11th January 2022
Understandably, most attention on the Building Safety Bill has been focused on the proposal to extend the limitation period for claims under the Defective Premises Act. Less eye-catching, but perhaps just as significant for developers, landlords and leaseholders in residential developments are the Bill’s measures relating to the regulation of “higher-risk buildings”.
There are two elements to the new regime:
The provisions of the Bill are lengthy and complex and it is not possible to cover every detail in this article. What follows is a broad summary of the main provisions of the Bill and how they are likely to work in practice if the Bill becomes law.
“Higher-risk building” is defined differently for the purposes of Parts 3 and 4 of the Bill.
Clause 30 of the Bill would create a new section 120D of the Building Act 1984 which will define a higher-risk building in England as follows:
“(2) Higher-risk building” means a building in England that –
(a) is at least 18 metres in height or has at least 7 storeys, and
(b) is of a description specified in regulations made by the Secretary of State.
(3) The Secretary of State may by regulations make provision supplementing this section.”
In Part 4 of the Bill, higher-risk building is defined differently:
“(1) In this Part, “higher-risk building” means a building in England that
(a) is at least 18 metres in height or has at least 7 storeys, and
(b) contains at least 2 residential units.
“(2) The Secretary of State may by regulations make provision supplementing this section.”
Both definitions adopt the threshold requirement that the building must be at least 18 metres in height, or have at least seven storeys. Anyone familiar with cladding disputes will recognise the 18m threshold as a distinction adopted from Approved Document B: in theory at least[1], buildings under 18m in height should be capable of evacuation by the fire service using ladders, meaning less stringent safety standards are appropriate.
The definitions then diverge:
Draft regulations have been issued which shed some light on the intended scope of the two parts:
At present responsibility for enforcing the Building Regulations generally sits with local authorities[2]. Part 3 of the Bill will amend the 1984 Act so that responsibility for enforcing the Building Regulations in relation to higher-risk buildings will fall on the “regulator”, i.e. the Health and Safety Executive. The regulator takes on the newly defined role of “building control authority” for higher-risk buildings, as well as for work with a “prescribed connection” to higher-risk building work. Local authorities remain the “building control authority” for other work.
The Bill also expands the potential scope of the Building Regulations. If the Bill passes, the Building Regulations can include:
There is nothing in the Bill which limits the new scope of the Building Regulations to higher-risk buildings, but it is to be assumed that the new Regulations, if and when published, will draw a distinction.
One of the difficulties faced by occupiers of buildings affected by building safety issues is that it is not always obvious who bears responsibility for fixing issues with the fabric of the building. When an issue with (say) defective cladding is identified, leaseholders in residential blocks are often faced with a scenario whereby the landlord, developer and contractor all point fingers at each other, leaving the tenants with a choice between living with the potentially unsafe building, taking potentially expensive measures to remedy the situation themselves, or commencing a risky and expensive legal action.
Residents’ committees are convened, resolutions are made and letters are written, but in the meantime the building remains unsafe, because no one wants to be the party to put their hand in their pocket, pay for the necessary remedial works and then face the unpleasant task of trying to recoup that expenditure from others.
Part 4 of the Bill looks to overcome this problem by ensuring that for all higher risk buildings there is at least one “accountable person” who is under ongoing duties to assess the safety of the building and take such steps as are necessary to ensure the building is safe, including works to the fabric of the building. However, as set out below, the Bill as currently drafted does little to avoid the problem of leaseholders bearing the costs of such measures.
Who is an accountable person?
An accountable person is anyone who holds a legal estate in possession in the “common parts” of a higher-risk building, or anyone who is subject to a repairing obligation in respect of any of the common parts. “Common parts” are defined to include the undemised structure and exterior of a building, as well as any part provided for the enjoyment “of residents of more than one residential unit”.
This seems fairly straightforward: if there is a party with a repairing obligation in respect of the common parts, that party is the accountable person. If there is no-one with a repairing obligation, the accountable person is the party who has a legal estate in possession of those parts. Each of the following could be an accountable person:
The Bill therefore does not prescribe who will be the accountable person or even how many accountable people there will be: that all depends on the private arrangements between the parties with an interest in the building. What the Bill ensures is that at least one person will be the accountable person, and that person will be identifiable by reference to a straightforward test.
The Bill also introduces the concept of a “principal accountable person”. Where there is only one “accountable person” they will also be the principal. Where there is more than one accountable person, the principal accountable person will be the person who holds a legal estate in possession in the undemised parts of the structure and exterior of the building.
To hammer home the idea that someone identifiable must take on these new responsibilities, the Bill makes provision for an application to the First-tier Tribunal in the event of any dispute as to who occupies the role of accountable person or principal accountable person.
What must accountable persons do?
The Bill proposes that accountable persons and principal accountable persons will be subject to ongoing legal duties backed by enforcement on the part of the regulator and by criminal sanction in the event of non-compliance.
The Bill imposes different duties on accountable persons and principal accountable persons. These duties are built around the concept of a “building safety risk” which is a risk to the safety of persons caused by fire, structural failure or other matters specified in regulations.
