DOUGLAS RHODES, a partner at Trowers & Hamlins, explored how the bill will ‘change service charges relating to fire safety’ for both landlords and residents.
Last month, the government published the draft bill, which included mention of the new role of the accountable person, who will ‘have to listen and respond’ to concerns and ensure resident are heard, called the accountable person. There will also be resident and leaseholder access to ‘vital’ safety information about buildings, and new complaints handling requirements for ‘effective action’.
The BSR will ‘oversee all this and make sure that accountable persons are carrying out their duties properly’, and ‘ensure that high rise buildings and the people who live in them are being kept safe’, with ‘new powers to raise and enforce higher standards of safety and performance across all buildings’. Resident panels will be appointed to have a voice in developing the regulator’s work.
The government will also be ‘speeding up’ its work with finance and insurance sectors to protect leaseholders from fire safety costs ‘without relying on tax payers’ money’, while a new building safety charge will make it ‘easy for leaseholders to see and know what they are being charged for’. To ensure these costs are affordable, the government has ‘deliberately included powers to limit’ costs that can be re-charged to leaseholders.
‘For the first time’ new build buyers will be able to complain to a new homes ombudsman, and developers will have to be a member of the scheme, with the ombudsman having the power to require they ‘pay compensation’. For construction, the bill will ‘fully establish’ the BSR to ‘enforce new rules and take strong actions against those who break them’, ensuring they are ‘accountable for any mistakes’.
The BSR’s three functions including overseeing safety and standards of all buildings; ‘directly’ assuring safety of higher risk buildings; and improving the competence of those ‘responsible for managing and overseeing’ works. A ‘more stringent’ set of rules for high rises will apply when buildings are ‘designed, constructed and then later occupied’, with each stage making it ‘clear who is responsible for managing the potential risks and what is required to move to the next stage’.
This ties into the “golden thread” of ‘vital information about the building’, and buildings need to be registered with the BSR as well as apply for a building assurance certificate. The accountable person will then need to ‘conduct and maintain’ a safety case risk assessment and appoint a building safety manager ‘to oversee it day to day’, with building inspectors ‘responsible for signing buildings off as safe for people to live in’ also having to follow the rules and register with the regulator.
Additionally, the government will have the power to ‘better regulate’ construction materials and products, and ‘ensure they are safe to use’. Ministers will appoint the UK’s first chief inspector of buildings, who will lead the new regulator ‘to make sure effective action is taken where concerns are raised’.
It was later reported that a survey of 1,000 leaseholders across the UK found that 70% were ‘reluctant and worried’ over the plans for increased responsibility for flat block safety, before leaseholders in Leeds stated the plans had caused them ‘enormous alarm’. Further details were revealed in August, including a two year prison term for breaches of the new regulations, as well as how the BSR will have ‘far-reaching powers to police design, construction and operation of buildings and competence’.
Inside Housing reported on Mr Rhodes’ article, which explores how the bill will ‘change service charges relating to fire safety’, and how the legislation ‘designed to address fire safety in high-rise buildings is about to bring in a new era’ of charges. Landlords in particular ‘will need to understand the rules’, which will be the ‘biggest change’ in nearly 20 years and will create ‘a new category of service charges for higher risk buildings containing long [term] residential leaseholders’.
He pointed out that the bill’s focus on a new regulatory regime for higher risk residential buildings – at least 18m tall or with more than six storeys, and two or more dwellings – introduces ‘significant new obligations’, such as the accountable person and building safety manager roles; the need to prepare a building safety case; the need to register with the BSR; and ‘preparing and implementing’ a resident engagement strategy.
On who will pay for the new measures, the bill ‘partially’ answers this through amending the Landlord and Tenant Act 1985, which contains statutory protections for both residential tenants and leaseholders. Building safety charges will be introduced and which long leaseholders will be liable to pay for. The costs are defined as costs incurred ‘by or on behalf of’ an accountable person, and a building safety budget will need to be planned before such charges can be ‘demanded’.
If any additional costs become necessary during the year, an additional budget ‘will need to be served’, and funding from tenants will ‘need to be held in trust in a designated bank account’, though ‘it remains to be seen whether there will be an exemption for housing associations similar to the one for general service charge funds’.
A year end reconciliation must be provided within 28 days of the end of the relevant accounting period, and must ‘specify what measures were carried out, what costs were incurred, what costs were not incurred and why not, the total amount of building safety charges due, the total received, and the total remaining’, including actual receipts and sums budgeted or spent.
‘Reasonableness’ as applied to other charges applies to building safety charges, so tenants ‘will only be liable to pay’ when charges are ‘reasonably incurred and the services or works are provided to a reasonable standard’. New requirements will be introduced for when charges exceed an ‘appropriate amount’ that is ‘yet to be determined’, including the ability to apply to a tribunal, though differences include an exemption notice procedure for compliance or urgent action notices.
Mr Rhodes pointed out that while the bill remains in draft form, proposals for charges were ‘not set out’ in the Hackitt Review consultation the government undertook, so ‘these provisions may change during the passage’ through parliament. At the moment, they carry ‘very significant implications and an increased administrative burden’ for landlords of high rise residential blocks, but it is ‘unclear’ if any cost protections will be offered to social housing residents beyond ‘those that already exist’.
There are other difficulties when considering how these will apply to mixed tenure estates ‘common across the social housing sector’, and at present charge provisions only apply to long leaseholders. Assured tenants, often subject to service charges, will see ‘further differences’ if these are ‘not extended’ to them, such as two consultations required under different rules.
Mr Rhodes concluded by noting that the changes ‘constitute a major reform to service charge law and practice’, with professionals in that sector urged to ‘pay close attention’ to the bill, and ‘engage with the government to raise any concerns’ as to how provisions ‘will operate’.