Opinion

The Building Safety Bill offers some financial relief for leaseholders

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The Building Safety Bill in its current form is an altogether better solution for leaseholders than we could have hoped for during the passage of the Fire Safety Act 2021.


I welcome the government’s reset on its approach to fire safety based on the idea of proportionality. It is right that leaseholders will be protected from the costs of remediating dangerous cladding.

In addition, most leaseholders will now not have to pay for the remediation of non-cladding fire safety defects, but the developers will. While we find the right balance of responsibility with the Building Safety Bill, it is clear that we need to further consider the degree of responsibility we will cement into law for our British developers, as well as our insurance industry.

The reforms announced by the government mean that in most cases, payments imposed on leaseholders will never be triggered. Photograph: iStock

There has been a consensus that leaseholders are the least responsible party in the cladding crisis. That’s why many developers are content to pay for remediation work, and many were content to pay a levy. The Secretary of State has made it clear that no leaseholders should bear the cost of fixing dangerous cladding, with developers and cladding companies paying instead.

In the small number of cases where building owners do not have the resources to pay for the remediation cost of non-cladding fire safety defects, leaseholders may have to pay a contribution. That is very much the last resort. It is capped at up to £10,000 outside of London and up to £15,000 inside London, with no costs for flats worth less than £175,000 (£325,000 in London) and a higher cap for flats worth more than £1 million.

Fees that have already been spent on waking watches, fire alarms, sprinklers, smoke detectors, etc in the past five years will count towards the cap, meaning some leaseholders will pay nothing more. Where these payments are triggered, they will be spread over 10 years. The reforms announced by the government mean that in most cases, those payments will never be triggered.

Some developers think this new system, which is being introduced in order to protect leaseholders, is unfair on them. Most developers are happy to pay to remediate issues in buildings they have constructed. However, they are not content to pay to remediate blocks built by developers who are either not based in this country or are no longer operational.

Royston Smith MP: "Not only have insurers not helped with remediation, but they have hiked premiums by eyewatering amounts."

Sometimes when trying to fix one problem, you can of course, create another, and we need to be careful not to disadvantage the industry and damage their ability to build more homes. Just as it was wrong to make leaseholders pay, it also seems wrong to now lay the blame on all developers, some of whom have already acted responsibly.

During this time of unprecedented inflation on building material costs, and the costs associated with the cladding crisis, is there still a viable business case for developers to build more new homes? Will anyone be willing to build flats or apartments? Is it fair to expect our British developers to pay for the failures and profits of foreign or defunct developers?

I also believe that the insurers have gotten off too lightly and I have made my views known to the Secretary of State and in debates in Parliament. No developments can start on site unless there is third-party liability and indemnity insurance. Therefore, if something goes wrong after the development is completed, then the insurers should also be liable to remediate those problems.

Not only have insurers not helped with remediation, but they have hiked premiums by eyewatering amounts. The insurance industry has increased leaseholders’ premiums for their flats. In some cases, for example, in my Southampton constituency, premiums have gone up from £300 per annum to over £3,000 per annum for each flat.

My constituents have no choice but to accept the expensive premiums because there are few companies willing to insure their building. We must ask ourselves: what are these flats being insured for and is it right that the only industry that looks set to profit from this fire safety crisis is the insurance industry?

It can’t be repeated enough. Nearly all flats in this country are safe. Some of the things the government have now said are in scope, such as wooden balconies, would never have failed a fire safety inspection previously. The cladding on most buildings is not aluminium composite cladding (ACM) and some cladding is hardly flammable at all. And in the event that it were to combust, there would likely be more than enough time to evacuate.

Unfortunately, we have become too risk-averse. We need to put this right while having a proportionate approach.

In some areas, the Building Safety Bill doesn’t go far enough. Part of the problem with the fire safety crisis was brought about by a lack of regulation and enforcement. It was not just developers, contractors, and manufacturers who were responsible for what happened in Grenfell, but also a lack of regulation and inspection that happened over many years. Even now, the proposed inspection regime may not be strict enough.

In Southampton, the city council will now ensure that local regulation and inspection is stricter than the new legislation will demand. The council commissioned much needed new buildings that they have now discovered have fire safety defects. Many of these defects in new buildings would have been noticed had regulation been more comprehensive or inspectors carried out more than merely spot-checks.

We have now moved some way to ensuring that leaseholders will not be held responsible, but instead, we have made others accountable, some of whom may not be. Developers should be made to remediate the buildings that they are responsible for; but we must reconsider whether they should also be asked to put funding aside to remediate buildings that had nothing to do with them.

We also need to revisit the issues of the role of, and the public’s trust in, the insurance industry. Lastly, we ought to rethink how we strike a balance between bureaucracy and building safety that will actually have a positive impact.

The Building Safety Bill will return to the Commons shortly, and I hope that some of the issues I have highlighted will be addressed as it continues its passage through Parliament.

Royston Smith MP is Conservative Member of Parliament, Southampton Itchen

Follow Royston Smith MP at: roystonsmith.co.uk
twitter.com/Royston_Smith

More on the Building Safety Bill here

bills.parliament.uk/bills/3021

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The Building Safety Bill offers some financial relief for leaseholders

By Royston Smith MP, Southampton Itchen on 12 April 2022

The Building Safety Bill in its current form is an altogether better solution for leaseholders than we could have hoped for during the passage of the Fire Safety Act 2021.