UPDATES RE RESIDENTIAL FIRE SAFETY

Following our Cladding Q&A insight in November 2020, the following questions focus on the Building Safety Fund and legislative reform including the draft Building Safety Bill and the Fire Safety Bill.

1. What is the Building Safety Fund (BSF)?

The BSF is a £1bn fund (2020/2021 tax year) intended to help those living in buildings constructed using forms of combustible cladding, other than ACM (Aluminium Composite Material). The fund of £1bn is considered far too low. Estimates consider true costs to be between £5bn and £30bn.

2. What are the application requirements?

• Applications must be made by building owners or responsible entities (e.g. a RTM company), not leaseholders.

• The top storey must be at least 17.7m above ground level (i.e. 18m rule, with 30cm tolerance).

• All of the works must be recoverable from leaseholders – the fund is there to support leaseholders, not building owners.

• Works must not have been committed to when BSF was announced (11 March 2020), which creates an unfair result for some.

• Mixed use buildings are covered, but non-residential (e.g. hotels and hospitals) are not.

• Applications need to be supported by lots of evidence.

• The deadline for fully costed proposals is 31 December 2020, and works must start before 31 March 2021. Applications are dealt with on a first come, first served basis.

• You must take “reasonable steps” to pursue anyone else who may be liable. Any sums recovered, must be repaid.

3. What are the challenges with the BSF?

• The BSF will not cover mitigating measures e.g. a waking watch.

• Buildings with a mixture of ACM and other combustible cladding have to apply to both the BSF and ACM funds which will create significant administrative challenges.

• The timescales are very tight considering how slow the BSF administrative process is (deadlines may however be extended).

• There may also be state aid issues and limited availability of funds, experts and contractors.

• With few contractors, there is also concern that minor works will be started so as to meet the March deadline but then mothballed until availability allows for the works to be completed.

4. I am a leaseholder and my landlord failed to organise funding. Can I now challenge the service charges?

This might give rise to arguments that service charge costs have not been reasonably incurred, as the landlord could have obtained BSF funding.

5. I am a leaseholder and my landlord succeeded in getting funding. How will the funds be applied in practice?

The project will likely be run as if no funding had been obtained, and as such, the full cost of the project will probably be shown as a credit in the service charge accounts of eligible leaseholders. The section 20 consultation process would also need to be complied or dispensed with.

There will probably be no need to consult for pre-works surveys, as they are not classified as “works” under the section 20 consultation requirements. However, compliance with a section 20 notice will likely be very challenging in many cases, as there is a need to obtain contracts promptly in order to secure funding before the deadline. A section 20 consultation could therefore cause prejudicial delay to the BSF application.

Therefore, dispensation of the section 20 consultation process will probably need to be sought. Whilst there is no time limit on this, it is recommended that the landlord applies for dispensation as soon as possible and preferably before entering into a binding contract.

Informal, or extra-statutory, consultation will remain a desirable option for leaseholders. As such, make sure you keep up a line of communication with the landlord, as this is a necessity for a straightforward dispensation application and clears up a lot of doubts and ambiguity.

6. What is the Building Safety Bill?

A draft Building Safety Bill (BSB) was published in July 2020. Whilst it is very much still in draft form, it represents the government’s present view on how best to deal with the crisis. It is intended to be a regulatory regime for higher risk buildings but where this threshold sits remains uncertain at the moment.

The controversial provisions of the BSB are clauses 88 and 89. These clauses will imply a term into all residential leases that the landlord or management company will carry out relevant safety works as are required by the BSB; and the leaseholders will pay for the costs within 28 days of demand. This creates a new parallel service charge regime, by which you make buildings safe. It bypasses the position under individual leases.

7. What was the general response to the BSB?

The Communities and Local Government Select Committee (CLGSC) published its report on the BSB on 24 November 2020 and it is critical.  For instance, leaseholders would need to pay to repair safety defects which predate their ownership and that is considered unfair. There is also a question as to the government culpability as to misleading practices in the market. Local authorities would probably be set to benefit from the BSB given that their leases can have poor drafting and service charge provisions, meaning that it is challenging to make a service charge recovery. However, the Local Government Association criticised the BSB and questioned what happens if the leaseholder does not have the money to pay.

8. What does the CLGSC propose the government should do in the alternative?

They propose that:

• the government should commit to protecting leaseholders entirely against paying for historic fire safety costs;
• the government should provide the initial funding and look to recover the costs from developers; and
• to extend the payment timeframe, as it needs to be significantly longer than 28 days.

9. How likely is the BSB to be passed?

There is significant cross-party support for changes to the idea that leaseholders have to pay. The Sunday Times leaked that the government may compromise and offer 30 year loans at 2% interest to help leaseholders pay. It is however still a significant personal burden for a leaseholder to take on.

10. What is the Fire Safety Bill?

The Fire Safety Bill (FSB) is further progressed than the BSB. The set of reforms relate to bringing cladding under the scope of the Regulatory Reform (Fire Safety) Order 2005, so it is enforceable by the fire brigade. The other proposal is to ensure the external face of the front door be part of the common parts (so it is the responsibility of the landlord), as you need the entirety of the corridor to be fire safe.