The draft Building Safety Bill: Costs, and complex buildings

Recovery of costs, clauses 88 and 89

These clauses have caused considerable disquiet amongst lawyers and leaseholders. In outline they provide that the tenant of a long lease must pay the ‘building safety charge’ (BSC) within 28 days of demand. It works by inserting the new sections into the Landlord and Tenant Act 1985, mirroring much of the existing machinery that apply to variable service charges. So it requires consultation if the costs exceed a specified amount (not yet prescribed) with the possibility of dispensation (and seemingly no requirement of consultation if it is urgent or the building is in ‘special measures’), enables the payability to be challenged (costs must be reasonably incurred, works done to a reasonable standard), and there can be no recovery if there is no demand for payment, or notification, within 18 months of costs being incurred. The application of these limits will presumably draw on the case law already developed in relation to service charges, but this does not provide much protection against potentially major charges landing on leaseholders, as can be seen with the way in which leaseholders in social housing have faced massive bills for major work programmes.

The BSC covers the costs of the building safety measures, including overheads. The EN explain (para 674) this could include producing the safety case, appointing the Building Safety Manager, building safety works, compliance costs etc., although recovery of some costs are excluded (for example, penalties etc imposed on the AP by the regulator, and where the AP is getting ‘financial support’ for those works, such as a grant).  It is the IA that highlights just how extensive these charges could be.

Collectively this is all going to be very costly.

First, putting together the safety case. IA para 241 explains that information must be held digitally and it is assumed that buildings that don’t currently have plans will ‘carry out a two-dimensional Computer Added Design (CAD) plan and evacuation drawing, costing between £10,000-£19,000 per building.’ (this is the least costly option).  In other circumstances the creation of the key dataset will be between £600 and £1200 per building (para 244). Keeping the building information up to date is estimated to cost £300-500 per annum (para 242), and keeping the key dataset updated £200-300 per annum (para 244) . These costs fall within the building safety charge.

Secondly, the appointment of the Building Safety Manager (BSM). The appointment itself is estimated at around £3000. In relation to the tasks of the BSM the IA states (para 321) that if the BSM was to undertake all designated activities (reviewing supporting evidence, writing the safety case and reviewing and checking the safety cases) the cost per building is between £6,400-£10,000 per annum.  It is estimated that a BSM can manage between 7-11 buildings, and that on average it will take 28 days of BSM time per building per year.

Later in the IA the impact on leaseholders is explained. Para 312 states that the costs of compliance (presumably the items discussed above, plus registration and other duties) are estimated, using a range of 35-100 leaseholders per building, as averaging £100-400 per leaseholder, noting that there will be considerable differences between buildings, depending on the complexity and the number of leaseholders.

There is, however, the big ticket item of the cost of any new building safety measures required. As noted in the first post, there is nothing protecting leaseholders from the costs of measures necessary to put things right where there has been a failure by others (whether the government due to the lack of clarity in the Approved Document B, and a poor building control regulatory system, or developers breaching building regulations).  The IA notes that there will be costs of bringing existing buildings up to standard. Table 36 on page 64 contains some eye-watering estimates, with the maximum cost per leaseholder shown as being £78,000. It is also noted at para 314 that it is the government’s intention that leaseholders should not face unaffordable costs and that they are exploring options to mitigate these. It has been suggested by some that the current wording of the Bill, in the new 17O(3) to be inserted into the 1985 Act, indicates that the costs of remedying construction etc defects cannot be passed on. This is not what that clause says: it prevents only costs attributable to misconduct by the current AP.  So leaseholders therefore may have to bear the costs of remedying misconduct by others, such as the developer, the builder, or those producing the government’s own advisory documents.

Mixed-use and complex buildings

Another area of difficulty is understanding how the Bill will apply to mixed-use buildings. In relation to the recovery of costs, it is said that the building safety charge is to be split ‘between all dwellings in the building in accordance’ with any specific provisions in the lease, failing which, following the method used in the lease for other service charges ‘or’ any methods agreed in writing with the tenant for apportioning building safety costs. There can be an appeal to the First Tier Tribunal if the approach adopted is not considered a ‘fair method’. But what happens if the building contains other dwellings not let on ‘long leases’ or other non-residential units?  A higher risk building need only have 2 dwellings in it, and yet there appears to be no mention of how costs are apportioned to other users of the building. This is really important and yet very unclear on the current wording.

Elsewhere the Bill does make some provision for mixed-use buildings. To support the ‘whole building’ approach cl 102 requires the AP to ‘cooperate’ with a ‘responsible person’ (as defined under Art 3 of the Regulatory Reform (Fires Safety) Order 2005) who, within the same building, also has responsibilities for fire safety.  In practice, how these two regimes interact is likely to be extremely complex, yet there is little provision for it. Under the current regulatory system there has been a distinct lack of clarity about jurisdictional boundaries between the Fire Service and local authorities in relation to enforcement. Indeed, the complexity is acknowledged in the IA which notes that the government intends to consult on how the duties of cooperation will work (para 62).

Some thoughts

These posts have been a quick reflection on some of the key issues in the Bill, and obviously there is much that is very good in the Bill. No-one can doubt the importance of making people safe in their homes. But there are potentially deeply problematic areas which hopefully will be clarified and addressed during the Parliamentary process. There must be very careful scrutiny of the Bill, and hopefully the offer made by Clive Betts MP that the Housing, Communities and Local Government Committee will undertake this task will be taken up.

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How to cite this blog post (Harvard style) 

Bright, S. (2020). The draft Building Safety Bill: Costs, and complex buildings. Available at: https://www.law.ox.ac.uk/housing-after-grenfell/blog/2020/08/draft-building-safety-bill-costs-and-complex-buildings (Accessed [date])