Second April 2022 Building Safety update

With developments continuing rapidly, we provide an update below on the following topics:

• Building Safety Bill: this has been reviewed in the Commons and is due to be back in the House of Lords on 26 April, with the Government seemingly firm that it will pass into law this parliamentary session (which is due to end shortly).

• Developer and construction products industry negotiations: further information is now available about the “Developer Pledge”, but discussions between the CPA and the Government may be nearing a stalemate

• RICS Guidance and EWS 1: new guidance and updated forms now published to reflect reference to the new BSI PAS9980 guidance for assessing external walls

• Building Safety Levy: Government comments and queries about sums the levy is expected to raise, and what it may cover

Building Safety Bill – likely to become law shortly

The House of Commons debated the House of Lords’ amendments to the BSB on 20 April 2022. As anticipated, the Government has rejected the three amendments that related to further extending the leaseholder protections for historic building safety remedial works’ costs which we discussed in our last update (ie that these would cover buildings of any height, with no potential leaseholder “capped” contributions at all, and that they cover would enfranchised leaseholders, ie those who bought their freehold). The Government has also introduced some additional and relatively minor drafting amendments.

This means that – at least at this stage – (i) the leaseholder protections now again relate to buildings of 11m+ only, and (ii) (as a last resort if there are no other targets under the Government’s “waterfall” of contributors) leaseholders may have to contribute up to certain “caps” for non-cladding-related remedial costs; and (iii) enfranchised and common-hold leaseholders are excluded from the protections.

However, during the debate the Government also made it clear that:

• Under 11m buildings should not, in its view, require any extensive or costly historic remediation works because of their different risk profile, and the rare exception may be able to be dealt with on a “case by case” basis in some form, which they will be considering.
• A consultation will be set up in relation to the issue of enfranchised/common-hold leaseholders and protections that may be able to be afforded to them in future.

The new amendments will now be returned to the House of Lords for their consideration, which is due to take place on 26 April 2022.

If the House of Lords agrees to the Commons’ changes, and make no further amendments, the BSB will be in its final form and ready to receive Royal Assent. The Commons debate signalled a clear intent by the Government that the BSB should be passed into law during this Parliamentary session (while not yet formally confirmed, indications are that this year’s session may end on 28 April 2022). This means that it is likely that, even if there are further changes, these may be swiftly debated and the BSB could still receive Royal Assent by that date. In this context, the Commons’ debate also acknowledged that the BSB is not perfect and that there is going to be a significant amount of secondary legislation needed to support and implement the Act in due course.

As a reminder, even though Royal Assent means the BSB will have become law, it does not mean it will come into force all at once – far from it. Only a very limited number of sections will be operative immediately, with some others ��� including the changes to the Defective Premises Act 1972; the new causes of action etc relating to construction products; and the sections relating to certain leaseholder protections and remediation orders etc – then due to come into force 2 months after Royal Assent; but the majority of the Act looks set to have a relatively long transitional period of 12 – 18 months or more to allow the Government to get the requisite secondary legislation in place etc.

Once Royal Assent has been given and the BSB formally enacted, we will provide an update of key dates and likely timeframes.

Developer “Pledge” update

More detail is now available in relation to the “Pledge” – which at least 35 Developers have now signed up to. A copy of the Government’s 13 April 2022 statement and sample Pledge letter is available here, along with a list of the Developers who have so far agreed to it. In summary:

• The Pledge is equivalent to an agreement in principle, and will be documented in enforceable contracts between the Government and the developer;
• It is made clear that the developer will agree to:
  • perform or fund works to address “life-critical fire safety” issues on 11m+ buildings in England which they played a role in developing or refurbishing in the 30 years prior to 5 April 2022 (but properties where they acted solely as contractor are excluded). Thus in scope buildings appear to include both those which the developer still owns, as well as those which it does not.
  • for those buildings, agree there will be no access to any funding from the Government’s various Building Safety Funds (and to reimburse funding already paid out).
• In terms of establishing if or what works may be required, it is agreed that the “Standard” against which buildings will be assessed is the PAS9980 methodology and “other industry standards relevant to ensuring that the building meets a “life-critical” safety standard”.
• Developers will need to demonstrate to the Department that they have either provided funding or carried out remediation works as quickly as reasonably possible, and will have to report periodically to the Department on progress, timelines, and steps taken to identify buildings that may require work; as well as to provide data to the Department on buildings which it has built or refurbished within the relevant 30 year period.
• The Pledge does not constitute an admission of liability, and the formal documentation will make it clear that all civil claims available to developers and building owners etc will remain.

It is hoped that further detail may become available in relation to the structure of the formal documentation, which should provide some additional insight into how the Pledge arrangement will work in practice and what their impact might be.

Government discussions ongoing with construction products industry

Discussions appear to be ongoing with the construction products industry as to whether they may be willing to achieve a negotiated solution, as set out in the most recent correspondence from the Government of 13 April– and the CPA’s response, but these are not as advanced as those with developers and may have reached somewhat of a stalemate.

Updated EWS 1 Forms and RICS guidance

In March 2022 RICS published updated EWS1 Forms and RICS valuation guidance for multi-storey multi-occupancy residential buildings with cladding to reflect the withdrawal of the Government’s old Consolidated Advice Note and the introduction of the new PAS9980 standard - see: Update to EWS1 form and RICS valuation guidance. Of interest in this context is that the House of Commons’ debate on the BSB on 20 April 2022 also made it clear that the Government considers PAS9980 to be the appropriate methodology where appropriate, and further that, in the Government’s view, EWS1 forms should not be required for buildings below 18m in height.

Building Safety Levy

As previously reported, one of the key new mechanisms which is going to be introduced by the BSB is the “building safety levy”, which will or may be charged on new residential builds at the point of building control approval. Further detail about the levy is going to be introduced in secondary legislation.

However, we thought it may be of interest to note that in its recent letter announcing the Developer Pledge, the Government also commented that they expect that “industry will also pay up to a further £3 billion through an expansion to the Building Safety Levy”.

In this regard, on 19 April 2022, the DLUHC Committee wrote to Mr Gove to raise, among other things, some queries in relation to this statement, including whether:

• The £3bn is going to be additional to the £2bn which it was previously projected that the Levy would raise over the next 10 years;
• Whether money raised through the Levy would pay for non-cladding as well as cladding issues, and for social housing blocks as well as private blocks.

It is understood that the Government is due to respond to the Committee on a number of matters regarding building safety issues – including its March 2022 report which we reported on recently.