The construction industry has been wrestling with issues relating to cladding and fire safety for the past few years, as the sector and policymakers respond to the wake of the Grenfell Tower tragedy. We have previously written about the Building Safety Bill, which continues to make its way through Parliament towards the statute book. What is the latest regarding the Bill, and the Government's wider response to cladding remediation costs?
We examined the main framework of the Bill in our article last year. Since then, the Bill has been the subject of parliamentary debate and many proposed amendments. Arguably the most significant amendments were those tabled on 14 February 2022, by the Government itself, which were accompanied by a press release in which it was claimed that leaseholders living in their home over 11 metres in height would not pay "a penny" for the removal of cladding presenting a danger to safety.
The Government has confirmed its approach will be to seek contributions to remedial costs from housing developers in the first instance, with an invitation to major developers to come up with their own voluntary contributions, under the threat of otherwise having a solution imposed.
The amendments to the Bill seek, in practice, to create what has been described as a "waterfall system", in which the expectation is that developers and manufacturers of dangerous cladding products are expected to bear remedial costs in the first instance. Next in line will be freeholders (who will be protected by an affordability test not yet set out), followed by leaseholders (who will only be required to meet costs unrelated to cladding, subject to a cap).
This should reverse the current situation that frequently unfolds at the moment, in which leaseholders are asked to contribute first rather than last (and without any protection from a cap on payments). The caps that have been proposed are complex and subject to various caveats, and it remains to be seen how intact these proposals will be once the parliamentary process has been completed. It is proposed that costs already incurred by leaseholders will count towards the cap, and therefore such leaseholders who are within the protection of the legislation will not have to pay any further amounts.
However, there is no protection or assistance proposed for leaseholders in buildings under 11 metres in height, or with four storeys or fewer.
It is still anticipated that the Bill will become law during 2022, although the majority of provisions will not come into force immediately. Implementation of the Bill's full provisions is anticipated to take place within six to 18 months of the Bill becoming law.
The changes introduced by the Building Safety Bill and the general shift in approach to these issues indicated by the Government will have a wide-ranging impact and affect stakeholders throughout the construction and property sectors. The position continues to evolve.