27 November 202328 November 2023 derek

Our Meeting with Barratt – November 2023

Politics

After we recently attended Barratt’s 2023 AGM, we arranged a follow-up meeting to discuss their building safety remediation programme in more depth.

We met with David Thomas, Barratt’s Group CEO; Brian Lochead, Director of Barratt’s Building Safety Unit; and Tim Collins, Group Public Affairs Director. Four EOCS campaigners joined the meeting, including two leaseholders from Barratt buildings in Woolwich and Wimbledon, which helped to illustrate some of the broader issues with specific practical examples.

Addressing our concerns about the slow pace of remediation since Grenfell, Barratt’s team said they felt the Government’s policy and approach had undergone a lot of changes which meant the direction of travel “had not been clear until 2023” – with remediation first being organised through the Government’s own ACM Cladding Fund and Building Safety Fund, and then a “virtual U-turn” to developer self-remediation. The “developer pledge” was first announced in January 2022 and signed in April of that year, followed by a legal contract published in January 2023 and signed by Barratt in March. 

They noted that Barratt was one of the first companies to start removing Aluminium Composite Material (ACM) cladding from their buildings in early 2018, before there was any legal liability to do so. Barratt was also the first developer to publicly call for an industry levy, in 2021, acknowledging that “housebuilders and the broader industry have a collective responsibility” to pay for homes to be made safe.

It was certainly a moment of welcome relief when Barratt (and others) confirmed in their April 2022 pledge that leaseholders would not have to pay for the remediation of building safety defects; but that was far from the end of the story and 19 months later, we still hear from far too many leaseholders in Barratt buildings that there is “no light at the end of the tunnel,” with no remediation work having started yet, and often no plan or start date in sight.

Up to 278 Barratt buildings still waiting to start or complete remediation

Barratt is the UK’s largest volume housebuilder and the financial provision it has set aside for the remediation of life-critical fire safety defects is larger than any other developer. 

At their financial year end, on 30^th June 2023, Barratt held £536m on their balance sheet as a provision for remediating up to 278 buildings (89 developments) across England, Wales and Scotland (see image). This is in addition to £37.5m of the provision already “utilised” for remediation work in the prior three years. 

Barratt’s report also indicates the progress with remediation to date – which is relatively low so far, in comparison to the work that lies ahead. In the last financial year, 10 buildings were either remediated or “released” from the provision (i.e. where it was confirmed that remediation was not required). The 2022 annual report shows that a further 30 buildings were remediated or released in prior years. Therefore, a total of 40 buildings have been remediated or released to date. For context, the number of buildings still under review for potential remediation (278) is seven times greater than this.

Barratt’s current average provision of £1.93m per building is slightly lower (-6%) than the average for all developer remediation projects, according to figures published by DLUHC, although this will of course vary depending on the mix of building heights in the portfolio, scope of work required, and so on. We note that the provision was also “revalued” by -£51.9m in the last year (a -12% reduction compared to the previous value). As we are in an economic climate where resource costs are unlikely to be falling, we assume that this revaluation is due to Barratt improving the accuracy of their cost estimates as their remediation experience has increased – although “revaluing” the cost of a project could also be caused by reducing the planned scope of work. 

Since our meeting with Barratt, DLUHC has also released a developer remediation dataset for the first time. This appears to show that significantly fewer Barratt buildings require remediation, compared to the information provided in Barratt’s annual report, which may be confusing at first sight. 

The two sets of data are not directly comparable. DLUHC’s data is more recent than Barratt’s annual report, by four months (it is dated 31^st October 2023); the geographical parameters are narrower, as it only relates to buildings in England (excluding Scotland and Wales); and it only relates to buildings over 11 metres, whereas it’s possible that the figures in Barratt’s annual report may include some buildings below that height (we intend to discuss the topic of buildings under 11 metres at our next meeting with Barratt). 

Perhaps most importantly, DLUHC’s dataset does not include any forecast (estimate) of buildings that have not yet been assessed but will require remediation. 

