Housebuilders have signed the developer pledge – now we must work out the details – Housing Today

In May 2022, Charmaine McQueen-Prince, Senior Property Solicitor at HomeGround Management Ltd, wrote for Housing Today about the Developer Pledge six weeks after it had been unveiled. The original piece can be read here.

It’s been six weeks since the developer pledge – part of the government’s strategy to ensure residential developers pay in part for the UK’s building crisis – was published on the Government’s website. There is no denying the pledge itself is a substantial concession gained by Government from industry for a problem which has long dogged the sector. But with the pledge now signed by several of the largest developers, and the Building Safety Act passed, what progress has been made?

Well, in short, we’re not sure – for a number of reasons.

Firstly, the pledge says leaseholders should not pay for life-critical fire safety remediation work – but there is great confusion over what that term means, to the point where I – a property solicitor with 18 years’ experience – cannot clearly define it.

Does it mean developers will pay for defective external walls, fire stopping and compartmentation? Or does it mean developers will pay for works even broader in scope e.g. balcony remediation and what about defective structural works?

According to the pledge, buildings will be assessed and remediated to the PAS9980 methodology and other undisclosed industry standards and EWS1 ratings have been proposed by some developers. Are EWS1 ratings and PAS:9980, appropriate remediation standards? And what is the exact difference between them? 

The RICS EWS1 form/process is borne from the Government’s, original advice note and is an assessment of the external wall. EWS1 assessments have been commissioned by building owners and their agents, sometimes at the request of leaseholders, to assess external walls but the EWS1 form and assessment are also used by lenders and valuers to ascertain risk and value property. In addition, EWS1 forms are only valid for five years and RICS expect them to fall away with the increase of external wall assessments. This raises the question of whether EWS1 ratings are an appropriate remediation standard?

Then there is PAS 9980borne from the Government’s now withdrawn Consolidated Advice Notes, a holistic risk assessment focusing on fire performance, façade configuration and fire strategy. PAS 9980 is described as a code of practice and takes the form of recommendations and guidance. This means there’s likely to be a certain level of subjectivity in such assessments and different assessors may not make the same recommendations. In addition, assessors are not required to confirm conformity to building regulations (past or present) unless there’s an obvious breach – given the history of external wall construction this approach may sit uneasy with some and could lead to additional works in subsequent years and who will bear those costs? Is PAS 9980 an appropriate remediation standard?

The remediation standard required under the ACM and Building Safety Fund is a height and product based approach, and more likely to comply with building regulations. There is no doubt, many would argue that works arising from EWS1 assessment and PAS9980 would have to meet current building regulations – which is true. But the scope of remediation works may be significantly different depending on the “industry standard” chosen and whether remediation is undertaken through the ACM or Building Safety Fund. Going forward, fund delivery partners may insist on a PAS9980 assessments which would be a significant change to the ACM and Building Safety Fund criteria. Government and developers need to be specific about which remediation standard applies to the pledge. However some might argue that the recent update to the EWS1 form means that the EWS1 assessment must align with PAS 9980 but this doesn’t stop them being separate and very different assessments.

Government and industry assessment of external wall remediation has seen a seismic shift from wholesale removal of ACM (category 1 and 2), EPS Render, Timber and HPL to a proportional approach which is being sold as PAS9980 and would have been welcome four years ago.

It may be difficult for some to buy into this new approach given past actions and regulatory failings. Building owners and leaseholders want to know their buildings are safe. Developers, industry and the Government need to gain the trust and confidence of leaseholders. Agreeing works, and a safe, appropriate, long-term remediation standard without the mantra of “no betterment”, and a rock-solid start date would be a good place to start.

So how close are the government and the developers to entering into a legally binding agreement? We don’t know. But surely it should be a priority to include building owners and responsible entities in on those discussions because they own and/or are responsible for the safety of those buildings? It would give them the opportunity to discuss remediation standards, competency and quality assurance where developers are in control of remediation.

The main question to all of this is when will remediation works begin? Unsurprisingly, we don’t know that answer either but there are potentially three remediation options:

• Developer remediation
• ACM/BSF funded remediation for buildings over 18m+
• Developer funded remediation for buildings of 11m+

Taking each in turn, developer remediation is unlikely to be an attractive option for developers for various reasons. That includes resourcing, procurement, supply chain, and the sheer number of buildings requiring remediation.

For the past four and a half years, building owners and responsible entities have been appraising their 18m+ buildings with external walls, and where defects have been found many have appointed consultants to co-ordinate procurement, undertake tender exercises and arrange remediation. Many building owners are in the middle of, or have, already negotiated consultant appointments, build contracts and collateral warranties with contractors.

Where remediation projects are well advanced and the details of the pledge are still to be negotiated, it might be sensible for building owners and responsible entities to use ACM and/or Building Safety funding to progress remediation. However, the only issues that might impact this approach and cause delay are the amendments required to the Government’s grant funding agreement to take into account the provisions of the Building Safety Act 2022, and confirmation from the government that there are no subsidy implications following the change of subsidy provision from leaseholder to corporate entity. If these issues were quickly resolved, remediation could be undertaken using these funds and the developers could simply reimburse the Building Safety Fund the cost of remediation.

Finally, developer funded remediation could loosely mirror the Building Safety Fund. However, it is highly likely that developers would want to administer and protect their funds by way of a funding agreement, similar to the Government’s grant funding agreement, and enter into other construction agreements that would protect them should things go wrong. This approach is likely to delay remediation. 

So, when will remediation work begin? Once the government and the developers properly address the scope of works and funding issues. If this is not done remediation will continue to be delayed or “on hold”. The Building Safety Act 2022 received Royal Assent on 28 April, with the cladding and waterfall provisions coming into effect at the end of June. The government and developers have weeks to enter into a binding agreement clearly setting out the mechanism of the pledge – what’s the likelihood that that will happen and if it doesn’t what then?

Drawing all of this together, the only way forward is to agree the scope and standard of works and attribute funds to remediating defective buildings. How do we do this? More collaborative engagement with Government, developers, building owners, responsible entities and leaseholders to move projects forward and deal with some of the (longstanding) issues raised in this blog. From this, we can then begin to do what all parties want – to solve the building safety crisis, and ensure homes are safe.