Ron Alalouff examines the legal and practical aspects of paying for fire safety defects in residential buildings.
Remediation is a word many people have had to get used to since the Grenfell Tower fire. It propelled into the limelight the potential dangers of unsafe cladding and other building safety defects. Over the years since the fire, intrusive building surveys have progressively revealed major fire safety defects in high rise and other buildings, with the government making periodic announcements about remediation funding schemes, and legislating for leaseholder financial protection in the Building Safety Act 2022.
A summary of the state of play of who pays for fire safety remediation work on high-rise blocks has been published by the House of Commons Library. It sets out a timeline of the various steps the government has taken to intervene in what has become known as the “building safety crisis”. This timeline is summarised as follows:
- May 2018: The government will meet the “reasonable cost” of the removal and replacement of unsafe cladding by councils and housing associations.
- May 2019: The government will fully fund the replacement of “unsafe aluminium composite material (ACM) cladding on high-rise private residential properties, where building owners have failed to do so”.
- March 2020: In the budget, the government says it will provide £1 billion through the Building Safety Fund in 2020/21 to support the remediation of unsafe non-ACM cladding systems on residential buildings 18m and over in the private and social housing sectors.
- February 2021: Robert Jenrick – then Secretary of State for Housing, Communities and Local Government – announces additional funding of £3.5 billion for the removal of combustible cladding in high rise blocks of 18 metres and over.
- April 2022: The government announced a framework agreement with developers to contribute a minimum of £2 billion towards cladding remediation on buildings 11m to 18m high.
- June 2022: Leaseholders in blocks above 11 metres are protected from the cost of cladding remediation work, with some exceptions. For non-cladding remediation work, the Building Safety Act 2022 provides for a “cascade of responsibility” for assessing who is responsible for meeting the costs with leaseholders – in some cases – having to contribute up to a capped amount.
- July 2022: The next phase of the Building Safety Fund opens for new applications for eligible high-rise residential buildings, where the building owner or developer can’t afford to pay for remediation.
- July 2023: The Cladding Safety Scheme opens, providing funding for remediation of unsafe cladding for all buildings over 11 metres, where the developer cannot be made to pay.
- September 2023: 50 of the largest developers are signed up to the developer remediation contract.
In spite of all these measures, there are continuing concerns according to the House of Commons Library report, including:
- The lack of financial assistance for those who have already paid towards remediation work, some buy-to-let landlords, and those in affected blocks under 11 metres high
- Leaseholders having to pay contributions (albeit capped) for non-cladding remediation work
- The potential impact on the social housing sector’s ability to develop new affordable homes and invest in existing stock
- The pace of remediation work, and how long it is taking for funding to come through (the government has said the Building Safety Regulator will start taking enforcement action in spring 2024).
The legal landscape
On 28 June 2022, provisions of the Building Safety Act 2022 came into force to protect certain leaseholders from the financial impact of fire safety remediation. To be a qualifying leaseholder, the block must be over 11 metres (or five storeys) high and, on 14 February 2022, the property was the leaseholder’s main home, or the leaseholder owned no more than three UK residential properties in total.
Under the provisions, qualifying leaseholders cannot be charged for cladding remediation, and the amount they might have to pay towards non-cladding work is capped. For the protections to apply, the work must fix a building safety risk as defined in the Act. This includes any defect caused during the construction or refurbishment of a building in the past 30 years that causes a risk to people’s safety from the spread of fire, or the collapse of some or all of the building.
Remediation of combustible cladding is covered, as are works to replace inadequate fire doors or fix missing compartmentation. Interim fire measures, such as waking watch costs, are also covered.
Who pays?
Building owners and landlords must pay if:
- They are (or are linked to) the developer of a building with the defects, or
- They meet a certain wealth threshold. The Act says all owners with net worth of over £2 million per affected building they own should pay for the work.
If a developer can’t be found or won’t pay, “funding will be made available directly to pay for cladding repairs”. The Building Safety Fund for cladding remediation on blocks over 18m reopened for applications on 28 July 2022. The Cladding Safety Scheme for medium rise blocks (between 11m and 18m) – where the developer cannot be traced or held responsible for remediation work – was fully opened on 26 July 2023.
If an owner or developer is liable to pay but refuses to do so, several bodies have powers under the Building Safety Act to take them to court, including fire and rescue authorities, local authorities, the Building Safety Regulator, leaseholders themselves, or the Secretary of State.
Non-cladding defects
Responsibility to pay for non-cladding work is the same as set out earlier. In cases where the developer can’t be held responsible and the building owner doesn’t meet the wealth threshold, some costs can be passed to leaseholders, subject to a cap (in most cases, £10,000 outside London and £15,000 in London).
Where a flat’s value is less than £175,000 (£325,000 in London), leaseholders will make no contribution. For properties worth over £1 million the cap is £50,000, and for those worth over £2 million the cap is £100,000. For shared owners, the cap is proportionate to their equity stake in the property. Sums paid towards interim fire measures – including waking watch costs – over the last five years will count towards the cap.
By 15 September 2023, 50 developers had signed the government’s developer remediation contract. This commits those developers to remediate unsafe buildings they’ve developed over the past 30 years (ending 4 April 2022), by taking responsibility for all necessary work to address life-critical fire safety defects arising from the design and construction of buildings 11 metres and over in height that they developed or refurbished. Under the contract, developers will also have to reimburse the government for taxpayer-funded work to remediate defects in those buildings. The government has said that eligible developers who refuse to sign or fail to comply with its terms face “significant consequences”, including restrictions in planning and building control approvals on their future developments.
Real cases
While hard and fast figures on how funding is progressing – and who is in fact paying for remediation – are hard to come by, we can survey the media landscape to find examples of what is happening on the ground.
