generated through the design and construction process, but it's important to understand this new idea of high-risk buildings is going to apply to buildings already in existence and haven't been through the process, and there's going to be the same information requirements in relation to those existing buildings.

There will be a wee bit more leeway around what information is needed and isn't needed, I think there will be an understanding that it's not gone through the same gateway, but I think it is important to understand that just because you're an existing building, if you come under the definition of high-risk building, you will be caught up by the new regime during the occupation.

00:14:42 David Lee, Host

It sounds as if it may take some time for that golden thread to weave its way through this whole process.

00:14:50 Amy Pairman, Associate

I think so, and I think we'd really need to know exactly what is going to be required to be produced. We've got a bit of an idea from the HSE in terms of what might be needed and from the consultation, but what we really need is hard and fast rules that say; this is what you'll need to produce, so people can start putting the infrastructure in place.

00:15:09 David Lee, Host

Okay, Eric.

00:15:11 Eric Johnstone, Senior Associate

Yeah, I think it's exactly what Amy says there, projects which are going to start once we have all the building blocks in place, we know exactly what documents the government say should be part of that golden thread.

The picture going forward is clearer, there will be more onerous duties on everybody that's involved in these projects and that's something that industry is going to have to come to terms with and ensure it's got procedures in place to deal with. But you'll at least have a framework on which they can hang all the documents that they know they need to have and then you will have the golden thread, in the true sense that it will start at the pre-planning stage where you're considering a high-risk development. You'll know you will need to have your fire strategies in place from day one, and that will run right through to when the buildings in occupation. But as Amy says, where you've got a building that's 20 years old, and if we're chargeable we see the documents haven't necessarily been kept in the best condition then you are in a more challenging position.

00:16:23 David Lee, Host

We've talked quite a bit about the process there, Eric, what about people? What is an accountable person in this context and what responsibilities do they have?

00:16:34 Eric Johnstone, Senior Associate

As with a lot of the points we've been discussing, there are layers here. High risk buildings can have multiple accountable persons but an accountable person for a higher risk building is somebody who either holds a legal estate in possession of any part of the common parts of a building, or somebody who doesn't hold a legal estate but is under a relevant repairing obligation in relation to those common parts.

As I've said, there is a lot of scope for that to lead to there being more than one accountable person on a building, and in those situations you need to have a principal accountable person. The building safety regulator intend for that person to be the person responsible for the structure and exterior of the building.

In terms of their duties, all accountable persons have some duties, the principal accountable person has more. Accountable persons all have duties to take reasonable steps to prevent a building safety risk from happening, and that's where a building safety risk is defined as the spread of fire and or a structural failure. They've also got a further duty to reduce the seriousness of an incident if one happens. So it's an acceptance on the part of the government that you can't ensure that something won't go wrong at some point, but they also want to make sure that if it does, then we avoid any further horrific scenes like we saw at Grenfell. They want to make sure that there is proper planning in place to ensure that, insofar as you can, residents in the building are protected in addition to the duties which sit with an accountable person.

The principal accountable person has much wider scope of duties that they have to perform. So they are responsible, in terms of any new building, for registering the building with the building safety regulator when it's completed. For existing buildings, they are also obliged to register those buildings and the government have set out a timetable for that, again with the warning that these dates may change. The government’s current intention is for all high-risk buildings, which are currently in occupation, to be registered between April and October of next year and the legislation currently points to it being an offence to allow a building to be occupied after October 2023 if that registration hasn't been carried out.

The principal accountable person is also responsible for preparing a safety case report for the building. Essentially what that does is it draws together all the work that the other accountable persons have done to assess building safety risks and the reasonable steps which have been taken to control those risks. So it's one document that brings all the steps for that building together, and that's a document which the principal accountable person has to hold and provide to the building safety regulator when asked, so as a principal accountable person, your homework may be checked, so you should really keep it up to date.

00:20:11 David Lee, Host

I'm assuming people aren't going to be queuing up to take that role on, but in every business there’s going to have to be somebody doing it.

00:20:19 Eric Johnstone, Senior Associate

Yes, and it is going to be a responsibility that comes with the position as the person responsible for the building. So that is often, but not always, going to be a landlord or a management company. So you will hopefully have the people in place with sufficient experience to undertake these roles and whilst it may be a further cost for the business, the end goal of this has always been to ensure resident safety.

A point that builds on that is the final two duties that the principal accountable person has. They have to apply for a building assessment certificate when the building safety regulator asks them to, and this is going to be a rolling process of certification so essentially what that will prevent is buildings falling behind current standards. So something that is suitable and meets all regulations and is considered to get a gold star for health and safety in 2023 may not still be considered so positively when you get to 2033. But the government are going to have this five year assessment certificate that your building will be looked at and reviewed on that rolling basis and you will be, as the principal accountable person, told these are the changes which require to be made to allow your building to continue an occupation.