Accountable persons would be made responsible for taking substantive steps to ensure the safety of the parts of the building for which they are accountable:
In addition to whatever obligations they may have as an accountable person, the principal accountable person is also required to perform duties aimed at coordinating, monitoring and reporting on the duties required to be undertaken by accountable persons:
Of all of the duties imposed by the Bill, the most significant seems to be that created by clause 86: the duty on accountable persons to take all reasonable steps to prevent a building safety risk materialising. Given that the Bill expressly anticipates carrying out remedial works as a “reasonable step”, this duty seems to be expansive, and potentially expensive for accountable persons. If an accountable person discovered that cladding on a higher-risk building was unsafe for example, it seems difficult to argue that they would not be under a duty to replace that cladding, “promptly”, as a reasonable step in order to prevent the building safety risk arising.
Although onerous, such a duty is precisely the policy that the Bill is aiming to create: if there is a risk to occupiers due to fire or structural failure, the Bill identifies a specific person responsible for dealing with that risk, and imposes a duty backed by criminal sanction to deal with that risk promptly.
Who pays?
That leads to the question of who pays for steps that have to be undertaken by accountable persons and / or the principal accountable person. The Bill proposes amendments to the Landlord and Tenant Act 1985 which will imply into relevant leases pursuant to which the tenant covenants with the Landlord to pay the “building safety charges” listed in a new Schedule to the 1985 Act. It is not possible to contract out of this implied covenant.
In outline, the landlord is entitled to pass on almost all of the costs of complying with the duties set out in the Bill, except for the cost of carrying out any works to the building, including works taken as a step under clause 86 of the Bill. “Relevant leases” are any leases for a term of seven years or more under which the tenant is liable to pay a service charge. Social housing is excluded.
On first sight, this appears to be a significant boon to leaseholders, and to achieve the government’s stated policy objective of relieving leaseholders of the costs of remedial works to the fabric of the building. In fact though, for most leaseholders the Bill will effectively preserve the status quo. Schedule 7 to the Bill (which creates a new Schedule 2 to the Landlord and Tenant Act 1985) makes it clear that “building safety charges”, which are passed on to tenants via service charges, do not include the cost of carrying out remedial works, whether pursuant to clause 86 or otherwise.
However, although such costs are not “building safety charges” for the purposes of the new Schedule, there is nothing in the Bill which prevents those charges being passed to tenants pursuant to the express terms of their leases (so that they fall outside the scope of the Bill completely). For many tenants, little will change, as was acknowledged by Mr Eddie Hughes MP in committee. He said that the purpose of the building safety charge being separate from the usual service charges under a lease was merely to ensure that residents are given “further information about what they are paying for to keep the building safe and assurance that the manager of the building is charging reasonably“. He also confirmed that it was not the policy of the Bill to interfere with the allocation of costs as determined by the terms of a particular lease:
” We wish to make it clear that remedial costs are not included in the building safety charge. This clause does not make leaseholders liable for the costs of remedial works. Whether or not leaseholders are liable for works is governed by the terms of their existing leases.“
Even if the express terms of the lease are not such as to allow the landlord to pass on costs of remedial works via a service charge, many landlords will simply not be in a position to pay for necessary works. Ownership of residential developments is often structured in such a way that the immediate landlord is little more than a shell company with no real assets.
The problem of shell landlords is not unique to this context, but the courts have taken the view that it is for Parliament to solve the problem by providing routes for tenants to sue up the landlord chain (see Rakusen v Jepsen [2021] EWCA Civ 1150). As currently drafted, the Bill does not appear to do very much to improve the lot of tenants faced with the prospect of expensive safety-critical remedial works to the fabric of their building.
How are the duties enforced?
The first line of enforcement of the substantive duties created by Part 4 consists of the duties imposed on the principal accountable person. The obligation to register a building with a regulator, report on demand (via an application for a building assessment certificate) as to how the duties are being complied with, and to appoint a building safety manager will all put pressure on accountable persons to comply with the substantive duties imposed by Part 4 of the Bill.
In the event of a failure to discharge the new duties, the regulator is empowered to issue contravention notices requiring an accountable person to remedy any failure. In extremis the regulator can apply for a “special measures order”, in which case the regulator effectively takes charge and appoints a special measures manager to implement the steps required by the regulator.
Sitting behind all of that is the risk of criminal sanction. Failing to meet a requirement of Part 4 of the Bill in such a way as to create a significant risk of death or serious injury is an offence punishable by a fine and / or imprisonment. Corporate officers can be held directly liable for offences of corporate landlords, although it is unclear whether this would be of any assistance in the “shell landlord” scenario identified above. The offence created by clause 101 of the Bill requires that the accused contravened one of the relevant requirements “without reasonable excuse”: a lack of available funds seems likely to be a “reasonable excuse” for these purposes.
Once one penetrates the dense regulatory drafting, it becomes apparent that the Building Safety Bill proposes a radical realignment of responsibility for ensuring the safety of higher-risk buildings. Landlords and developers in particular will want to carefully study the implications of the Bill, and no doubt if enacted the Bill will result in many taking on duties they would much rather be without.
Overall though a legal framework which ensures that someone is directly responsible for the safety of the common higher-risk buildings ought to be welcomed. The new regime ought to ensure that risks are identified and dealt with before they materialise. Where things nevertheless go wrong, it ought to be more straightforward to identify the responsible party.
Author: Daniel Churcher
[1] The National Fire Chiefs Council has questioned whether this distinction is realistic, given that many fire services only have ladders capable of reaching 11m heights. The adequacy of the threshold has also been raised as an issue by the Public Bill Committee for the Building Safety Bill: see James Leabeater QC’s article on the Committee hearings.
[2] Per section 91(2) of the Building Act 1984.
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