On the safe side

The government has made it clear that property developers, which it deems as being the party who financially benefits the most out of a completed development, are required to make a greater contribution to fixing the cladding crisis.

Many will be aware of the letter Michael Gove sent to the residential property developer industry in January, setting out a clear agenda with commitments that developers are expected to make to “ensure the industry that caused the cladding problem pays to fix it”. Specifically, property developers will be expected to agree a clear and fully funded commitment to:

• make financial contributions this year, and in subsequent years, to a dedicated fund to cover the full outstanding cost of remediating unsafe cladding on 11m to 18m residential buildings (current estimate £4bn)
• fund and undertake all necessary remedial work to buildings over 11m that they have played a role in developing (both 11m to 18m and those over 18m), and
• provide comprehensive information on all buildings over 11m which have historic safety defects and which they have played a part in constructing over the last 30 years.

The consequences for those developers failing to comply include the restriction on developers’ access to government funding and future procurements to undertake the remedial works. The government has also threatened the use of planning powers, the pursuit of companies through the courts, or if necessary, imposition of a legal solution, should the industry fail to take responsibility.

Latest provisions – remediation orders

Remediation orders and remediation contribution orders were introduced following Lords amendments to the bill. As a result, the First-tier Tribunal will be given the power to make a remediation order requiring a relevant landlord to remedy specified relevant defects in a specified relevant building by a specified time. In relation to such orders:

• an application could be made to the tribunal by any “interested person” – which includes both persons with proprietary interests and regulators (the new Building Safety Regulator, local authority and fire authorities)
• “relevant landlord” is widely defined to include any landlord with maintenance repair responsibilities under the lease or any enactment
• “relevant defects” are widely defined and include anything arising from construction or conservation works in the last 30 years that causes a building safety risk, and
• “relevant buildings” means a “self-contained building, or self-contained part of a building, in England that contains at least two dwellings”.

Remediation contribution orders are similar orders from the First-tier Tribunal requiring an organisation to meet all or part of the costs of works undertaken to remedy relevant defects. The above definitions are also relevant to remediation contribution orders, but the key addition here is that these orders can be made, not just against current landlords, but also against:

• other landlords within the last 30 years
• developers, and
• “associated persons” to landlords and developers – which is widely defined and can include individual directors, companies with common directors, and other companies within a group.

Higher-risk buildings

The enhanced regulatory regime – featuring the Building Safety Regulator, gateway approvals process, competency requirements, “accountable person” dutyholder and mandatory reporting – relates to “higher-risk buildings”. These are buildings of at least 18m or seven storeys in height containing at least two residential units.

The Act also makes provision to allow the secretary of state to modify this definition if required, and indeed the published draft of those regulations – the Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2021 – would bring both hospitals and care homes within the scope of higher-risk buildings.

Building Safety Regulator

The Act creates a new Building Safety Regulator which will have a central role in the new stringent regulatory framework for higher-risk buildings. This represents a fundamental change in the approach towards responsibility for high-risk buildings, removing them from the scope of approved inspectors and local authority building control teams, and centralising control under the new regulator.

The regulator will be part of the Health and Safety Executive (HSE) and will cover both fire and structural building safety risks. Previously, although structural risks may have fallen to the HSE, fire safety risks would have fallen to a combination of local fire authorities and building control teams. 

Golden thread and gateways

A key element of the Act is the concept of the ‘golden thread’ of information that runs throughout the construction process and ensures safety and compliance at all stages. This concept is embodied by a new system of three ‘gateway’ points. Those responsible for construction of such buildings will have to demonstrate that the buildings safety requirements are met at each gateway before the construction project can move onto the next phase.

Gateway one: This has been in force since August 2021 (having been implemented through secondary legislation) and requires information to be submitted to the local planning authority which demonstrates that fire safety requirements have been considered and incorporated into the proposals. Once established, the regulator will act as a statutory consultee for all planning applications relating to a higher-risk building.

Gateway two: This replaces the building control deposit of plans stage. It provides a ‘hard stop’, and construction cannot begin until the regulator is satisfied that the design meets the functional requirements of the building regulations. The aim is that gateway two will be less of a ‘tick-box exercise’ than the building control process, and more about holistically and realistically addressing and managing the safety of the building. 