One call back to the point Amy was discussing earlier, the principal accountable person is also going to be responsible for the golden thread information and that golden thread should continue to be updated during the buildings life cycle. So for example, if you have to install a new sprinkler system in three years' time, that should make its way into the golden thread of information, because that's going to be a key part of the fire safety assessment for that building.

00:22:22 David Lee, Host

So big, onerous responsibility there, Amy, just on another related issue, what was the act to say about periods and rights of redress for claims to be made in respect of a defective property?

00:22:37 Amy Pairman, Associate

Yes, I think another key aim of the government in the Building Safety Act is trying to increase the routes to try and hold developers and expose the construction industry more generally responsible for defects in properties.

There's quite a number of routes under the Building Safety Act they've done to try and achieve this. They've made changes to the Defective Premises Act, they've changed the Building Act 1984, they're creating a new right to claim in relation to construction products, they're introducing a new idea of building liability orders and they're introducing remediation and cost contribution orders. We don’t have time to talk about those so I'll just focus on the first, but we do have information about all the different changes on our Building and Fire Safety Hub, so people want a bit more information about them they can go there.

So the first change is the Defective Premises Act, so this isn't actually an existing act, and it applies to all dwellings in England and Wales, regardless of their height and what it requires is that organisations involved in the construction of a dwelling make sure it's fit for habitation when the work is complete, and it gives a right to claim if its not. So what the building Safety Act has done is it's widened this route to claim under the Defective Premises Act by making two changes. Previously a claim could only be made in relation to the provision of a dwelling, so that really was taken to mean the original construction or conversion but now it's possible to make a claim in relation to any work undertaken on a dwelling, so long as it's done in the course of a business.

The second change is then to significantly extend the potential time periods for a claim. Any claim that accrued after the changes came into force, so after 28th of June this year, the time period to make a claim is 15 years from when the works are complete. Then looking back any claim in existence before the 28th of June this year, there is now a retrospective 30 year period to make a claim, which practically speaking means any project which completed on or after the 28th of June 1992 is now potentially alive again from a claims perspective. So really, it's increased the claim exposure for a lot of people, and there's also a duty under the Building Safety Act for landlords to make sure they're looking at all possible routes to pursue third party claims in order to recover the costs of historic defective works.

The second one to touch on, as well as the defective Premises Act, the government also supplemented the routes to bring a claim by changes to the Building Act 1984. So there's a section of the Building Act, section 38, which gives a right to claim damages where harm is suffered because a building has not met the building regulation standards. So effectively if there's a breach of the building regulation and it causes damage then it will be actionable and this applies to all building regulations, not just limited to dwellings.

But section 38 is a section of law that's actually been on the books for quite a long time, since 1984, but it's never been brought into force. What we all thought was going to happen was the Building Safety Act was going to bring section 38 into force, and then extend the time periods a party can make a claim in relation to it. But oddly, what's actually happened is the government has brought into force the extended time periods, so the time period to bring a claim under section 38 is now being extended to 15 years compared to the usual 6 but they haven't brought the section into force which means right now you can't bring a claim under section 38 because it's not in force. We know a lot of people have written to the government asking them what's the plan here? Is this a mistake? Is it coming in? But there's not been a response, so it's really just a watch this space for now.

When thinking about the practical impact of all of that, aside from the obvious one of increasing the claim exposure, it also raised a few contractual questions and whether when drafting a contract might you want to extend the contractual time limit period to reflect this increased statutory time limit under the defective premises act and the building act. There's different arguments on both sides, and that's probably a podcast in itself, but again, we've got a short blog on our hub, that people can go to if they want to have a look at the start point.

00:27:07 David Lee, Host

Thanks very much Amy, we've talked a lot about the what and the why and the who and we've heard a little bit about time scales and the when, but there still seems to be some uncertainty around the time scales.

What's the best bet if anybody comes to you and says, what timescales are we looking at?

00:27:30 Amy Pairman, Associate

Yes, this is the million-dollar question and as Eric said, whilst we've got the building Safety Act, we don't yet have the majority of the secondary legislation which brings into force all the changes we've been talking about.

When these changes were first being discussed by the government, the government said all the relevant legislation and all the relevant changes would be in place 12 to 18 months from the Building Safety Act becoming law, so that takes us to April and October 2023, but the consultation Eric mentioned looking into input on the changes only closed on the 12th of October this year, and the government's aim is to produce a response within 12 weeks. So just the response to that consultation takes us to January 2023, which means it's going to be quite a tight turn around if they want to get the legislation in place and in force by April. So again, it's really a watch this space, but I think we'll know a lot more once we get that response to that consultation and in January next year

Maybe one aspect that might give people some comfort is in the consultation, the government has said there will be transitional provisions in relation to the new gateway regime I talked about during the design and construction phase. The current suggestion is that if a developer has submitted an initial notice or deposited full plans by the day the new regime comes into force and they then commenced work within six months of the day the new regime comes into force, then the old regime will apply. So they won't have to go through gateways two and three, but it'll still be a high risk building, and so during the occupation, the occupation requirements Eric touched on will still apply.

