Passing the Buck after Grenfell
Massive regulatory reforms in UK Construction and the Residential Property are set to arrive via The Building Safety Act, currently the Building Safety Bill, with emphasis on High Rise Residential Buildings (HRRBs)
Introduction
You may recall that after the Grenfell Tragedy Dame Judith Hackitt was engaged to review building and fire safety regulations. Her recommendations have led to a complete overhaul of building safety regulations to seek to ensure that nothing of this nature can happen again
The proposed legislative changes are wide-ranging and industry stakeholders are collaborating to ensure that the building safety and standards reforms can be put into practise effectively. The regime will be headed by a newly appointed Building Safety Regulator (the Regulator), expected to start operating within 12 to 18 months.
Building Safety Regulator
Essentially there will be a shift of roles in terms of building regulations concerning HRRBs. Local authority Building Control will no longer be the regulator, the Building Safety Regulator takes its place.
The Regulator is part of the Health and Safety Executive (the HSE), reporting to the Secretary of State, and is responsible for managing and overseeing building safety risks in all buildings to include the implementation of the new safety regime for HRRBs.
The definition of an HRRB includes new and existing buildings at least eighteen metres in height or at least seven storeys and containing not less than two residential units. Where a development consists of several buildings of different heights, one project may be the subject of two different regulatory systems.
Care homes and hospitals are included, but there are several classes of buildings which are not, for example certain commercial developments.
The regulator will oversee the safety and performance of all buildings by developing key performance indicators with powers to impose sanctions for poor performance. Assist and encourage registered building inspectors and the built environment industry to meet building safety criteria and improve building standards. The Regulator will also have the power to establish and maintain committees comprising a residents' panel, an industry competence committee and a building advisory committee.
Duty holders
Duty holders are of two types, the construction phase and the occupation phase.
Getting the construction roles right is a necessity from the beginning. Those involved in regulatory roles, known as ‘dutyholders’ will need to demonstrate ‘competence’ i.e. have the necessary skills, knowledge and experience for their role.
During design and construction, this concept of a dutyholder includes the developer or building owner, the principal designer, the designer, the principal contractor and the contractor. All those involved must be ‘competent’.
Occupation Phase: The Accountable Person will be any individual, partnership or corporate body that owns the building (holds the legal estate) and/or is under a repairing obligation for the common parts of a HRRB. There can be more than one Accountable Person for a building and if that is the case, one will be the Principal Accountable Person for that property.
Broadly speaking their duties are continuing assessment of safety through an appointed Building Safety Manager.
Gateway Compliance
The broad view is that there must be compliance with Gateways 1, 2 and 3.
Gateway 1 (Planning): this Gateway (which is already in force and does not form part of the Bill) requires planning applications to include a ‘fire statement’ demonstrating fire safety requirements have been incorporated into the construction proposals.
Gateway 2 (Building Control): This is being replaced with Gateway 2, which will require building control approval to be obtained before starting building work (Previously developers could start building work when they have deposited plans and given notice to the local planning authority of commencement or submitted a building notice.)
Gateway 3 (Completion and Occupation): With completion of the works comes Gateway 3, another point at which the Regulator can halt progress if requirements have not been met. An application must be submitted to demonstrate how the Building Regulations have been complied with, which includes as-built information.
The Bill will make changes to the Defective Premises Act 1972 to extend statutory rights for homeowners to bring a claim for safety defects against developers. The Bill seeks to extend the limitation period for claims to thirty years. Development agreements and construction contracts need to provide for a similarly extended liability period (rather than the customary six years (for simple contracts) or twelve years (for deeds)). Any obligations on the professional team to maintain professional indemnity insurance should reflect this.
So what are the implications?
Well, clearly local authority building control can no longer be liable for defects.
Instead the new regime is seems to spread liability across the board, most clearly not just on the professional teams and contractors, but also on the owners and by their building safety officers.
In the end with so many differing parties establishing liability may be a difficult task.
Costs will rise. There will be more detailed monitoring consuming more time for checks and accountability; incidentally in recognition of this leases will provide for recovery of the new Building Safety Charge (the Charge) to be introduced by the Bill and any additional costs as a result of other measures introduced by the Bill which may not fall within the Charge (such as costs of enforcing warranties and bringing claims for defects).
The Charge is intended to cover building safety costs (not including the cost of remedial works) which will apply to leases of seven years or more where the leaseholder pays a variable service charge.
So it seems the costs will invariably be paid for by lessees over and above their normal service charges.
With this in mind perhaps the most sensible way for a freeholder to go after they have developed the block is to sell shares in the freehold company to the lessees and let them deal with what, may very well, turn out to be a statutorily controlled monitoring exercise.
Article by Elsa Twarzik, June 2022