Making private blocks of flats safe post Grenfell

Since the Grenfell tragedy, it’s emerged that around 140 privately owned blocks have failed the fire safety tests. Some are resident owned but many are owned by ‘independent’ landlords, such as the 2 blocks in the Citiscape case owned by Vincent Tchenguiz and the 9 blocks in the largest affected development at New Capital Quay (NCQ) in Greenwich, owned by Galliard Homes. This blog looks at the failure to act in these independently owned blocks, whilst noting that problems continue both with social blocks (although there is government funding now available for this, it comes with strings, and not many social landlords appear to have yet replaced cladding) and resident owned blocks (facing affordability problems, and serious headaches for directors of the resident owned freehold and right-to-manage companies).

The first big case highlighted in the press was Citiscape, but the property managers there acted early to indicate that cladding would be replaced. Soon after the First Tier Tribunal ruled that leaseholders could be charged for the replacement cladding the original developer, Barratt Homes, announced that they would pay.

For many of the independently owned blocks there is still an impasse. The MHCLG has encouraged building owners to ‘do the right thing’ but in most blocks no action has been taken to get the cladding replaced and the building made safe. Occupiers are living in fear and worry; those with mobility issues are anxious about their ability to get out; those with mental health issues can find that the fear of a fire and the uncertain consequences exacerbates their condition. The financial impact is also huge, and worrying: flats cannot be sold; values have plummeted; leaseholders have been told that they will have to pay for the costly interim safety measures, and if they do not pay them freeholders have the right to forfeit the lease. This is a major concern. Many are also finding life choices affected. Those with growing families, jobs in other locations and other life events are unable to move. At NCQ there are almost 1000 flats – built, owned, and also managed by Galliard through a number of group companies. The cladding here is Alcubond PE (Polyethylene), the worst type, and the insulation, Kingspan 15, is also flammable. The same cladding was used on a building in Roubaix, Paris, that went up in flames in 2012, with one death and 10 injured. Similar cladding was used on the Grenfell Tower.

What can be done? This is a classic David v Goliath situation, but at least David had God on his side as well as his stone and sling. Leaseholders also carry stones and slings, but struggle to wield them due to institutional indifference and complexities and uncertainties of pursuing legal remedies through the courts. Organising large groups for multi-party litigation is notoriously difficult. It is yet another example of what Blandy et al. observe in relation to multi-owned housing, of power being in the hands of the developers, leaving leaseholders feeling powerless.

What can be done to force someone to take action?

Using private law. There are various possibilities in private law. Completed in 2014, NCQ leaseholders have the benefit of NHBC building insurance. But NHBC have declined to pay up to date and are dragging things out, arguing about whether the blocks met Building Regulations. NHBC has 80% of the building insurance market so it is the lead insurer in relation to claims. Insurance experts believe that the claims are too significant for NHBC to settle without consents from re-insurers and others. Should NHBC accept claims they will expect developers to repay them under normal insurance principles. This gives both NHBC and developers a common interest in claims not being accepted. There can also be claims against the developer and other professionals under the Defective Premises Act or through sales contracts.

The incentives for developers, freeholders and insurers is to play it long in the hope that energy for action dissipates, claims become time-barred and there is a gradual acceptance that interim measures will do.

Using the Fire Safety Order. Fire Authorities have duties to act under the Regulatory Reform Fire Safety Order 2005. So far they have limited action to requiring various fire safety works (e.g. alarm systems, hydrants) and requiring a waking watch. It is clear from the National Fire Chiefs Council that these interim measures leave significant risk and they should only be temporary measures pending removal and replacement of the cladding. Fire authorities adopt a narrow reading of the Fire Safety Order, and do not regard themselves as having jurisdiction to do more than insist on interim measures. But read differently the Order does give them powers to compel cladding to be replaced. Often working closely with the developer owners, it seems a classic case of ‘regulatory capture’. And yet more inaction.

Housing Act 2004. Under this, local authorities can take action where there is a ‘Housing Health and Safety Hazard’. This can include requiring cladding to be replaced. Medway Council has recently issued an improvement notice requiring this, but most councils have held back. For the most part LAs have taken a subordinate role to Fire Authorities often under jurisdictional Protocols and regard Fire Authorities as being in the lead. Consequently, they have not acted.

Compelling action. Both the fire authorities and the councils can require something to be done. With the Medway exception, both have held back. There is a complete inconsistency in messaging. The Government has turned down FOI requests to find out which private blocks are affected, citing ‘security concerns’ for fear of arson or terrorism. The National Fire Chiefs say that waking watch must be short term, and yet councils and fire authorities take the view that there is not sufficient risk with the waking watch in place. This is not good enough. Under Article 2 of the European Convention on Human Rights there is a right for life to be protected by law, and under Convention jurisprudence there is a positive obligation for public authorities to act to protect Article 2 rights. Given this, the situation outlined above is unlawful and public bodies are exposed to claims for damages for failure to act.

New incentives are needed to make progress. Possibilities include:

•  A review of the approach taken by Fire Authorities and LAs under their Fire Safety Order and Housing Act duties and powers. The current approach leaves a significant lacuna in our fire safety laws.
• Developers being made aware that participation in future funding programmes such as Help to Buy will depend on approaches they take to resolving cladding issues on buildings they are responsible for. The government is now facing significant losses on Help to Buy loans of up to 90% of the loan amount. It is wrong that private developers should stand by and let taxpayers take these losses which arise purely from their actions.
• Developers being made aware that LAs will be less amenable to dealing with them in relation to new projects in their areas where they have not taken responsibility for cladding issues.Some London LAs are considering working together on this.
• Amendments to the Fire Safety Order being made to give specific powers to Fire Authorities to require removal and replacement of unsafe materials.
• Compulsory acquisition of the freeholds of affected buildings, as Slough Borough Council has done with Nova House.

Ways forward – enabling funding

• NHBC being made aware that FCA and CMA as concurrent enforcers of competition and market laws will be asked to initiate a market study on both building control market and building warranty insurance market (where NHBC claims to have an 80% market share) to see: if the markets are operating for the benefit of consumers; whether there are barriers to entry that make the markets insufficiently competitive; whether the tying of insurance and building control services raises issues; and whether inherent conflicts of interest are managed to avoid competition and consumer problems.
• The FCA exercising its powers to investigate any breaches by NHBC and other insurers of the FCA Principles in the sale of insurance and administration of claims – particularly those on integrity; skill care and diligence; management and controls; treating customers fairly and conflicts of interest.
• Provision of a fund by government either for developers/freeholders to apply to, or for leaseholders to apply to, for assistance with the costs of removal of the cladding on private tower blocks.
• Provision of a fund by government for LAs to apply to for funding of compulsory purchase of sites.

It is now a year on since the terrible events of Grenfell. Thousands continue to live in fear. The law does not lack teeth; there are legal powers and political tools that can be wielded. It is time to do so.

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How to cite this blog post (Harvard style) 

Bright, S. & Bright, C. (2018). Making private blocks of flats safe post Grenfell. Available at: https://www.law.ox.ac.uk/housing-after-grenfell/blog/2018/06/making-private-blocks-flats-safe-post-grenfell (Accessed [date]).