We met with Housing Secretary Michael Gove on 11th January – this was our fourth meeting with him since his September 2021 appointment and the first since his return to the role in late October 2022.
Ahead of the meeting, we were asked to provide agenda items – while there was a wide range of topics that we wanted to discuss, we focused on five key areas, and these are detailed below. For background on the issues raised with then Secretary of State Greg Clark in August 2022 and the responses from the Department for Levelling Up, Housing and Communities (DLUHC) that followed that meeting, please see our blogpost.
Mr Gove opened the meeting by recognising that this was not a perfect situation, but DLUHC were trying to tackle it as effectively as possible by handing responsibility back to those with deep pockets.
We responded to this by welcoming Mr Gove back to DLUHC after the political events of the second half of last year and reflecting that the leaseholders we represent were pleased he had been reappointed. While the engagement with DLUHC officials had continued in Mr Gove’s absence, it was clear that he was best placed to ensure that the solution he and his team had devised would now be implemented at true and discernible pace, so that leaseholders would finally be able to think about moving on from this nightmare.
The first topic we discussed concerned the Developer Contracts, how the government will ensure the self-remediation process will be fit for purpose, as well as their plans to ensure that the developers who have not yet pledged will finally do the right thing.
We noted the 9th December deadline for the Home Builders Federation to provide its final comments on the draft contract and Mr Gove’s 23rd December tweet confirming that the developers’ final representations had been received, with the promise to publish the final contract in January. We were told that there would be consequences for the developers that did not sign the contract under the Government’s Responsible Actors Scheme, i.e. new powers for the Secretary of State to restrict those that did not take responsibility from operating in the housing market, through new prohibitions on planning and building control.
We asked for a firm commitment to a date for developer contract publication; however, no firm date was provided. We noted that it was a year since Mr Gove’s letter to the developers with the initial deadline of early March 2022 to agree a fully-funded plan of action, and we reiterated our longstanding concerns over what the definition of “life-critical fire-safety standard” would mean in practice; how this would be viewed by entities such as valuers, lenders and insurers; as well as how the developers’ actions would be monitored, given the longstanding focus of industry on their profits over our safety. The mooted independent leaseholder dispute resolution process was noted but little further detail was provided on this.
We also asked to meet the team working on the contract prior to its publication, to understand what changes have been made since the initial publication on 13th July – a response on this is awaited.
We reiterated our conviction that there were still many developers who had not been asked to sign the developer pledge and were doing all they could to ignore their responsibilities yet were still benefiting from taxpayer funding – this was recognised as an issue but the timescales for the long-mooted “phase 2” remains unclear.
We welcomed the principle of the lender agreement announced in December (after the initial announcement in July) with the effective date of 9th January. We raised our concerns over how individual lenders would implement the agreed approach and our fears over the impact of the RICS Valuation approach for properties in residential buildings with cladding and the impending detriment to the value of our homes:
- A building that is to be remediated by the developer would still have its value impacted due to the “desirability factor” highlighted by RICS, where a discount would likely be required to mitigate the impact of planned major works as well as enormous future insurance premiums, an area that remains unresolved (and on which more below).
- A building in any other funding scheme would have its value impacted by the above as well as a potential discount built in to reflect the £10k-£15k (and more in some cases) cap for non-cladding costs.
- A non-qualifying lease in any building, bar those covered by the developer self-remediation scheme, would face a material fall in value due to the lack of protection from costs as well as the desirability factor issue.
We noted that a consistent approach to valuing flats in affected buildings was welcome and that this might help to free some of those trapped. However, despite many leaseholders having spent thousands of pounds on building safety related costs in the five and a half years since the Grenfell tragedy, there now appears to be an implicit acceptance of a material fall in the value of our homes due to issues we played no part in causing. We also noted that, due to the time taken to implement the 15th July Industry Statement, the sharp rise in interest rates in the second half of 2022 meant any mortgaging or re-mortgaging would now reflect Bank of England base rate of 3.5% and not the 1.25% base rate in July.
