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Cladding Remediation Costs (3/22)

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Building owners have asked residents to  bear financial responsibility.  As you will know, the Government has committed £5 billion to fully fund the remediation of dangerous cladding for all leaseholders in high-rise residential buildings (18 metres and higher) in England. I was encouraged to learn that over 97 per cent of the buildings identified as having unsafe Aluminium Composite Material (ACM) cladding at 31 December 2019 have either completed or started remediation work.  

Decisive steps have been taken to ensure that those who manufactured dangerous products, developed unsafe buildings, or profited from the crisis pay to make it right. The Secretary of State has been clear that developers have until March to agree to a fully funded plan of action to remediate dangerous cladding on medium-rise buildings (11 to 18 metres) in England. Ministers assure me that all steps necessary will be taken to make this happen. If industry fails to take responsibility, the Government will if necessary impose a solution in law. Cladding and insulation manufacturers also have until March to agree a settlement that will restore confidence and secure an appropriate contribution from the sector.

To deliver a robust and proportionate building safety regime, the Government has put forward a Building Safety Bill and I am sure that many will join me in welcoming the fact that new amendments to the Bill will introduce statutory protection for leaseholders. This will enshrine in law the Government's commitment that no leaseholder living in a building over 11 metres will  pay a penny for the removal of dangerous cladding. 

I should stress that buildings below 18 metres are safe, unless there is clear evidence to the contrary, and I welcome the Government’s efforts to encourage the use of sensible mitigations such as sprinklers and fire alarms. An additional £27 million has been announced to install fire alarms in residential buildings of all heights where a waking watch is in place. This builds on the £35 million already available to reduce dependence on costly watches in high-rise buildings. Furthermore, the Secretary of State has committed to undertake cross-governmental work to protect leaseholders from forfeiture and eviction because of historic costs.  

A new UK Residential Property Developer Tax will be introduced from April 2022, with a Building Safety Levy set to follow for developers seeking permission on certain high-rise buildings. These are crucial steps in ensuring that taxpayers do not foot the remediation bill and large property developers contribute to the national effort to correct these safety issues.  

Non-cladding costs 

In the aftermath of the Grenfell tragedy, the independent expert panel recommendation was to focus on unsafe cladding, which is why the remediation of cladding has been at the centre of making buildings safe. It is also the case that unsafe cladding acts as an accelerant to fire spread, and funding will remove the biggest obstacle to remediation proceeding. That is why I am glad that the Government has stepped in to protect leaseholders living in medium and high rise buildings from the cost of remediating dangerous cladding. 

The Government has set out proposals to protect qualifying leaseholders in buildings over 11 metres with properties valued at less than £175,000 (£325,000 in Greater London) from all remediation costs. Elsewhere, developers that still own a building over 11 metres that they built or refurbished, and landlords linked to an original developer will be required to pay in full to fix historic building safety issues in their property. This will also extend to building owners who are not linked to the developer but who can afford to pay in full.  In the small number of cases where building owners do not have the resources to pay, leaseholders will be protected by a cap. This will be set at £10,000 for homes outside London and £15,000 for homes in the capital. It will be inclusive of past costs, meaning that any cost already paid towards waking watches and other costs will be taken off the sum.

Safety of Construction Products 

As part of the Government's ongoing work to reform and strengthen building safety regulation, I welcome that two experts have been appointed to lead an independent review of the system for testing construction products. The panel will engage with a wide range of stakeholders and examine how to strengthen the current system to provide confidence that materials are safe and perform as marketed.  

Additionally, a new National Regulator for Construction Products will be established within the Office of Product Safety and Standards and given powers to remove any product from the market that presents a significant safety risk. This will be complemented by measures in the Building Safety Bill which will seek to make fundamental changes to the regulatory framework for high-risk buildings and ensure that rigorous safety standards are upheld for construction products. 

External Wall System 1 Forms (EWS1) 

It is important to note that the External Wall System 1 (EWS1) process is not a Government or regulatory requirement: it was created by the industry.  I welcome the publication of expert advice setting out that EWS1 forms should not be a requirement on buildings below 18 metres. This is fully supported by the Government and by all major lenders, and it is therefore disappointing to learn that the Royal Institution of Chartered Surveyors (RICS) has decided not to accept the panel's advice. Rightly, the Government has stated that is expects RICS to “work harder with lenders to protect leaseholders in flats that are safe from unnecessary anxiety and mortgage delays, which their EWS1 process is causing.”  

In cases where an EWS1 form is required, I am encouraged by the Government’s action to helps speed up the valuation process for homeowners. Nearly £700,000 has been announced for RICS to train more assessors to carry out the EWS1 assessment. The Government will also be implementing a scheme to indemnify building assessors conducting external wall assessments, giving them the confidence to exercise their balanced professional judgment. 

New guidance for assessors  

I am encouraged that the Government is supporting new, proportionate guidance for assessors, developed by the British Standards Institution. This will help to ensure external wall assessments are carried out to a high and consistent standard, giving building owners clarity on the fire risk of the construction of external walls. 

Insurance Premiums 

I recognise that there is concern amongst leaseholders regarding the rising cost of building insurance premiums in high-rise flats, even in properties unaffected by cladding issues. That is why I am encouraged that the Minister for Building Safety, Lord Greenhalgh, will be working with insurers on new industry-led approaches that bring down premiums facing leaseholders.

The Secretary of State has also asked the Financial Conduct Authority (FCA) to review the sector, in close consultation with the Competition and Markets Authority. The FCA will recommend measures that industry, the Government and regulators could take to achieve the goal of creating a more affordable marketplace for buildings insurance that offers widely available and affordable cover for those who live in flats and other multiple-occupancy buildings. Let me assure you that I will continue to follow developments in this area closely. 

Tax on Premiums

Insurance pricing is a decision which is affected by a wide range of factors, and the taxes that insurers pay are just one part of this. It is hard to predict the impact of an exemption on insurance pricing for leaseholders, as this largely depends on how the insurers would react. In addition, any loss in tax revenue would have to be balanced by a reduction in public spending, increased borrowing or increased taxation elsewhere. While I understand that there are no current plans to introduce an exemption on insurance pricing for leaseholders, all taxes are kept under review and are carefully considered as part of the annual Budget process.

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Dr Liam Fox MP Member of Parliament for North Somerset

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