Government must step in and resolve difficulties around cladding pledge – Housing Today

In August 2022, Charmaine McQueen-Prince, Senior Property Solicitor at HomeGround Management Ltd, wrote for Housing Today urging the Government to step in and resolve difficulties around housebuilders’ cladding pledge. The original piece can be read here.

Serious questions remain about housebuilders’ pledge to carry out fire safety works on existing blocks, not least about the role of building owners, writes Charmaine McQueen-Prince

Despite being announced and published nearly four months ago, the ‘developer pledge’ -under which housebuilders have agreed to fund life-critical fire safety works on buildings going back 30 years – has still yet to provide the answers the government were hoping for. Indeed it has left many in the property industry with even more questions.

This has been compounded by the publication of the long form agreement – the legal contract for developers to sign relating to the pledge – which was published on 13 July.

The agreement contains a number of issues for responsible entities (building owners), and given building owners have not been involved in the discussions that led to the pledge or the long-form agreement that followed, crucial context is missing for those that need it most.

For instance, there is a distinct lack of clarity around a number of definitions in the draft agreement, particularly those that refer to the internal assessment of the building and the external wall. The agreement is not entirely clear on who will pay for these assessments. If it’s the developer, how is the building owner reassured of the complete independence of the fire risk assessor especially if they’ve been instructed to assess a developer’s entire portfolio?

To add to this, it’s unlikely that a building owner will be able to rely on a developer instructed assessment for professional indemnity purposes. What happens if the assessor gets it wrong? And is an assessment in accordance with PAS 79-2, a requirement under the agreement, appropriate given that it has been withdrawn? Could building owners be setting themselves up for further remediation costs in the future as a result? 

What is clear from the agreement though is that the developer is unlikely to reimburse all costs paid by the building owner – which seems incredibly unfair if they relate to the safety of the building, given it is the developer who was responsible for constructing or refurbishing, while the building owner was simply following government funding criteria and relevant guidance.

Furthermore, the agreement is not clear on whether it covers developer funded work where works are procured by the building owner and I understand that this is a preferred option of some developers.

In addition, developers will be expected to use “best endeavours” to enter into a contract with building owners based on an industry-standard form, with no indication as to whether this is a pre-existing form or one to be provided. Without such information, building owners will be left to individually negotiate contracts with each developer, leading to further delays to remediation works. 

The agreement provides that liability for remediation of certain buildings can be transferred from the BSF to developers. These buildings are likely to have been in the fund since 2020 and fairly-well advanced in terms of having a remediation solution and appointed consultants. Reworking or renegotiating the remediation solution to a PAS 9980 solution may raise concerns with the building owner, and may in turn result in a loss of contractor but will certainly delay remediation while negotiations take place and is likely to increase remediation costs.

Finally, there is no clear and obvious route for next steps if the agreement is terminated for example non-compliance. What happens next? Can the building revert to its original funding scheme? Is there insurance cover for this situation? As with all these grey areas, if they arise then the only group who continue to suffer is the one we should be helping – leaseholders.

The Department for Levelling Up, Housing & Communities (DLUHC) must take note of the legitimate concerns building owners have when they consider the next version of the agreement. Developers need to take the initiative, and draft a reasonable standard form of contract for developers and building owners to sign, to minimise the risk of projects stalling. But the real solution to all of this – as has been said for some time now by many parts of the industry – is for the government to step up and fund projects first, and recover funds later from developers or other responsible parties. This is the only way to avoid further delays and spiralling costs, and make buildings safe as quickly as possible.