14 January 2022 by Amie Mackay

Government forces developers to fix cladding crisis – leaseholders will not have to pay!

This week the Government has announced its ‘reset’ approach to building safety and a ‘bold new plan’ to protect leaseholders and to force developers to pay to fix the cladding crisis.

Secretary of State for Levelling Up, Housing and Communities, Michael Gove, guaranteed that no leaseholder living in their own flat will have to pay a penny to fix unsafe cladding.

Previously, the Government had committed up to £5bn for the removal of dangerous cladding for buildings taller than 18.5m. Now, leaseholders in buildings of between 11m and 18.5m will also be protected.

Many leaseholders have felt trapped in their unsafe homes, unable to sell or re-mortgage and forced to take out substantial loans to meet the remediation costs to remove unsafe cladding.

Mr Gove has revealed a 4-point plan to reset the Government’s approach (as per the Government’s website):

  • Opening up the next phase of the Building Safety Fund to drive forward taking dangerous cladding off high-rise buildings, prioritising the government’s £5.1 billion funding on the highest risk;
  • Those at fault will be held properly to account: a new team is being established to pursue and expose companies at fault, making them fix the buildings they built and face commercial consequences if they refuse;
  • Restoring common sense to building assessments: indemnifying building assessors from being sued; and withdrawing the old, misinterpreted Government advice that prompted too many buildings being declared as unsafe; and
  • New protections for leaseholders living in their own flats: with no bills for fixing unsafe cladding and new statutory protections for leaseholders within the Building Safety Bill.

Should developers choose not to pay for cladding removals voluntarily, the Government will threaten them with legal compulsion.   Certain provisions in the Building Safety Bill will also allow the Government to introduce a levy on developers of high-rise buildings, building on the 4% tax on the largest, most profitable developers, which was announced in this year’s Budget and expected to raise at least £2 billion over the next 10 years to help pay for building safety remediation.

This is a much needed and welcomed reform to solve this crisis.  Previously, ministers have fought back against the suggestion that they are to blame for this crisis and yet it has become evident that the official guidance in regulating fire safety simply was not good enough.  Government intervention and funding has therefore been fundamental here, where, in these instances, no breach of Building Regulations occurred.

The leasehold system is designed to manage the common services and general maintenance of a building, while ceding to each household the ownership of their home.  It was never intended to handle the massive remediation costs that have overnight reduced the mortgageable value of high-rise and medium-rise flats to zero.

Concerns have been raised across the industry as to how this funding will be secured, and how the Government intends to operate a fair and transparent system of holding the industry to account, when already it faces a blanket tax because of the previous actions of a few pre-Grenfell.

The Government will announce a decision on which companies are in scope for funding contributions but expects it to cover all firms with annual profits from housebuilding at or above £10m.

For further information, please do not hesitate to contact Amie Mackay.

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