Government cladding update: Developers to fix unsafe buildings or be banned from the market

Government cladding update: Developers to fix serious safety defects in unsafe buildings or be banned from the market.

Positive news for homeowners as developers must agree to remedy serious fire safety defects in their blocks or be banned from starting new developments under the latest government cladding update.

In the latest government cladding update, Housing secretary Michael Gove has announced a six-week deadline for developers to sign a government contract agreeing to fix life-critical fire safety defects in their towers or face a ban on developing.

The Department for Levelling Up, Housing and Communities has published the contract that will give legal force to the pledge made by 49 housebuilders to fix these defects on their own blocks going back 30 years.

Richard Goodman, Director General, Safer and Greener Buildings at the DLUHC, wrote to developers on 30 January 2023 saying Mr. Gove expects them to sign the final version of the contract by 13 March 2023.

By signing the Developer Remediation Contract, the government says developers will be required to: 

• • Take responsibility for all necessary work to address life-critical fire-safety defects arising from design and construction of buildings 11 metres and over in height that they developed or refurbished over the last 30 years in England.
  • Keep residents in those buildings informed on progress towards meeting this commitment.
  • Reimburse taxpayers for funding spent on remediating their buildings.

According to the government it will protect thousands of leaseholders living in hundreds of buildings across England who would “otherwise face costly repairs for serious safety defects, including non-cladding related issues.”

It’s expected the contracts will secure commitments worth around £2bn or more to rectify defects on properties with identified fire safety issues. It comes on top of the £3bn already being raised through the Building Safety Levy to fund repair works announced in the 2021 Autumn Budget.

House-builder Persimmon was the first developer to confirm they’ll sign the contract. 

What if developers don’t sign up?

Any developers who refuse to sign the contract announced in the latest government cladding update will face a ban on “commencing developments for which they have planning permission, and from receiving building control approval for construction that is underway.” The government says it will set up a Responsible Actors scheme in the spring, using powers under the Building Safety Act, to enable it to do this.

The letter also warns developers that if they fail to sign the contract they “should expect that fact to be public” and that the “department will take steps to inform investors and customers of the risks arising from continuing their commercial relationships”. 

Mr. Gove added “there will be nowhere to hide” for those who “fail to step up to their responsibilities”.

Reflecting on the Grenfell Tower tragedy, Mr. Gove also admitted in an interview with the Sunday Times:

“There was a system of regulation that was faulty. The government did not think hard enough, or police effectively enough, the whole system of building safety.

“I believe that [the guidance] was so faulty and ambiguous that it allowed unscrupulous people to exploit a broken system in a way that led to tragedy.”

However he said much of the blame also lies with those who made the products, did the work and signed it off; developers “put people in danger in order to make a profit”.

What does this latest government cladding update mean for homeowners?

So what does this government cladding update mean for homeowners? If you own a flat in a building 11 metres and over that has been developed or refurbished over the last 30 years in England and has life-critical fire-safety defects arising from its design and construction and the developer who built it signs up to the contract then this is good news for you.

It means the developer has committed to taking responsibility for all necessary work to address the life-critical fire-safety defects and to keep you informed. And if you have an agreed remediation plan in place it may make it easier for you to get a mortgage or sell your property. But when it comes to mortgages, each lender has different criteria for how they deal with fire-safety defects so it’s even more important than ever to speak to a fee-free mortgage broker about your options as they’ll give you the most up to date advice from across the mortgage market.

However there are still lots of questions about the government cladding update that we don’t have the answer to yet. We’ll update this article as developments unfold.

Concerns about latest government cladding update

Some concerns about the latest government cladding update have already been voiced. Lisa Nandy, shadow housing secretary, has questioned whether the terms of the contract have been diluted.

And Inside Housing reports that leaseholders are understood to have significant concerns about a term in the contract that absolves developers for responsibility for interim safety costs, including fire alarms and waking watches. 

These costs can be substantial; in one case waking watches were costing each household in a development more than £1,500 a month at one stage.

In some cases where developers have agreed to cover the costs of waking watches, residents are worried that a contract saying they are not responsible for doing so might undermine efforts to secure these commitments. 

Also, the Developer Remediation Contracts cover developments built by large builders who the government has contacted and asked to sign. If all the developers sign the contract, it means funding will be provided for an estimated 1,500 dangerous properties taller than 11 metres. 

However with more than 10,000 buildings expected to require work there is still a huge number of properties that will need funding from the state – or elsewhere – if leaseholders aren’t going to be the ones paying.

Are cladding manufacturers footing the bill?

While the government wrote to the manufacturers of cladding and insulation products last year, saying it would seek funding from them to help remedy the defective products, this process hasn’t moved on, according to reports. However Mr. Gove’s written statement on 30 January 2023 says that contractors and manufacturers are among those whose conduct is being investigated by his department’s recovery strategy unit.

And Inside Housing reports a source at the DLUHC saying:

“No options are off the table and we are working to identify and pursue companies that fail to do the right thing, including through the courts if necessary.” 

Will the leasehold system be abolished?

As well as the government cladding update there may also be good news for you if you live in a leasehold property. Criticism of leasehold has intensified since the cladding scandal. Many homeowners have faced crippling bills and been unable to sell their properties after buying leasehold flats that the freeholders refuse to make safe.

Mr. Gove has now said that he wants to abolish the leasehold system.

He said: 

“I don’t believe leasehold is fair in any way. It is an outdated feudal system that needs to go. And we need to move to a better system and to liberate people from it.”

Here at the HomeOwners Alliance we have been campaigning for the end to the leasehold system for several years so it is very welcome news to hear the government make fundamental reforms. But, as always, the devil will be in the detail.

HomeOwners Alliance Chief Executive Paula Higgins says:

“We are extremely pleased that the government has committed to a leasehold bill in the coming session of Parliament.

“But we need to wait and see if the draft of the Bill and whether it is indeed included in the next King’s speech which has been delayed until Autumn 2023.“

Those living in leasehold homes and awaiting clarification on the next steps might note that the passage of any reforms through Parliament won’t be plain sailing. Abolishing leasehold will need a credible cross party plan that backs up Gove’s fighting words so it sticks beyond the next election. 

When asked how quickly he plans to move forward with his promise to abolish leasehold ownership in the UK, Mr. Gove told the House of Commons:

“On leasehold, the plan is for a bill to be introduced in the [King’s] Speech and then rapid progress through this House.

“I do not know whether in the other place [referring to the House of Lords] there might be one or two people who are pro-feudalism, but I hope they will recognise that this House will be speaking with a united voice.”

Find out more on leasehold reform in the HomeOwners Alliance’s guide Leasehold Reforms: What you need to know about changes in the law, where they look at what leaseholders should do now.

Kindly shared by HomeOwners Alliance (HOA)

Main article photo courtesy of Pixabay