Our meeting with DLUHC

Politics

On Monday 27 June, we met with Michael Gove’s officials to follow up our meeting of 7 June prior to the Building Safety Act’s leaseholder protections coming into force the following day.

We focused on the leaseholder protections and the detail that would be announced on 28 June so we could gain clarity on specific areas of concern.

Service Charge demands

We highlighted that “building owners” (generally freeholders and head leaseholders) were issuing service charge demands for remediation costs in an apparent effort to extract payment from leaseholders before the protections in the Building Safety Act came into effect. We were assured that after 28 June those outstanding invoices would no longer be payable, irrespective of the date that they were issued. In response to our request for greater clarity to allay the fears of residents on this issue, further detail has been added to the guidance published on 28 June – Leaseholder protections on building safety costs in England: frequently asked questions

Do I have to pay building safety bills on service charge invoices from before 28 June?

No. The Building Safety Act protects qualifying leaseholders from costs and is fully retrospective. This means it applies to bills irrespective of when they were issued.

Leaseholder protections on building safety costs in england: fAQ

Furthermore, from 28 June “building owners” will have to provide leaseholders with a formal “landlord’s certificate” when making a demand for payment of a remediation service charge. Further details on the landlord’s certificate have now been published.

Building Owners’ responsibilities

We were informed that Secretary of State Michael Gove had written that day to the representative bodies for residential managing agents and landlords setting out building owners’ responsibilities under the Building Safety Act. This followed our request to Mr Gove’s team to write to all freeholders and managing agents on the same basis as he had written to a freeholder of high-profile buildings across the country. We were told that the burden of proof would be on the building owner before costs could be passed on, with Mr Gove’s letter stating clearly that from 28 June any building owners, or their managing agents, who breached the statutory protections in the Building Safety Act would be committing a criminal offence – see Leaseholder protections: letter to building owner and managing agent trade bodies.

We gained further clarification that such penalties could constitute various offences, including fraud by false representation under section 2 of the Fraud Act 2006 with the “up to 10 years in prison” referenced in the letter reflecting the maximum sentence for that particular offence. We were also assured that building owners would no longer be able to hide behind shell companies irrespective of the structure, e.g. where the majority shareholder is a trust or pension fund, with the amendments laid by the Government during the legislative process having been designed to close such potential loopholes.

Whilst we welcomed these assurances, we repeated the key issues that we had raised for some months, particularly on how institutional freeholders had form for clever tactics, with questionable morality if not legality.

We queried what would happen if building owners said that they did not meet the “wealth threshold” set out in law (i.e. a net wealth of £2m per affected building they owned on 14 February 2022) as well as where all flats in a building were under the caps set by the Government (£325k inside London and £175k outside London) where non-cladding costs could not be passed on to qualifying leaseholders. We raised concerns about unintended consequences if, for example, the building owner failed to pay for a waking watch or evacuation management, as seemed to be imposed regularly by the fire service in its regulatory capacity, and as a result the building was prohibited. This appeared to not have been fully considered by the Government, so we requested a clear answer on this likely scenario. The issue is, and always has been, what happens in practice. Satisfactory answers to these questions are still awaited.

We reiterated our request for a joint meeting with officials from DLUHC, the Home Office and the National Fire Chiefs Council (NFCC) to discuss issues relating to forced waking watch and evacuation management as well as wider enforcement under the Fire Safety Act.

Property valuation

With regard to the mechanism for calculating the value of property for the purposes of the caps protecting qualifying leaseholders from non-cladding costs, we were provided with the detail that the “multiplier” that would be used to calculate current flat values based on the year of purchase would be based on national flat values, rather than house prices, and that these values were frozen at the end of 2021. We requested further detail on the calculation of these values and asked that this be explained clearly in the forthcoming guidance relating to the further Statutory Instruments. These regulations have now been published – see Regulation 9 for detail on determination of a qualifying lease.

Lenders and insurers

We were told that the Department is continuing to engage with lenders and RICS to find a solution to the EWS1 requirement that is preventing the sale or remortgage of affected flats. Our understanding is that the intention is to ensure lending can take place in full when the developer pledges are turned into legally binding contracts. We made clear that we welcomed this engagement but emphasised that there needed to be agreement from all stakeholders including insurers and this was something for which we had pushed for over two years, given the manner in which the insurance industry had acted in relation to imposing desperately unfair and egregious insurance terms.

