Who Pays for Cladding Replacement?
Do you live in, own or manage a building with unsafe cladding? In this post we’ll explore the question of who pays for cladding replacement in residential buildings, whilst looking at the government-backed support available for different-sized buildings.
The devastating fire at Grenfell Tower in June 2017 will never be forgotten. The fire started on the 4th floor of the 24-storey tower block, and spread rapidly up the building through its cladding and external insulation, taking many lives and injuring more in the process. In the wake of the fire, many other properties were found to be a potential fire risk because they either had the same ACM cladding as Grenfell or exhibited other defects.
Five years on, according to an interview with Housing Secretary Michael Gove on LBC, there are still almost 10,000 buildings with unsafe cladding, equating to around half a million people living with the risk. Cladding remediation work, the removal of unsafe cladding and replacement with a safe alternative, is costly, and without it, leaseholders are in limbo. They are left living in a property that is a known risk and are unable to sell their properties until the remediation work is complete.
The Building Safety Fund “ for non-ACM clad buildings over 18 metres
In 2020, the government launched the Building Safety Fund. This fund was aimed at remediating unsafe non-ACM cladding, but again only on residential buildings over 18 metres in height. The scheme was later paused for applications whilst it underwent some changes.
Following its relaunch in July 2022, the Building Safety Fund, worth £4.5 billion, now puts more emphasis on the individual risk levels of a building “ this means that any safety defects are considered and it is not limited to cladding. All applications now have to be supported by a Fire Risk Appraisal of External Walls (FRAEW), which must be carried out by competent professionals in line with the new PAS 9980:2022 code of practice.
This system is all about making remediation solutions more proportionate to the building’s particular level of risk. It could actually mean the difference between remediation costing millions of pounds, or nothing at all, because the level of risk may not be considered high enough for full cladding replacement due to other fire safety factors.
What about the role of developers?
Early in 2022, the government negotiated with the main residential building developers in the UK to sign up to the Developer Pledge. 49 developers signed the pledge, committing to remediate life-critical fire safety works in any buildings of 11-18 metres in height that they have been involved in building or renovating over the past 30 years in England.
The developers signed into the pledge have also agreed to reimburse any funding received from government remediation programmes in respect of buildings they played a role in developing or renovating.
Each developer has been asked to sign a legally binding contract reflecting these pledges and must inform affected leaseholders as to how they are meeting their commitments. This is the list of developers who have so far signed up for the pledge, and the government has stated that it will impose enforcement provisions against non-signatories.
The Building Safety Act has been amended so that building owners are responsible for cladding replacement
While the Developer Pledge went some way to fixing the problems, it didn’t go far enough. In July 2022 The Building Safety Act took the place of all existing regulations to deliver protection for qualifying leaseholders from the costs of remediating a building with historical safety defects.
With it, came three new bodies created to ensure the scheme is watertight. They are the Buildings Safety Regulator, the National Regulator of Construction Products, and the New Homes Ombudsmen. The government also announced that there would be a new developer tax and a levy to ensure that the industry is held to account when it comes to making good historical safety issues. On January 2023, the government wrote to developers asking them to sign a contract committing them to making good unsafe buildings, which they developed.
Once the Developer remediation contracts are signed, they are legally binding and the government will expect the developers in question to do the following:
- Take responsibility for all remediation work on life-critical fire-safety defect arising from the design and construction of any buildings more than 11 metres high that they developed or refurbished in England over the past 30 years.
- Keep residents informed on progress towards meeting this commitment
- Reimburse taxpayers for funding spent on remediating their buildings
So now, the answer to the question of, who is responsible for cladding on flats, is the building owner.
Leaseholders are not expected to pay for the remediation work. To date, all money used for remediation has come from the Building Safety Fund or the developers responsible for the property “ any developer with a turnover of more than £10 million with a home building income exceeding £2 million, is now expected to fund cladding remediation work.
In other words, the requirement for a building owner to organise and fund cladding remediation is now set in law.
Gove pushed for developers to be held responsible for unsafe cladding from the start and now, due to the legally binding remediation contracts, there is a deadline of March 13th this year, for firms to agree to pay the costs or face ˜significant consequences.’ Legislation is being put in place to ensure that those who don’t comply will be banned from the market “ planning permission for future projects will be revoked and any work on existing developments must be stopped. The message is loud and clear “ if those responsible do not fix their mistakes, they will pay a hefty price.
Also, in line with the amended Building Safety Act, freeholders or residential building owners will be held to account if they are not co-operating. Responsible authorities now have legal powers to compel them to remediate their buildings, and to ensure that they meet the costs. Failure to do so could result in a prison sentence.
Under the developer remediation contracts, developers will commit to spending an estimated £2 billion or more on unsafe buildings that they are responsible for.
Gove said of the move: œIn signing this contract, developers will be taking a big step towards restoring confidence in the sector and provoking a much-needed certainty to all concerned. There will be nowhere to hide for those who fail to step up to their responsibilities.
Six major lenders do about turn
It will have come as a huge relief to leaseholds to hear that in January, at least six major lenders said they will consider mortgages covered by leaseholder protection in the Building Safety Act or a property that is eligible for a government or remediation scheme.
Need help with a cladding remediation fund application?
Cladding remediation fund applications are renowned for their complexity and known to be time-consuming. As a leaseholder, managing agent, freeholder, or right-to-manage company, you may find the process of applying for government funds challenging. Nevertheless, the funds could be crucial to the safety of your building’s residents.
At Cladding Consulting, we share the government’s commitment to supporting leaseholders to a position of safety and reassurance by expertly managing the entire cladding remediation process, from initial appraisal right through to the completion of works, with minimal outlay for the applicant.
Whether you are at the beginning of your funding application journey, part way through a cladding remediation fund application, or entering into negotiations with a developer for funding through the Developer Pledge, we can help.
To arrange your free, no-obligation consultation, please get in touch.