Enhancements made to the Building Safety Bill by the government escalate tension in the construction sector
In a significant move to ensure the safety of high-rise buildings in the UK, the Building Safety Act was published on February 21, 2022. This legislation aims to make developers, manufacturers, and building owners responsible for remedial works, particularly in relation to cladding and other safety issues.
The amendments to the Building Safety Bill, however, do not provide a clear solution for funding remedial works in resident-owned buildings where neither the building owner nor the leaseholders have the necessary funds. This leaves many buildings with remedial works shelved until funding resolutions are found.
The proposed amendments are designed to protect leaseholders from costs associated with cladding remediation and other remedial works. However, they do not address the potential funding stalemate that may occur in resident-owned buildings due to the attempt to circumvent contractual obligations in leases.
Under the Building Safety Act, developers are expected to manage and pay for remedial works primarily. They can also apply for Recovery Cost Orders (RCOs) to reclaim monies spent on remediation from other responsible parties under the "just and equitable" standard.
If remedial works are delayed or obstructed, new legal duties and criminal penalties apply, including fines or imprisonment by 2029 for failure to remediate buildings over 18 meters without reasonable excuse. Disputes about cost liability can be addressed at the First Tier Tribunal (FTT), which applies a discretionary test considering all circumstances and is empowered to make cost recovery decisions.
The government has the power to ensure developers and construction product manufacturers contribute to the costs of remediation. They may block developers and construction product manufacturers that refuse to contribute to remediation costs by refusing planning permission and building control sign-off. Higher rates for developers that do not agree to contribute to remediation costs may also be implemented.
The building safety levy will be extended to include more developments. Anti-avoidance provisions are included to look at other entities connected to the building owner. Proposals have been made to force landlords to make contributions via new Contribution Orders, even if it risks insolvency.
However, the government's approach, as demonstrated by the amendments, does not seem to fully address the funding issues for remedial works in resident-owned buildings. The amendments do not provide a mechanism for finding funding resolutions in resident-owned buildings where neither the building owner nor the leaseholders have the necessary funds for remedial works.
Moreover, the amendments do not specifically address the unique challenges of each building and the varying tenant mix in managing and paying for remedial works. These issues remain unresolved, potentially leaving many resident-owned buildings in a funding limbo.
For more information, the Build Safe Live Safe series provides further details on this topic. The open letter from the government to residential developers in January 2022 warned about stricter measures if solutions for funding remedial works in medium-risk buildings were not proposed.
In conclusion, the Building Safety Act sets strict obligations for developers to manage, fund, and complete remedial works within a statutory timeline. However, the funding challenges in resident-owned buildings remain unaddressed, potentially leaving many buildings in a state of uncertainty.
Financing remains a crucial concern in the remediation of remedial works for resident-owned buildings, as the amendments to the Building Safety Bill do not provide a mechanism for finding funding solutions in such cases. Despite the efforts of the government to enforce developers and manufacturers to contribute to remediation costs, the unique challenges of each building and the varying tenant mix in managing and paying for remedial works remain unresolved, potentially leaving many resident-owned buildings in a funding impasse within the broader business and finance industry.