Setting aside the issues of comparability between the two datasets, DLUHC reports that out of a total of 708 relevant Barratt buildings (mid and high-rise buildings in England), 65% have had an assessment so far (457 buildings) and 28% of these required remediation (128 buildings), including those where work has already been completed. 12 buildings will be remediated via government schemes (to be reimbursed), with the rest being directly remediated.  

At this stage, the required remediation rate for Barratt’s assessed buildings (28%) is slightly lower than the average remediation rate for all developers in the scheme (36%).

DLUHC also reports that so far, 42 Barratt buildings have either started or completed direct remediation (21 in each category); this excludes buildings remediated through government schemes.

More than a third of Barratt’s relevant buildings (35%) have not yet been assessed (251 buildings). If we assume that the same proportion of non-assessed buildings will require remediation as assessed buildings (28%), then an estimated 70 non-assessed buildings may require remediation – however the remediation rate could reduce for later assessments, if the highest-risk buildings were assessed first.

It is unclear why DLUHC hasn’t asked developers to provide a forecast of how many non-assessed buildings are expected to require remediation, as developers must already have this information internally, to monitor if their balance sheet provisions are sufficient. We have raised this question with DLUHC, as we believe datasets published to the public should represent a full and fair picture of the scale of remediation work left to go, but they currently give the wrong impression. This is important because, ultimately, this represents how many people’s lives are still on hold until their homes are made safe and sellable. 

Factors slowing down the pace of remediation

Barratt anticipates that the majority of their remediation programme will be completed “over the next five years” – which means some people’s lives could be on hold for up to 11 years post-Grenfell. This would be alarming enough; however, we raised concerns about whether this timescale is even achievable. It would require a tremendous increase in the pace at which buildings are being remediated/released – from 10 buildings in the last financial year, to an average of 55 buildings every year for the next five years.

Barratt said the pace of remediation will increase, but they have planned on the basis that there is a maximum run-rate, which appears to take into account the limit on resources available at any one time. 

So far, they say the main constraint on moving faster has been the “real bottleneck” caused by the limited number of suitably qualified fire engineers available to carry out fire risk assessments (FRAEW). Barratt told us they had anticipated a shortage so they tried to ringfence the most reputable fire engineers – which of course may help their company but doesn’t help to resolve what is a national issue. It’s three years since the Government announced they would invest in training for 2,000 new building fire safety assessors within six months to address the shortage. Barratt’s view is that availability of assessors is “moving slowly” in the right direction, but it would be “over-optimistic” to say the problem has gone away.

Barratt said the availability of competent contractors has also been an issue, including contractors going bust mid-project. They also agreed that there are still issues with contractors not being able to get suitable personal indemnity insurance (PII) cover, particularly with respect to the guarantees some freeholders require, and that sometimes risk assessors are having difficulty securing appropriate PII too. This is interesting because the Government recently withdrew its PII scheme for building fire safety assessors after just one year, having decided that the market was working, which is not what we are hearing.

We were particularly concerned to hear that a continuing impasse with a few specific freeholders is still preventing access to some buildings to carry out assessments, because terms cannot be agreed. Barratt declined to name the freeholders involved but did not disagree when one leaseholder suggested their freeholder, E&M, would be an example. Barratt hoped that upcoming tripartite meetings with DLUHC would help to break the deadlock; this cannot come soon enough for the swathe of buildings where people remain utterly stuck because of this failure to come to an agreement. 

Our concerns about reduced scope of work under developer-commissioned assessments

After living for years with a failed EWS1 rating for their building – and sometimes a failed PAS9980 assessment too – leaseholders are naturally concerned when new risk assessments commissioned by a developer result in a reduced scope of work or a declaration that no remediation is required at the developer’s expense after all. 

Aside from safety concerns, leaseholders fear the financial consequences if other stakeholders do not accept the verdict that no more remediation is required – from freeholders to building insurers, property valuers or future homebuyers. 

