The Government’s Rescue Plan and the Unanswered Questions

Readers of this blog will be familiar with the problems facing leaseholders in private blocks of flats with combustible cladding. The government’s announcement on 9^th May 2019 of the fund to assist with remediation, discussed in a previous post by David Sawtell, is most welcome. The strong impression from activity over recent months, and the ‘Dawes letter’ (Melanie Dawes is Permanent Secretary of MHCLG) explaining the public funding constraints on making money available, is that James Brokenshire (Secretary of State for Housing, Communities and Local Government) has personally been very committed to finding a solution. But there are questions about how this will work, as well as concerns about the amount and scope.

The Government announced that it will fully fund the replacement of unsafe aluminium composite material (ACM) cladding on high-rise private residential properties where building owners have failed to do so. The fund itself will be ‘around £200 million’ and ‘building owners will have 3 months to access the new fund’. The announcement is fleshed out more in the parliamentary statement by Brokenshire. He states: ‘The fund is intended to provide capital support for the removal of ACM cladding systems, including insulation, as well as the removal and disposal of existing cladding, replacement materials and labour.’ It is a grant, not a loan. The scheme includes situations where leaseholders have already had to pay for remediation. Further, funding is conditional: ‘we will stipulate that building owners must pursue warranty and insurance claims and any appropriate action against those responsible for putting unsafe cladding on the buildings, with moneys to be repaid to the Government.’ In terms of process, the statement continues,

[w]e will write to all potential fund applicants by the end of next week [letter sent 09/05/19] to start engaging them in preparation for formal applications. We will also make funding ​conditional on the building owner or responsible person agreeing a contract to start remediation works within a set period. We will provide further details on the application process; I urge those who intend to apply to start developing ACM remediation proposals and costings so that applications can be made and processed promptly.

So what are the further questions that arise from this?

1. As has been broadcast in much of the media discussion, the scope is too narrow. A previous post explains that fire safety issues extend well beyond ACM cladding. ACM cladding is very bad, but what has become clear since Grenfell is that there are also serious fire safety issues with other types of cladding (particularly high pressure laminate, thought to be on around 1600 buildings), combustible insulation, defective fire compartmentation, fire doors not resistant to the required standards, poor fixings, and so on. As investigations proceed and cladding gets removed, new problems are revealed. At the APPG cladding forum on 8^th May 2019, the Government announcement was anticipated, but most leaseholders said that any announcement limited to ACM would not deal with all of the problems on their sites. Brokenshire notes that a testing programme is underway for non-ACM systems, and we should not prejudge the outcome. But we already know that the problem is way bigger than ACM: as the UK Cladding Action Group claim, there is a ‘cladding lottery’.
2. Even for buildings with ACM cladding, the costs extend beyond fixing the cladding. The costs of the waking watch run into many thousands of pounds per month, and although the Government has frequently said that leaseholders should not have to pay, the fund does not cover these types of costs. Brokenshire’s statement attempts to soften this by noting that as the funding will speed up remediation, the costs of the waking watch and other interim measures will be foreshortened. But as we know, even when remediation is planned, freeholders can drag their feet and progress is often slow (as Matthew Pennycook points out). Given the admission earlier in Brokenshire’s statement that this type of ACM did not ‘comply with building regulations and should never have been put up’, why should leaseholders bear any of the costs? Not all industry experts would agree with this statement about what did and did not comply with the Building Regulations. As NearlyLegal refers to it, this is the ‘elephant in the room’ with debates raging about the extent to which the wording of the Building Regulations and Approved Document B is itself to blame. The simple point, however, is that none of this is the leaseholders’ fault.
3. What will be required in terms of taking ‘appropriate action against those responsible’? In his parliamentary response, John Healey asks how the Government will ensure that block owners ‘pursue liability claims and repay the public purse’. In many cases, the limitation period will prevent litigation (a future post on limitation periods is coming…). And, as NearlyLegal asks, ‘who will judge if those steps are sufficient? And what steps are expected? Where there has been a change in reversionary ownership since the works were done (very common – you build the building via an SPV and take all the sale proceeds into that SPV and then sell the reversionary interest (and ground rent income) to a third party) what sorts of claims does the government have in mind?’ This sounds like a field day for lawyers.
4. As asked by John Healey, is there enough money in the fund? NearlyLegal states: ‘£200m isn’t enough. I have three of these 167 affected blocks on my desk at the moment and between them they’d take 10% of that fund.’ What exactly is covered by the money: we know it does not cover interim measures, but what about the inevitable add on costs, professional fees, and further fire safety or other building defects discovered when work begins? Investigations behind the cladding have been said to reveal a ‘dog’s breakfast’.
5. How will remediation be enforced? What about blocks that do not, for whatever reason, apply for funding within the time limits? On this, the Government appears to be assuming that the local authorities will take enforcement action, stating, ‘we remain ready, willing and able to support local authorities in the enforcement activity that they may determine to be necessary, and we are clarifying rules, regulations and guidance to assist them in that regard.’ But previous posts (part 1, part 2, and part 3) have again illustrated difficulties with the Housing Act 2004, including the question of who the building owner is, for the purpose of serving notices and enforcement. If enforcement is being left to local authorities, this is a very blunt tool; prosecutions won’t make buildings safe, and very few authorities will be able to do the works in default. In practice, where local authorities have sought to enforce, there is usually an appeal against the notice.
6. What about the expertise and knowledge required to participate? Most non-remediated blocks are likely, almost by definition, to have freeholders who are disinterested, and parties without the skills required to understand, commission and run complex projects. In response to a question, Brokenshire states ‘it will be up to the owners to set out what steps will be required. Obviously we will inform them of the nature ​of the information that we require about, for instance, assessments and the various bids and tenders that we would expect to have been undertaken.’ There will need to be a lot of hand-holding, with expert help and support.
7. The funding is conditional on agreeing to start remediation within a set period, but Brokenshire said that the variety of works required means that there cannot be a specific period. The Government is ‘trying to find a way of acting as a lever or catalyst’.
8. Who will the grant be paid to? The freeholder who has not been bothered to do the work to date? Can it be paid to Right to Manage or Resident Management Companies?

9. 

   Is there the capacity to do this volume of remedial work? And materials? And do we know enough yet about what a safe replacement looks like? There is yet to be a final decision on reforms to Approved Document B (the fire safety part of the Building Regs), so do we risk a situation where we put on material – which passes domestic standards as they presently stand – only to find standards are raised a year or so down the line?

So, all in all, as NearlyLegal says, a good first step. But hopefully the first of many.

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How to cite this blog post (Harvard style) 

Bright, S. (2019). The Government’s Rescue Plan and the Unanswered Questions. Available at: https://www.law.ox.ac.uk/housing-after-grenfell/blog/2019/05/government-rescue-plan-unanswered-questions (Accessed [date]).