Government action on cladding - how did the industry react?

On Monday, Michael Gove - Secretary of State at the Department for Levelling Up, Housing and Communities - announced that leaseholders in buildings 11 to 18 metres in height will no longer have to contribute to replacing cladding, following sustained criticism of the government's handling of the cladding scandal.

Despite this move, as it stands, there currently remains no help for those living in buildings under 11 metres high.

In a statement to the House of Commons, Gove also warned developers that they must agree to a £4 billion plan to fix dangerous cladding on low-rise flats by March or risk new laws compelling them to act. Gove warned property developers who have profited from dangerous cladding, which was exposed most devastatingly in the Grenfell Tower fire of June 2017, that 'we are coming for you' as he set out the government's plans unveils to ensure developers - and not leaseholders - pay for cladding refurbishments across the UK.  

But how did the industry react to this latest development in the leasehold/cladding crisis?

The Association of Leasehold Enfranchisement Practitioners (ALEP) welcomed the action taken by the government to ensure developers are held responsible for meeting the cost of removing unsafe cladding for lower height buildings. 

Mark Chick, ALEP director, said: “ALEP welcomes today’s announcement by the Housing Secretary, which will hopefully free leaseholders living in lower height buildings from the burden of paying to remove unsafe cladding materials. It is entirely appropriate that the companies responsible for installing defective materials should pay for any removal and remediation work, rather than the homeowner." 

He added: “However, many flat owners have been left in limbo, unable to sell or remortgage their property until any uncertainty concerning the exact type of cladding on their block has been resolved. Therefore, it is essential that government now works with the wider construction industry to identify those blocks that are actually at risk.” 

MetroPM, a national residential property management company, also praised the move to remove any financial burden on leasehold, but said the estimated £4 billion costs may well have to be funded by the Treasury as it was 'unclear how alternative plans to make developers pay could work'.

The cladding scandal originally emerged after the Grenfell fire, which killed 72 people in 2017, after which flammable cladding and other fire safety defects were discovered in hundreds of blocks of flats across the UK. Since that point, it has left many homes unsellable and unmortgageable as well as leading to expensive waking watches on homes identified as a fire-risk. Research carried out last year by the London Assembly found that these waking watches were costing Londoners a staggering £16,000 an hour. 

The government had already promised to pay to remove cladding in taller buildings, and Michael Gove has now indicated that leaseholders in buildings between 11 and 18.5 metres will no longer be expected to pay.

Ian Smallman, a director at MetroPM, which has offices in Birmingham and Cheltenham, said: “We welcome what now appears to be the agreed principle that no leaseholders will be burdened with the cost of remediation. But someone, somewhere will have to pay and the devil will be in the detail of the government’s plans to chase developers for these costs."

He added: “It will be interesting to see how they are going to pursue this issue legally given that developers were only ever acting to fulfil building regulations that were in place at the time.

“The important thing is that the works should be starting now to ensure that everyone is safe, and that means the Treasury should arguably foot the bill at this stage as no one knows how long the alternative legal process will take, or whether it could ever work.”

Israel Moskovitz, property investor, expert and founder of Avon Group, said of the announcement: “We were pleased to hear the government’s latest announcement on the issue of cladding. It is encouraging that proper plans are to be put in place to reduce ambiguity and ensure that the costs of fixing dangerous cladding isn’t put on leaseholders and companies who had no control over the building process." 

"This cladding crisis has gone on for far too long, and it is only right that the government is now finding a way to support those in buildings under 18.5m too and taking action to raise £4bn to make affected buildings safe. This should help residents across the country live in safe conditions without footing enormous bills."

He added: "However, it is essential that the government also address funding for the building safety defects not mentioned in this announcement such as defective fire doors, wooden balconies and construction defects.”

Meanwhile, Residential property experts at law firm Irwin Mitchell say the announcement shows the government has shut the door on providing its own funding to help leaseholders, instead relying on developers to pay for the cladding crisis.

Jeremy Raj, national head of residential property at Irwin Mitchell said: “The sentiments and ambition of Mr Gove’s statement today were praiseworthy and long overdue. The realities of his proposals are, however, as yet of questionable efficacy and breadth."

“The truth is that the fifth anniversary of Building Safety reaching its current level of crisis for leaseholders in taller blocks of flats in particular is fast approaching. The acknowledgement today that reaction to date has been slow and ineffective will be cold comfort, particularly in relation to those with non-cladding issues. Government must indeed accept when its own performance has not been acceptable and ensure a rapid improvement.

“The cladding on Grenfell had nothing to do with current or historic developers of new build homes, having been retro-fitted many years after the original build, using materials that were clearly dangerous that seem to have been ignored or waved through by the regulatory authorities.

“The idea that responsibility for resolving the cladding scandal – which has now widened to become a general building safety scandal - should be laid solely at the doors of developers asked to voluntarily cough up more cash, is likely to lead only to further delay and heartbreak for leaseholders caught in dangerous or un-sellable properties.

“Many developers will be puzzled as to how and to what extent they can justify such expenditure on a ‘voluntary’ basis in the context of their obligations to shareholders, and a lack of direct responsibility, particularly given clear evidence of contributory negligence by others.

Large housebuilding developers are already facing the Residential Property Developer Tax, which targets companies with annual profits of over £25m with a 4% tax to go towards cladding, and the legal experts at Irwin Mitchell argue that laying the blame at one person’s door doesn’t help the situation for affected leaseholders – or help with the long-term housing crisis the UK is currently facing.

Raj continued: “In the context of an acute national shortage of safe, suitable and environmentally sound housing stock, it will not help to demonise and threaten all developers if they can clearly see that the manufacturers and suppliers of those dangerous materials, the poorly resourced regulators and the industry as a whole, seem to be being let off the hook.

“It now seems clear that the Treasury has firmly shut the door to further funds being made available and that, along with Planning reform, a full upgrade and proper funding of Building Control remains a distant hope for the future.

“Nobody wants the leaseholders caught up in the post-Grenfell nightmare to continue to suffer, and it is right that they should be absolved of financial responsibility for making their buildings safe.

“However, significant issues relating to building safety remain in addition to the cladding problems and many of our clients do not appear to be helped by today’s announcement in resolving the problems with the homes they bought in good faith, expecting them to be safe to live in and easy to sell on.”

Elsewhere, Kate Davies, executive director for the Intermediary Mortgage Lenders Association (IMLA), commented: “The statement that the government will seek a ‘solution in law’ for slow-moving developers is promising, but also suggests further delays and a timescale that is of little reassurance to leaseholders here and now. Withdrawal of the consolidated advice note is also welcome but, again, we have questions around how long it will take the BSI to draw up the promised new proportionate guidance.”

She added: “Even where the government provides a timeframe, this vagueness persists. Developers have been given two months to create a plan for resolving the growing cladding costs crisis but, without a sense of the time required for the government's Apex taskforce to identify and contact recalcitrant developers, leaseholders have been given little more of a promise than ‘trust us and wait.’”