UK: A New Regulator

The Grenfell Tower disaster in 2017 has put the spotlight on the methods and materials used in the construction of residential premises. In her report following that disaster, Dame Hackitt identified that "the classification and testing of the products need to undergo a radical overhaul to be clearer and more proactive" with an emphasis on "traceability and quality assurance techniques". These words make sense following the Grenfell Inquiry at which testimony reportedly alleged numerous dishonest practices by the industry in relation to product safety and testing. As Dame Hackitt stated in her report, the changes which are required do not constitute a mere "shopping list". Major systemic changes are required to improve industry standards. The new regulator will be part of the foundation of this new, outcomes-based approach to building safety.

The new regulator will:

• have what are described as "strong enforcement powers", including the ability to remove any product from the market that is deemed to pose a "significant safety risk"
• be able to prosecute companies proved to have contravened safety rules and standards
• investigate concerns by carrying out its own product testing
• operate under the banner of the Office for Product Safety and Standards (which has been granted a £10m fund to expand to this role)
• work with the Building Safety Regulator and Trading Standards to "encourage and enforce compliance".

A review has also been commissioned, to be formed of various industry experts, which will examine the testing regimes used for construction products. We expect to be able to update you on their findings later in the year.

Unsafe cladding update

Meanwhile, the Government continues its legislative and financial response to the issue of unsafe cladding on high rise buildings, which was found to be one of the major contributing factors to the Grenfell Tower fire.

In addition to the £1.6bn previously pledged, in February 2021, the Government announced a further £3.5bn of funding via its Building Safety Fund, to remove "combustible cladding" on buildings over 18 metres (typically six storeys). This is designed to target the buildings where fire safety risk to life is unacceptably high.

It remains the case, however, that the Building Safety Fund only covers the costs of replacing cladding, despite the fact that the post-Grenfell investigations into fire safety have uncovered a range of other risks unrelated to cladding. These risk include the presence of combustible materials elsewhere on the building (notably balconies and fire escapes), as well as inadequate or missing fire breaks, which are essential to preventing fire spread in high rise buildings. The costs of any remedial works to address these risk are not covered, which inevitably means those costs will be passed to leaseholders. Furthermore, applications to the fund are only accepted from building owners, not leaseholders, and there is a whole host of eligibility criteria which must be met to access the fund.

For buildings with unsafe cladding between 11-18m tall (approximately four to six storeys), direct funding will not be available but instead building owners will now have access to a low interest government-backed scheme. Remediation costs will be recharged to leaseholders via their service charges, but the intention is that the scheme will be designed so that leaseholders will not be obliged to pay more than £50 a month for repairs.

It has also been announced by the Ministry of Housing, Communities and Local Government that there will be a state backed indemnity scheme for fire safety inspectors. The PI insurance market has been increasingly hardening, and has reached the point where insurance is almost unavailable for fire safety inspectors. This is affecting the ability for home purchasers to obtain an EWS1 form, which was introduced by the RICS to designate the fire risk associated with external wall systems of high rise buildings, and which mortgage lenders now require in almost every case to mortgage any property in a building over 18m tall. As the EWS1 form must be completed by a suitably qualified fire safety inspector, it is hoped that this new state backed indemnity will open up the log jam that currently exists with obtaining such forms, and which is threatening to make affected flats unsaleable.

How will this all be paid for?

"It cannot be right costs fall solely on taxpayers." Robert Jenrick

The Government initially intends to recoup the costs of fire safety intervention through:

1. further taxes on house builders (to be introduced in 2022); and
2. a tall building levy, which is thought will take the form of a "Gateway 2" developer levy – a levy on high rise buildings that is applied when developers seek planning permission for towers.

Whilst these measures avoid existing leaseholders being directly responsible for the costs of addressing fire safety risks, it remains to be seen what affect these measures will have on the market and whether the costs will end up being indirectly passed onto new homebuyers.

We will keep you appraised of further developments.

This article is from the March 2021 issue of Cornerstone, our regular newsletter for those working in the construction industry.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.