What responsible entities must consider now the ‘Developer Pledge’ deadline has passed – Housing Digital

In April 2023, Charmaine McQueen-Prince, Senior Property Solicitor at HomeGround Management Ltd, wrote for Housing Digital outlining the four key points that responsible entities now need to consider following the Government’s deadline for developers to sign the legally binding Developer Pledge. The original piece can be read here.

On 13 March, Michael Gove’s six-week deadline for developers to sign up to the legal terms of the Developer Pledge passed.

Although the near 100-page contract is between the government and developers, it’s still imperative that responsible entities familiarise themselves with the contents of the agreement, which will influence the pace, method, and cost of remediation of their buildings.

In light of this, there are four key points responsible entities must consider.

The process of identifying defective buildings remains vague

There are five potential options for developers:

• Rely on their own information – which historically hasn’t always been available to responsible entities or accurate
• Contact responsible entities and seek permission to undertake their own Fire Safety Assessments (FSA) and/or Fire Risk Appraisal of External Walls (FRAEW)
• Contact responsible entities and rely on their FSAs or FRAEWs
• Rely on information from local authorities
• Rely on information from the DLUHC

Identifying and prioritising buildings with life-critical fire safety defects is a hugely important task and, no doubt, will take time. Remediating or mitigating the defects in all of those buildings will likely take years.  

Prioritising the most dangerous buildings is the right thing to do, but the crisis is nearly six years old, and leaseholders will become even more frustrated if their building is ‘bumped’ in favour of others and remediation is delayed. Responsible entities should therefore work closely with developers to ensure that all defective buildings are identified quickly and equally as important to ensure that no defective buildings miss out on remediation.

Not all costs will be reimbursed or settled by the developer

Costs paid by the responsible entity, for up-to-date FSAs and FRAEWs, prior to the execution of the agreement, are unlikely to be reimbursed. If assessments and appraisals have been treated as service charge items, then the developer should be asked to reimburse the cost. 

Costs incurred by responsible entities will only be reimbursed on a transfer of a building from a relevant fund to a developer – but it’s unclear what will happen to costs where buildings aren’t transferred and costs aren’t met by the fund.

It’s also worth noting that costs relating to interim safety measures and increased building insurance premiums relating to life critical fire safety defects will not be met by developers, and some developers are even pushing back on costs incurred by responsible entities for reviewing the agreement, which forms part of the ‘works contract’ between the two parties.

The remediation standard is likely to be problematic

The defects to be remediated in the agreement (i.e. life-critical fire safety defects) are different to those in the BSA (i.e. defects causing a building safety risks through spread of fire or collapse) and the original Building Safety Fund (i.e. remediation of Non-ACM cladding systems – height and product approach). The Developer Pledge doesn’t align with the BSA or the original BSF requirements.

Problem one

One problem with the remediation standard is that, if an FSA or FRAEW indicates that a fire safety risk is tolerable, the remediation standard will be met and no remediation works will be necessary.

The problem with this approach is the external wall that didn’t comply with building regulations upon construction and doesn’t meet current building regulations will not be remediated.

According to PAS 9980, a tolerable risk can be a low risk or a medium risk, subject to periodic reviews.

If a medium risk is subject to periodic reviews and subsequent reviews require further works, it’s highly unlikely those works will be funded by developers.

If buildings are deemed to be medium risk, this may well impact the market value of the flat and keep building insurance premiums high.

Problem two

Another problem is that the agreement provides that, where works are required, those works must be building regulation compliant – but it does not require the developer to ensure any parts of the building (including those subject to the works) are compliant with building regulations and applicable law.

However, the developer is obliged to carry out necessary betterment works in order to obtain planning permission and/or building control.

Further potential problems

Construction professionals are questioning whether developers will be able to limit remedial works – in the way proposed – and obtain building control. They also question whether consultants and contractors will agree to undertake such works and whether they’d be insured to do so.

It also remains to be seen whether the Building Safety Regulator will accept the standard and the works emanating from it, which means this could all be a huge waste of time and money and result in further works, which the developer may refuse to pay for.

If independent assessors and appraisers, instructed by developers and responsible entities, fail to reach an agreement on the standard, this will further cause problems and delays to remediation.

In view of these concerns, is the Developer Pledge the best remediation option? Should responsible entities be considering alternatives such as Remediation Contributions Orders under the BSA 2022, which will allow them to be in control of the remediation standard and solution?

Existing building warranty claims

It’s assumed that developers will be discussing building warranty claims with providers – i.e., original construction work and building control services (if applicable). Leaseholders and responsible entities should be involved in those discussions, or at the very least kept informed of the decisions made and how they might impact the building warranty policy and its response to future claims.