Gateway three: This takes place at completion of the construction works and only once it is satisfied can the building be registered with the regulator for occupation, and completion certificates issued. At this point, all ‘golden thread’ documentation must be provided to the accountable person by dutyholders to help them manage building risks going forward. 

While extremely important and necessary, these requirements pose significant additional burdens to residential property developers at a time when they are experiencing unprecedented issues arising from Brexit, coronavirus (COVID-19) and large-scale fluctuations in the cost and availability of materials and labour. This will either mean that for new residential schemes, significant additional cost is passed on to buyers (best case); or, at least for the time being, projects are rendered not commercially viable to bring forward (worst case), particularly in areas of the country where property developers are unable to realise high exit prices for market sale projects or build to rent. 

Competency requirements

Principal designer or contractor

There will be specific competency requirements for the positions of principal designer, principal contractor and anybody else carrying out building or design work. The drafts of these requirements are found in the Draft Building (Appointment of Persons, Industry Competence and Dutyholders) (England) Regulations 2022.

Accountable person and principal accountable person

In addition to the existing “responsible person” under the Regulatory Reform (Fire Safety) Order 2005, the act introduces an additional “accountable person” dutyholder for higher-risk buildings. This is an individual or corporate entity that holds a legal estate in possession in any part of the common parts of the building (with some exceptions).

The accountable person will be responsible for assessing and managing building safety risks on an ongoing basis, and for demonstrating to the regulator, via a “safety case report”, on how this will be achieved.

If there is more than one person meeting the “accountable person” definition for a given building, then one of them will be the “principal accountable person” with the primary responsibility. In the event of a dispute, the First-tier Tribunal can make determinations as to who the relevant principal accountable person is for any given building.

Building safety managers – scrapped

Amendments to the bill introduced by the Lords have removed the provisions originally requiring the accountable person to appoint a competent “building safety manager” to carry out many of the day-to-day functions of managing building safety risks.

This is understood to derive from concerns that the building safety manager requirements were too rigid and could result in significant additional expense being passed on to leaseholders. The relevant duties which were to be assigned to the building safety manager will remain with the accountable person. However, there is concern that the lack of a designated and competent building safety manager role could lead to repetition of problems that existed under the current system under the Regulatory Reform (Fire Safety) Order 2005. 

Mandatory reporting, enforcement and offences

The Act imposes a requirement upon dutyholders for mandatory reporting of fire and structural safety occurrences to the regulator. This will be the responsibility of the principal designer and principal contractor during the construction phase, and the accountable person during the occupation of a building.

The Act also imposes criminal liability for failures to meet the procedural requirements contained in the Act, as well as for breaches that give rise to risk of death or serious injury. Individual liability can also be imposed on directors and other officers of companies who breach the relevant legislation. These offences carry an unlimited fine and, in some cases, the potential for up to two years’ imprisonment.

New provisions prohibiting prescribed developers

The latest amendments to the bill provide the secretary of state with the power to prohibit developers meeting a “prescribed description” from carrying out development works. It is unclear how this would work in practice, and in what circumstances this might be applied. There are currently no draft regulations dealing with this provision. However, the Act does expressly reference the failure to sign up to building industry schemes as a potential criterion for such a prohibition. 

Since most of the offending residential developers are likely to be on the smaller end of the spectrum rather than household names, they are likely to conduct business under corporate special purpose vehicles which transact on one development project only. For prohibitions to be successful, more sophistication will be needed to track those involved in the operation and management of these businesses and bar them from being involved in successive development schemes.

Outstanding issues

Questions about exactly how the regulator and the gateways system will function in practice remain. Although the key principles have been settled now that the Act has received royal assent, many of the practical and technical issues that will affect practitioners and clients will be contained within the various regulations that will be made under the Act. While the government has published draft regulations, it seems likely that these could still undergo further changes and redrafts even now the Act itself has become law. Additionally, much will rest upon the attitude and approach of the Building Safety Regulator – something which all practitioners will have to wait and see for themselves.