We also just need to watch though because the definition of commencement of work is going to be tightened because the government see that as a potential loophole of people effectively just going ‘I've put a site hut on the site, so I've commenced my works and then I can come under the old regime’ so it's going to be a lot more you actually have to do in order to say you've commenced work, and so far within the transitional provisions.

00:29:35 David Lee, Host

Wow, watch this space indeed!

Another big question, Eric, is always around enforcement, what powers will there be to enforce this new regime and are there any criminal sanctions?

00:29:49 Eric Johnstone, Senior Associate

As we've said before, a lot of the finer detail of this is going to come through the secondary legislation, but one thing the act does make clear is that the building safety regulators going to have extensive powers of investigation and that's going to include powers to require the production of information and documents, and also the power to enter into buildings in certain circumstances.

These powers are similar to the HSE powers and related to suspected breaches of existing health and safety law on your query about criminal consequences for breaches of the acts, we do know that the position is going to get a lot tougher.

When certain offences within the act are committed, it is possible for senior individuals to be held personally liable in addition to the organisation, this is going to happen in situations where the offence is committed with their consent connivance or is attributable to their neglect. Again, it's a little bit of crystal ball gazing here, but I think neglect is going to be a very important issue going forward because the query of ‘are you negligent if you are a construction director of any major organisation who has 20 or 30 projects and you don't read the finer detail of the documents that your staff pass up to you and just sign your name to the paper to get it off your desk.’ The question of whether that could be neglect is one that I think we're going to have to keep a very close eye on.

Sentences for offences which are set out in section 35 of the Building Act and they are penalties for contravening building regulations, have also been increased and this means that the maximum sentences are now an unlimited fine and/or two years imprisonment.

One thing that is probably worth touching on here is that there are also going to be further potential consequences for the organisations themselves because one thing that the BSA allows is for the government to set up building industry schemes and these are schemes for, and I'm going to quote here, ‘persons carrying on for business purposes activities connected with the design, construction, management or maintenance of buildings, including persons carrying on activities in relation to construction products.’ Now, memberships of these schemes is going to be restricted to an applicant who meets the membership conditions. These criteria have not yet been fully set out, but the act does suggest that the government will have the ability to use these schemes as a means of restricting access to the market for organisations and individuals who have not met what they consider to be appropriate criteria. Therefore, a failure to meet these requirements might mean that organisations will, in the future, be prohibited from carrying out development works.

00:32:56 David Lee, Host

So we've covered a lot of ground there, can you summarise briefly how you think businesses and organisations should prepare for these changes? Amy, first of all.

00:33:05 Amy Pairman, Associate

I think the main thing is to know the change is coming and to know that the time periods were talking about are January next year for the consultation response, and then April - October as what they're currently aiming for as the deadline.

So I think, 1) know the changes coming and 2) once you know generally what's going to happen, start to think about what parts of your business are actually going to be affected, are you going to be affected during the design and construction of a high risk building? Is it going to affect you during the operation and management of a building?

00:33:36 David Lee, Host

Eric?

00:33:38 Eric Johnstone, Senior Associate

Building on that, if you're on either side of the fence, it's probably worth reviewing your old projects and older buildings to see if there are any potential claims there that that applies equally on both sides of the fence.

Whether you're a party that's likely to be making a claim or receiving it, if you are primarily focused on the design and construction elements of projects, we think the gateways in the golden thread are probably the two areas that you're going to want to concentrate most of your efforts on going forward.

If you run the operation and management, the golden threads are still going to be key. I think that is aptly named, that's going to be the real key point through all of this legislation and reform, but the other point which you're going to need to do if you're particularly on the operation side is you're going to need to ensure that all your buildings, both historic and future, are registered with the building safety regulator and all their requirements are made.

00:34:40 David Lee, Host

Thank you very much to Eric Johnstone and to Amy Pairman for their excellent insights today. I think if there is one golden thread running through this podcast, it certainly is that this is a hugely complex area and you really do need to know what's going on and get good advice at an early stage.

Thanks again Amy and Eric for taking part in this latest episode of the ‘What do I do if...?’ series, which is part of ‘Podcasts by Brodies’ where some of the country's leading lawyers and special guests share their enlightened thinking about the issues and developments having an impact on the legal sector and what that means for organisations, businesses and individuals across the UK economy and society.

If you'd like to hear more please subscribe to ‘Podcasts by Brodies’ on your favourite podcast platform and for more information and insights please visit www.brodies.com