What is believed to be the first remediation order under the Building Safety Act was made in August 2023, where leaseholders successfully applied for remediation of defective external cladding and other issues against their freeholder/landlord.
The case – Waite & others v Kedai Ltd – concerned two residential blocks in south west London, one converted from an office development in 2015 with two additional storeys added, making it six storeys high, and the other a newly built seven-storey building separated from the existing block by a party wall. Following the Grenfell Tower fire, concerns were focused on the aluminium cladding on the top two storeys of each block, and on fire stopping of internal compartments.
After an invasive building inspection a report in June 2001 concluded: there were limited horizonal cavity barriers and no vertical cavity barriers; the insulation – while compliant at the time of construction – was now considered non-compliant; there was no firestopping around vents within cavities; the vents used were not fire-rated; and combustible materials had been used as part of the external wall system.
The case was heard in the first-tier tribunal property chamber. Key points arising from the judgment include:
- The applicants established a prima facie case for the tribunal to consider a remediation order. Applications of this type are evidence-based in themselves, led by inspection reports and expert evidence, and informed by the tribunal’s own expertise and experience. There is no need for formal burdens of proof on either party, as all that is required by the Building Safety Act is that once the tribunal has determined that relevant defects exist, it is for the tribunal to make an order to remedy those defects.
- While the remediation order must be precise enough that the developer/landlord knows what is required, the Building Safety Act is not prescriptive about the works needed to remedy the defects.
- In most cases, the preparation of a specification of works will also have to be paid for by the developer/landlord.
- The standard of works must comply with the Building Regulations at the time of the remedial work, and at the very least, a post-works Fire Risk Appraisal of External Walls (FRAEW) under PAS 9980:2022 should enable a satisfactory EWS1 form being issued.
- Whether the landlord/developer is seeking to obtain funding/redress from a third party is irrelevant to the exercise of the tribunal’s discretion.
In making the order for remediation, the tribunal set a deadline of 19 September 2025 for the work to be completed.
Although the remediation order was made against Kedai Ltd, they may not have to pay the eventual bill. During the preparation of the case, new surveys established that the building exceeds 18m in height, whereas previously it was wrongly measured at below 18m. This new information enabled the company to apply for funding from the government’s Building Safety Fund.
Olympic Park trials
Across to the east of London, residential blocks on the former Olympic Park have been caught up in the remediation crisis. There, the owner of the site, Get Living – a partnership between Qatari Diar, pension fund APG, and Delancey – faces a total remediation bill of over £27 million.
Triathlon Homes – which manages 1,379 homes in what is now known as East Village – has applied to a tribunal for an order under the Building Safety Act to require Get Living to accept responsibility for funding around £16 million of work on the homes Triathlon manages, according to a report in the Financial Times. The remaining £11.5 million remediation estimate is for properties owned and managed by Get Living.
Get Living is also the majority shareholder in EVML, the management company for the East Village, which is responsible for maintaining common parts of the estate as well as fire safety. EVML has applied for £13.5 million from the government’s Building Safety Fund to cover most of the cost of remediation of Triathlon-managed properties.
Defects such as missing fire breaks and the presence of ACM cladding have been identified at the properties, according to the Financial Times. Out of a total of 66 blocks on the site, 16 buildings have not yet been issued with an EWS1 form, which would enable leaseholders to sell or remortgage their properties.
Triathlon claims it shouldn’t have to pay, as it leases properties from Get Living, which is the freeholder. Get Living – which has set aside £14.3 million for fire safety remediation works at East Village properties it doesn’t own – claims that Triathlon is not willing to pay its share of the costs.
Housing association commits to fix defects
Also in London, housing association Notting Hill Genesis (NHG) has committed £72 million to remediate, upgrade, and refurbish homes on the Paragon Estate in Hounslow, after it evacuated around 1,000 residents in 2020 following intrusive inspections that found serious fire safety issues.
The estate is made up of six tower blocks and contains a mix of shared ownership, student housing, and intermediate rent homes. Improvements are said to include new insulation and facades, and the installation of sprinkler systems. NHG has also spent more than £20 million buying back leaseholder properties on the estate.
NHG has also made paid compensation to the tune of £6.9 million to residents at the Oak Square and Windmill estates for the disruption caused by remedial works. The housing association also revealed that it has set aside a further £157 million for building safety work across its property portfolio.
In a separate case, developer Pocket Living has reached an outline agreement with a contractor to pay for fire safety defects including wooden balconies, wooden cladding, poorly installed fire doors and missing fire barriers at Bridgepoint House in Ealing.
Remediation prosecution
In what is thought to be the first case of a council successfully prosecuting a building owner for delays in remediating dangerous cladding, Newham Council took action against Chaplair Ltd, owner of a nine-storey building in Forest Gate. Using powers under the Housing Act 2004, the council prosecuted Chaplair after it failed to remove the cladding on the Lumiere building by March 2021, under an improvement notice served in September 2020.
Though work to remove the dangerous cladding eventually began in May 2021 and was completed by February 2022, the council successfully argued at City of London Magistrates Court that there was no reasonable excuse for the delay.
Speaking after the hearing the Mayor of Newham, Rokhsana Fiaz, said the council has zero tolerance of building owners delaying essential life-saving fire safety work: “Failing to remove dangerous cladding as quickly as possible places lives at risk and, where necessary, we will act with full force using the powers we have to protect our residents.
“Six years after the Grenfell Tower disaster, today’s decision by the court symbolises a landmark ruling in our fight to raise standards and hold building owners to account in Newham. It will also help authorities across the country to safeguard the interests of their residents using the powers available under vital housing legislation.”
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Ron Alalouff is a Freelance Writer and Editor.