Developer pledge

We repeated the key question we had been raising since the details of the developer pledge letter was announced: namely, when would the developer pledges be translated into legally binding contracts that include all cladding and non-cladding work. We explained that a sticking point appears to continue to be what constitutes “life-critical fire safety defects”, with the Government insisting that all required work will be undertaken by those developers who have signed the pledge, but with developers continuing to push back on undertaking the full amount of work that has been assessed as required. Delays were also apparent with the introduction of PAS 9980, meaning that buildings deemed unsafe for years now had longer to wait for a further assessment that the Government hopes would restore proportionality. We were told contracts should be signed “in the next few weeks”.

We are hopeful that there may be some positive movement in this respect by the time the House rises for recess on 21 July, but our concern persists that the Government has focused on being reimbursed for the failed regulatory regime it has left in place for decades rather than on ensuring blameless ordinary people are fully protected.

We repeated our request for robust timescales for the Department’s plan to ensure that foreign developers, such as Lendlease, who have not yet signed the pledge but continue to benefit from generous taxpayer funding, will remediate their buildings, as well as for the previously advised Phase 2 for small and medium-sized (SME) developers who had not yet been asked to sign the pledge. At this point, it is unclear if/when that will happen despite many of those developers having also benefited from enormous amounts of public funding.

Buildings under 11m

The Department has written to the freeholders and housing associations of the buildings under 11m that we have reported directly to them. We understand that a review is underway on how PAS 9980 is being used for those buildings. We also expressed concerns on the clear unfairness of MCM/ACM now being banned on new buildings of any height, but no funding being provided for leaseholders in buildings below 11m where it is present. The position of those buildings, as well as others under 11m with serious fire safety defects remains uncertain. It is clearly unfair that leaseholders in buildings below 11m are still excluded from the protections in the Building Safety Act: all leaseholders are innocent and must be protected from remediation costs.

Orphan buildings

We asked again about the proposed scheme for orphan buildings and were told details on the funding mechanism would be available “soon”. We highlighted the importance of getting this scheme right from the outset, incorporating lessons learned from the Building Safety Fund, so that the process from application through to sign-off runs a great deal more smoothly than the previous unfit-for-purpose funding schemes. We were also told that the “next phase” of the Building Safety Fund would be in operation “soon”.

Leaseholder portal

We requested an update on the Building Safety Fund Leaseholder and Resident Service, which is not yet fit for purpose, and once again offered to assist the Department in making improvements after previous feedback meetings in April and May. While the detail we provided at those meetings appears to have been taken on board, it is not yet clear when our next meeting on the portal is to take place.

We concluded with a request for a written response to our outstanding queries on a number of areas that require further attention and resolution from the Department, such as Buy-To-Let leaseholders with more than three properties, enfranchised buildings, waking watches and longstanding concerns about building insurance. The pain of insurance has been felt by blameless leaseholders for some years. While we are hopeful of some positive movement in respect of these issues in the coming weeks, whether from the FCA and/or the Secretary of State, it remains to be seen if this will have a meaningful and immediate impact for the people who are suffering from extortionate costs right now.

In closing, we have said that we will work with Mr Gove and his team to ensure that the leaseholder protections in the Building Safety Bill are effective. Our position remains that the protections are not complete, but we reiterated our offer of assistance to ensure the least harm is caused, particularly to those people who have been unfairly ruled out of true morally decent help. It was agreed that we would provide feedback on the next round of leaseholder guidance before it was published.

We appreciate the ongoing engagement and the indicated levelling of the playing field with freeholders and managing agents but there is still clearly a great deal of work to do before action on the ground matches the Ministers’ rhetoric. Many leaseholders remain in limbo, and we will continue to push the Government to fill, or at the very least mitigate, these gaps.

We requested a further meeting with the Secretary of State as our last meeting with him was in April when the Building Safety Bill was passing through Parliament – we were advised that Mr Gove was keen to meet us again, but we are uncertain when that meeting will take place.

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