Government advice around building and fire safety

1. Introduction

The Building Safety Act became law on 28^th April 2022 for England, but how it comes into force will be staggered as the Government defines how they it work out in practice. This means we must now wait for further detail from the Government before we can progress further.

2. What is happening in Wales and Scotland?

Building regulation is a devolved matter, so while the Building Safety Act applies to England, this is not the case in Wales or Scotland.

The Welsh Government is working closely with the UK Government to apply aspects of the Building Safety Act to Wales, and has called for the developer pledge and Building Safety Levy to be extended to Wales as well as England. The Welsh government is meeting with developers to call on them to match the pledges they have made in England.

In Scotland, the devolved government has also called on developers to play their part where buildings are found to be unsafe. A number of legislative changes have been introduced following the Grenfell Tower fire, and a Single Building Assessment programme is identifying high-risk buildings in Scotland.

3. What are the new protection provisions for leaseholders in England?

Government has produced guidance providing leaseholders with an explanation of the implications of the leaseholder protections in the Building Safety Act 2022. The guidance can be found here.

The Act currently states that for non-cladding costs such as compartmentation, leaseholders may be required to contribute, but these leaseholder costs will be capped at £15,000 for Central London and £10,000 for the rest of England and Wales.

The Government’s protection of leaseholders is something which we have advocated since the start of the Government announcements requiring remediation.

However, for us and leaseholders, there are many unanswered questions which require further clarification. We hope that Government will provide this clarification at the earliest opportunity.

4. I still have further questions - what does this mean for me?

At this stage there are a number of questions that remain unclear or unanswered. We are seeking more clarity on these points from both the government and developers:

• What exactly is defined as a cost caused as a result of life-critical building-safety defects?
• What is defined as a ‘non-cladding defect’ or an ‘interim fire safety measure’?
• What exactly is covered under the formal Building Safety Pledge agreement?
• How should costs for non-qualifying leaseholders be dealt with?
• What does the affordability test look like for Freeholders and when will this become live?
• When will the Building Safety Fund and the specific fund for buildings over 11m go live? And what are the terms of the new Fund?
• What happens to buildings incurring ongoing costs now (such as Waking Watch) where affordability tests have not taken place?
• How will the value of properties that define leaseholder cap levels be calculated?
• What happens if a building owner cannot afford the costs over and above any leaseholder cap?
• What happens to costs already paid that are over and above the leaseholder cap?
• Who funds the upfront costs of remediation where leaseholders are required to pay a capped cost with payments spread over ten years?
• How will overseas building owners be held to account?
• What happens to leaseholders in unsafe buildings that are under 11m?
• What happens to those buildings without a developer who has signed the pledge that have been remediated at leaseholder cost – will there be a retrospective right to reclaim costs from government funds?

5. What does this mean if I am trying to sell my property?

The Building Safety Act has brought in a new, more holistic, measure of building safety. This is applicable to all buildings, but those above 11m tall, where risk is deemed higher, are most affected.

The Building Safety Fund had a very narrow scope. Height (above 18m) was one of the primary definitions of risk. The Building Safety Act and subsequent provisions mean that a new risk-based test, the PAS-9980, will define the risk level of a building.

For leaseholders trying to sell or remortgage their property, the EWS1 form has been the standard form of risk assessment for the past several years. Lenders have been unwilling to lend, or in some cases even give a value to, a property without a certain EWS1 grading.

It is important to remind leaseholders that the EWS1 was brought in by lenders and RICS as a way to manage their own financial risk – it was not developed as part of a building safety regime.

The new PAS-based building safety regime should phase out the EWS1 form so that an assessment of a property’s value will be based on the actual safety risk to residents, and whether or not defects are going to be put right by a developer.

This is, however, dependent on the individual lender. With so many questions unanswered, and legislation not yet fully fleshed out, some lenders may still stick to the EWS1 as a way of measuring property risk, and consequently value.

6. What will FirstPort do for me in this situation?

As your property manager, FirstPort is dedicated to keeping your building safe. We are working to bring together developers and freeholders to make sure that any buildings that are unsafe are put right as soon as possible.

For some buildings in the Building Safety Fund, we will continue along that route. For others, we are engaging with building owners and developers to make sure that any defects in the build are put right.

While we cannot promise that leaseholders will face no costs, we are making sure that we understand new Government directives seeking to protect qualifying leaseholders from the full costs of putting buildings right.

As the body that issues service charges to leaseholders, we are working hard to make sure that building safety costs, where they are not chargeable to leaseholders, are not passed on in statements of account.

Although things now appear complex as we await further detail, we remain committed to providing the best service to leaseholders and to ensuring that buildings we are manage are safe.

There are two key factors which still impact on our ability to find a clear route to funding of fire safety remediation on your behalf:

The Developer Pledge

As of July 2022, 48 developers have signed up to the pledge, indicating their intention to cover the cost of life critical fire safety remediation. On 13^th July 2022, Government published in draft a contract that they expect large developers to sign, committing developers to remediate unsafe buildings with which they are associated. The contract will give effect to the principles agreed in the pledge. Government is now engaging industry, other affected parties, with the aim of finalising the terms of the contract by 10 August 2022.

Freeholder (Building Owner) contributions and the Wealth Test

As listed above, there are a number of other points which remain unclear. Once we have better clarity, we will be able to advise leaseholders more fully as to what the specific implications are for them.

7. What charges will leaseholders still have to pay?

Leaseholders will still be responsible for the maintenance of existing life-safety equipment and other routine maintenance for their buildings.

The Property Institute (TPI) (incorporating ARMA & IRPM) offers this advice:

“the Building Safety Act does not prevent freeholders, RMCs, RTM companies or managing agents from issuing any invoices whatsoever for building safety measures. Some charges can still be recovered from 28 June 2022 following the coming into force of the Act (as ever, only where permitted by the terms of the lease); the provisions are complex and detailed. However, the focus of this letter leans towards the costs of fixing bad buildings and other related costs where buildings require some form of remediation. Every building has its own set of circumstances and at this early stage, we caution agents to be very careful that any charges to leaseholders are permitted under the new legislation. You should bear in mind that not all leaseholders enjoy the protection of the Act and the ability to levy charges depends on a wide range of factors including the nature and status of the landlord / freeholder, the nature of the work the demand relates to, and the amount of charges levied in respect of relevant building safety measures in previous years.

If there is any doubt, you and or your clients should take legal advice where necessary to confirm you / they are acting in accordance with the law.”