Lee Rowley, Minister of Building Safety, responded that the effect on property prices would have to be monitored. We were asked to provide the Department with relevant examples of this, as well as where lenders who have signed up to the agreement were not holding to the proposals (e.g., still requesting confirmation of start and end dates as well as fully-funded remediation plans.)
Landlord & Leaseholder Certificates
With regard to the new Leaseholder Certificate process, we stated that there were several areas where clarity was required to ensure that it was fit for purpose and that we were receiving a range of information in respect of certain building owners playing fast and loose with their duties including not providing a Landlord Certificate within the specified timeframes. We stressed that there was still room for improvement in the information provided to leaseholders on the Deed of Certificate FAQ page, particularly in relation to further help for shared owners.
Holding Building Owners and Developers to account
We asked Mr Gove to provide further clarity on the plans for the Recovery Strategy Unit (RSU) and the extent of the action it was willing to take. We noted that we had sent a detailed report to the RSU in November following a meeting with its lead, Graham Cundy. We restated our firm view that the Government should use its might to ensure leaseholders were not left to take costly and lengthy legal action that would continue to impact the pace at which unsafe buildings would be fixed.
The funding allocated to Local Authorities was raised and we asked for full clarity on what action, other than the ongoing action against Grey GR, would be taken, whether by central or local government. We were informed that preliminary meetings had been held with regional government, and we stressed that this must take place in a consistent and coordinated manner across the country.
We reiterated that “building owners”, who now had new responsibilities and liabilities imposed by the Building Safety Act 2022, were still doing their utmost to exploit perceived loopholes in the legislation and that further and firmer action must be taken in respect of those entities both where there was a relatively simple freeholder/leaseholder relationship or where a building is managed by resident volunteers. We raised a live example of one building facing a 31st January prohibition notice, and 132 families potentially being made homeless in a matter of weeks, due to the landlord having failed to recognise or adhere to its new responsibilities, and our wider concerns over how such practices, whether wilful malpractice or relatively innocent ignorance of the changes to the law, would lead to an increased number of such prohibitions.
We repeated our longstanding request for help for resident-managed buildings in the face of ongoing shenanigans by the building owners who were now supposed to be on the hook for costs.
We then discussed the important subject of ordinary people who had been excluded from leaseholder protections due to their having more than three properties, being in under 11m buildings or in leaseholder-owned buildings. We introduced the new Non-Qualifying Leaseholders group, with whom we are working closely. We recalled Mr Gove’s comments at the dispatch box on 10th January 2022 that all leaseholders were “blameless and it is morally wrong that they should be the ones asked to pay the price”. However, this cohort of leaseholders were still being asked to pay enormous sums due to the lack of protections.
The co-lead of the Non-Qualifying Leaseholders group then stated that the current approach left too many people fearing for their futures. Discussions then took place in respect of the implementation of the protections and the unfairness in setting a limit on the number of properties rather than portfolio size, for example, as well as the limit of three properties being inconsistent with the approach undertaken by mortgage providers to categorise “professional landlords”. Mr Gove was also requested to review the position of leases held in joint names and the inconsistency of this approach when compared to taxation rules where gains are apportioned on a prorated basis, i.e., one lease jointly held is counted as half held by one partner and half by the other. It was suggested that a change such as this would, in part, help to mitigate the harm faced by those who hold leases in conjunction with their partner.
The issue of under 11m buildings was also raised with the request for a better approach than the previous proposal to look at these buildings only on a case-by-case basis. Leaseholders in these buildings were caught between the Government insisting that they were not inherently unsafe and fire engineers, valuers, lenders and insurers requiring remedial works to be undertaken. The Government’s desire for proportionality was understood but this was contrasted with the importance of residents feeling and being safe in their homes and this class of building not remaining unsellable and unmortgageable. One example given at the meeting was an ACM-clad, under 11m building in Romford where costs of £30k per leaseholder had been estimated – this was a particularly egregious case due to the fact that the building was covered in the exact same material as Grenfell Tower, a material that was now banned from use in construction on buildings of all heights, yet there was no clear help for residents in those buildings.