We highlighted a development in Brentford, where the freeholder’s lawyers have asked the court five times to extend their stay on proceedings for dispensation of Section 20 in relation to fire safety remediation costs – stating that because Barratt and the freeholder still haven’t agreed the scope of work, they cannot be certain the developer will meet all the required remediation costs. It would be a perverse and completely unacceptable outcome of Michael Gove’s “reset” if buildings that were transferred out of the Building Safety Fund and into the hands of the industry end up with leaseholders being liable for charges to remediate some of the safety defects. 

We also highlighted a development in Wimbledon, where Barratt does not yet have a planned date for conducting an assessment, but in the meantime the managing agent appears to be planning to pass fire safety remediation costs directly to leaseholders – such as for the replacement of fire doors where, for example, gaps exceed the regulations and would never have complied in the original build. Barratt advised that they will consider issues such as fire doors on a case-by-case basis, and any concerns should be raised to their attention via the managing agent. 

In response to our concerns, Barratt said they use “independent” and “reputable” engineers to carry out assessments under the “more proportionate” PAS9980 standard introduced last year. As the numbers of competent assessors are limited, they admit it’s likely they will have a previous relationship with some of them. In cases where the choice of assessor is a sticking point, they say they have sometimes agreed a joint appointment with the freeholder. Barratt also advised us that all their assessments are peer-reviewed; this adds some time and cost into the process, but they believe this should give quality assurance. 

We remain concerned that too many FRAEW assessments are inconsistent and often of poor quality, and about cases where leaseholders believe their buildings remain unsafe or where other stakeholders do not accept that no further remediation is required. We want to see the Government introduce an independent dispute resolution process, so there is a clear and robust process for escalating specific concerns. Barratt’s CEO pointed out that when developers signed the pledge last year, they already committed to a robust and independent arbitration process to provide clarity for all parties where there are areas of uncertainty. We will be continuing to press DLUHC to bring such a process into force as swiftly as possible, and we recommend that concerned leaseholders call on their MPs to raise questions about this too.

Communication: 2/10

Royal Artillery Quays (RAQ) in Woolwich hit the headlines nearly three years ago, when the Leader of the Opposition, Keir Starmer, visited the development ahead of an Opposition Day motion calling on the Government to get a grip on the cladding scandal. To some extent, things have moved forward – but not as much as you might expect in three years for a high-profile development. Some minor emergency work has been carried out but the Chairman of the Residents Association, who is also a member of the EOCS campaign team, described how the main issue is still a lack of communication and a lack of certainty about when remediation will finally begin. Barratt confirmed that RAQ residents are due to receive an update and there will be an online call scheduled in the coming weeks.

A leaseholder from a Barratt building in Wimbledon also described how the lives of leaseholders have been on hold for six years due to their flats being unsellable, with no scope of work, remediation plan or timeline in sight. They had initially been told an assessment would take place in August 2022, but this was cancelled when Barratt took over responsibility for their building as they wanted to commission a PAS9980 assessment themselves. Aside from a “letter of comfort,” confirming that any required remediation would be undertaken by the developer, there has been no further communication from Barratt in over 15 months. 

Even when remediation is not yet imminent, we highlighted that communication is needed at least every six months, because leaseholders need to make decisions about remortgaging or letting properties. Barratt’s team apologised for the lack of contact and agreed that although updates generally become more frequent as developments approach and then undergo remediation, there needs to be a more consistent “rhythm of regular communication” with other sites too. 

We also asked Barratt to provide an easy point of contact, such as a dedicated email address, that leaseholders can use to obtain information, e.g. for remortgaging. This would be particularly helpful for leaseholders who live in developments with complex tenures where they may have no direct contact with the managing agent because they rely on a third party, such as a housing association, which can make access to information very difficult. Barratt said they would look into this. 

