New funding proposals for cladding remediation works
13th January 2022
It has long been recognised that there are no clear private law routes for lessees to seek redress for unsafe cladding. Generally, the landlord is under an obligation to repair (i.e. “to keep the building in good repair”) and the lessee is under an obligation to pay service charge for the cost of the repairs the landlord performs. Cladding remediation will not always fall within the landlord’s repairing covenant but where it does lessees will usually be obliged to foot the bill. If on the facts of their case a lessee can establish a cause of action directly against a developer in contract or negligence (that is a big if) limitation has often expired (Limitation Act 1980). Some lessees of new blocks will be fortunate enough to have NHBC or other building warranties but these usually terminate after 10 years. Time is not on the side of lessees.
There are no clear public law answers either. A debate exists about whether the wording of the building regulations in force at the time of the Grenfell fire prohibited ACM cladding and flammable cladding generally. That debate goes beyond the scope of this comment piece, but many developers would argue that they were operating within the scope of the regulations when they erected buildings with what is now deemed to be unsafe cladding. The Government would disagree.
Whether the Government was at fault in failing to regulate or not, Government funding is the only potential solution for thousands of lessees facing large service charge bills for cladding remediation and fire safety works. The Government initially set up a £200 million private sector ACM cladding remediation fund. In February 2021, a further £5 billion investment was announced to fund the cost of replacing unsafe cladding for all leaseholders in residential buildings 18 metres and over. This huge investment, although a relief for many, may still be dwarfed by the real costs of fire remediation works and did nothing to assist lessees in blocks below 18 metres. There was also the question which circled the fund: Why should taxpayers pay? Why should taxpayers effectively underwrite the assets of a certain class?
This month Michael Gove, as Secretary of State for Levelling Up, Housing and Communities, has sought to address these issues. There will be a new fund which will cover cladding remediation works for buildings between 11 and 18 metres. The fund will be around £4 billion but, unlike the 2021 fund, no further public money will be used. We are told that developers will pay. The question is: How will developers be made to pay? On the basis of some tough sounding tweets put out by Government departments, developers are being given the opportunity to volunteer first. If developers do not volunteer, or fail to contribute sufficient funds, it is not currently clear exactly what will happen. Presumably the fairest and least administratively burdensome route is for all offending developers to pay into a collective fund which will be allocated on the basis of applications. After all, it would be arbitrary if lessees’ access to funds is contingent on the solvency of the original developer. How those payments will be quantified and compelled is a difficult question. All eyes are on the amendments to the Building Safety Bill.
Tanfield Chambers will publish further analysis and guidance once the draft legislation is available.
By Robyn Cunnigham