The issue of enfranchised, i.e., resident-owned buildings, was also raised with a request for a firm timeline on the approach to such buildings after the Government’s call for evidence closed in November. While other freeholders are subject to means testing, with a high threshold of £2m net wealth per building, enfranchised leaseholders have no such protection and are being left to fend for themselves.
Mr Gove responded that he took the comments on board and that the leaseholder protections had been designed to protect “ordinary people” and the line did have to be drawn somewhere. He went on to ask for the Non-Qualifying Leaseholders group to provide information and further detail to DLUHC in respect of their membership, particularly buildings that fell outside the scope of the existing schemes. Mr Gove noted that there were cases of under 11m buildings across the country that DLUHC was in correspondence with and investigating in further detail.
The group asked to have meetings with DLUHC officials to discuss their concerns and a follow-up meeting is now being arranged.
We reiterated the issue of the pace of remedial work being impacted as the vast majority of buildings we work with have several non-qualifying leaseholders, often of pensionable age without access to raise finance, who will still be forced to pay life-changing sums before work can commence.
Our view, and that of the Non-Qualifying Leaseholders group, remains that all leaseholders are equally innocent and blameless, and it is desperately unfair to set arbitrary limits on which leaseholders will be protected and which will not.
Other issues: Insurance solution, Waking Watch and Shared Ownership
Finally, we raised the ongoing impact of all the current pressures faced by innocent leaseholders, such as extortionate insurance premiums, the forced implementation of waking watches and evacuation managers, whether by building owners or fire and rescue services, as well as the serious impacts we are seeing on vulnerable shared owners.
We asked the Government to provide clarity on what progress had been made with the Association of British Insurers (ABI) on a risk-pooling solution following the FCA report into building insurance and their recommendations and potential remedies.
As we all know, the market failure in building insurance is still being left to the insurance industry to resolve, with the ABI suggesting that it was only “working towards” a risk-pooling solution to be in place by the summer of 2023. We reiterated that this was a clear and present harm facing hundreds of thousands of leaseholders and one that had been left unresolved for years.
We recalled that, in 2021, a potential solution where the the Government would agree to act as a backstop and pay out on fire-safety related claims over a set figure, had been abandoned. Unfortunately, Robert Jenrick, then Secretary of State, appeared to take the advice of Michael Wade and HM Treasury and rejected a decent and reasonable proposal that would have mitigated the excess levels of harm faced, even though it was forecast to cost the Treasury only £20m-£25m (likely much less than the amount collected by HM Treasury through Insurance Premium Tax on affected buildings each year). Nearly two years later, we are still no closer to any solution. Following the FCA report, a fair solution is desperately needed, particularly given that the clear link between insurance costs and saleability of a flat is now made in RICS’ valuation guidance and this will still have a material impact on the flat sales market.
Mr Gove acknowledged that many different actors had operated from the point of view of personal advantage. We were advised that there were ongoing discussions taking place behind the scenes and these would take a little more time. We responded that we need a firm commitment as soon as possible given the clear pain that people are suffering and have suffered for years.
We raised specific concerns about shared owners trapped in the building safety crisis. While the government-backed shared ownership scheme is marketed as an “affordable” housing scheme, the reality is somewhat different. With building safety costs spiralling, and interest rates going up sharply, some shared owners are now forced to sell to cash buyers, facing life-changing debt as a result. For many shared owners, there will be no “stepping up” the housing ladder as they will instead return to renting, or be made homeless. We also raised concerns about impossible lease extensions for this cohort and ongoing issues with housing association landlords, calling for urgent solutions to prevent further financial harm being inflicted on shared owners. We will be providing additional information to the Secretary of State on these issues.
We closed by reiterating our thanks to Mr Gove, Mr Rowley and DLUHC officials for their engagement and we reminded them that it would soon be six years since the Grenfell tragedy, and that this year it is key that we see action on the ground that finally matches the positive-sounding announcements. This must mean a true era of transparency and accountability in relation to the actual scale of the building safety crisis and firm deadlines to make all buildings safe.
The End Our Cladding Scandal campaign calls on the Government to lead an urgent, national effort to fix the building safety crisis.
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