At the end of October, we launched a survey to get a quick view from leaseholders about communication issues in their buildings. 6% of responses related to Barratt buildings. Although this was a relatively small sample size, on average these leaseholders rated communication timeliness 1/10 and communication quality 2/10, with lower scores in buildings where FirstPort or Rendall & Ritner are the managing agent. 

Most respondents (89%) said their Barratt building had no remediation plan or start date. More than half (56%) had requested a landlord certificate but had either waited longer than four weeks or still hadn’t received it at all. Leaseholders noted “vague answers” that “seem unsympathetic” to their concerns; “not providing details about defects” or the intended remediation work; unexplained building safety charges; and “trampling over residents… without taking residents’ views into account.”

We have now shared anonymised feedback from the survey with Barratt and hope this may help to improve communications that are provided directly or via freeholders and managing agents going forward. 

No support for insurance increases in unremediated buildings

Barratt made it clear that they will not pay towards incremental building insurance costs in any circumstances. The company believes there is “no justification” for any increase in premiums, because these are not based on an increase in insurance claims history, either for the specific building or more widely in multi-occupancy buildings. In some cases, Barratt has written to leaseholders to urge them to raise their concerns about this directly with DLUHC. 

We will be meeting with DLUHC officials and other stakeholders on this topic soon. In our view, there has been a longstanding failure from all stakeholders to ensure innocent leaseholders are protected from outrageous increases in insurance costs, which have been unrelenting for years and which have significant financial consequences. We must see action on this issue urgently.

More support to help leaseholders move on from unremediated buildings

A leaseholder at RAQ told us recently, “We couldn’t have sold without a letter of comfort! Every bank considering lending wanted to see one! Barratt did one for each building in our development and [the managing agent] uploaded them to the portal so they can be accessed any time they are needed.” 

This is a positive example of how a relatively small action from a developer can – sometimes – unlock a vital escape route, allowing someone to move on with their life. Barratt advised us that “comfort letters” should be available to everyone and can be requested from a central email address, but many Barratt leaseholders have told us they haven’t heard of the concept, and they don’t know how to get one. We asked if this could be communicated again or made available automatically for each building. 

We also emphasised that a developer comfort letter isn’t always enough, as mortgage lenders frequently continue to ask for remediation start and end dates too. It seems to be too easily accepted that “complicated” buildings might fall to the back of the queue for their assessments, but we believe developers need to set an early target date for 100% of buildings to have their assessments completed – to ensure there is focus on not leaving a “tail” of buildings lingering in an undeserved limbo any longer. We want to see all developers ensure there are remediation plans in place for all buildings by June 2024.

We asked Barratt if other types of support, such as access to their part-exchange programme, could be made available to the small number of leaseholders who might be able to use that as a route to take their next step in life. If Barratt can provide “comfort letters” to give assurance to mortgage lenders, couldn’t it do the same for its own internal departments? We highlighted the case of a leaseholder who needed to move out of London earlier this year, in time for the birth of their first child. They chose to buy a Barratt house, but their part-exchange application was refused on the basis of not having an EWS1. They sold at a modern auction for a loss of nearly £80k compared to a recent valuation, and they also say that they lost out on a stamp duty incentive which buyers of neighbouring houses were able to get. We appreciate Barratt looking into the circumstances of this case and hope it may be possible to take a more joined-up approach for any future leaseholders who wish to move to another Barratt home.

Barratt’s directors emphasised that they were very open to feedback and hearing about cases where more action is needed. We will be meeting with Barratt on a quarterly basis going forward, so that we can escalate concerns in specific buildings or highlight broader issues affecting multiple developments – and continue to push for a fairer and faster end to the building safety crisis, for everyone.

CALL TO ACTION! 

If remediation work is still delayed at your building or you are at an impasse with your developer, freeholder or managing agent, please make sure you are escalating your concerns to DLUHC by emailing [email protected] To speed things up, please include the topic in the email header, name your building, be specific about your circumstances, summarise the actions that you have taken to date, and attach written evidence if you have it (e.g., letters or reports). Please copy our team at [email protected] so that we can follow up where necessary.

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