The Secretary of State for Levelling Up, Housing and Communities (Michael Gove)
It is a basic requirement of a modern society that people should feel safe in their own homes. For too many people this has not been the case. It is not the responsibility of Government alone to keep watch and to ensure that homes are fit for habitation, and that people can sleep safely; it is the responsibility of the industry that builds them, too. For too long, we know, that responsibility was not upheld by all in the way that it should have been; too many people have suffered and continue to suffer as a result.
One year ago, we set about righting those wrongs with what should have been a statement of the obvious: the moral duty to pay the cost of replacing unsafe cladding belongs not just to Government but to those developers, product manufacturers and building owners that put unsafe materials on people’s homes and continue to profit from them—and not the innocent residents living inside them.
One year on, the laws passed by this Parliament and the actions taken by this Government have systematically broken impasses that were considered intractable.
Leaseholders have been given legal protections from unfair remediation bills for the first time, thanks to the Building Safety Act 2022.
Leaseholders can sell affected properties and move on with their lives, or know that they have the freedom to do so when they choose: earlier this month Colleagues across the House joined me in welcoming the statement from the six major mortgage lenders confirming that they would once again consider mortgage applications on properties that are covered by the leaseholder protections in the Building Safety Act, or where the building is eligible for a Government or developer remediation scheme.
The Building Safety Act created new powers to compel the owners of unsafe buildings to ensure properties are fixed, and to require those who are responsible for their defects to pay for their errors and corner-cutting. These powers are available not only to Ministers, but to fire services, councils, and most importantly to leaseholders. The Government are continuing to work closely with fire services and councils to ensure that building owners are being held to account for their actions, and that, where required, enforcement action is being taken against them. Developers and building owners responsible for unsafe buildings should be under no doubt: there will be significant consequences if they fail to comply with their legal obligations.
The developer contract
In April last year, I announced that the largest house builders had signed a non-binding pledge outlining their intention to fix all life-critical fire safety issues in buildings over 11 metres which they had a role in developing or refurbishing in England. I welcomed their constructive engagement, as I do again now.
I am today publishing the contract that will legally commit developers to delivering on their word; a commitment worth more than £2 billion that will protect leaseholders in hundreds of buildings.
Developers will also be required to reimburse the taxpayer where public money has already been used to make their buildings safe. While there is much more to do, today is a major step towards putting leaseholders’ minds at rest.
Once the contract is signed by these developers, leaseholders and owners in affected buildings will benefit from a common framework of rights and responsibilities that will get buildings fixed without cost to leaseholders. The contract confirms that the developers will inform residents in affected buildings how they will be meeting these commitments. I am grateful to those developers who have got on with assessing and remediating their buildings without waiting for the contract.
I expect developers to sign the contract within the next six weeks, by 13 March. This includes every company that signed the pledge, as well as several companies that have regrettably not done so. If you built unsafe buildings over 11 metres but did not sign the pledge, I am putting you on notice: expect to be asked to step up in the near future. Now is the time to make a binding commitment. In signing this contract, developers will be taking a big step towards restoring confidence in the sector and providing much needed certainty to all concerned. They will confirm that they are responsible companies. I know, from the positive discussions I have had, that many will be keen to do so. This contract will allow those developers to plan for the future in the knowledge that they understand the full extent of their legal obligations.
The Responsible Actors Scheme
Using powers provided in the Building Safety Act, I will lay regulations this Spring to create a Responsible Actors Scheme, and make sure that eligible developers that do not sign up are prohibited from carrying out major development, and from receiving building control sign-off for buildings already under construction.
The regulations will set out eligibility criteria for the scheme and will require members of the scheme to enter into and comply with the terms of the developer remediation contract we published today.
Major developers who have built defective buildings need to sign the contract and comply with its terms. This is not up for debate. Any eligible developers who refuse to sign the contract and join the statutory scheme will be subject to the prohibitions.
I am looking at expanding the scheme in due course. I want to capture all those who built unsafe buildings over 11 metres and should be paying to fix them. If that is you, you should expect to be invited to step up and join the scheme in the near future.
Holding wrongdoers to account
My department’s Recovery Strategy Unit (RSU) has spearheaded legal action against recalcitrant freeholders and is actively investigating the concerning conduct of various companies across the built environment, including contractors and construction product manufacturers.
To those freeholders holding back work to make buildings safe, even where the Government has made sufficient money directly available through its building safety fund: you must fix your buildings or we will take action, including through the courts. This legal action has already started, and leaseholders have already secured the first successful remediation contribution order. I would encourage others to use these new powers to challenge bad behaviour.
I have heard with great concern from residents and leaseholders about the actions of some property funds that are delaying vital remediation work. My message to them is clear: if you cannot fulfil your responsibilities and make these buildings safe, you should sell them to someone who will. We are also backing councils to boost their enforcement action against freeholders unacceptably delaying works to make their buildings safe, with more than £8 million committed to support local authorities in the areas most affected by building safety issues.
Building insurace
At my request, the Financial Conduct Authority (FCA) reviewed the buildings insurance market for multi-occupancy residential buildings. Its report highlighted serious issues relating to commissions and other payments being shared with property managing agents, landlords and freeholders by insurance firms, with such payments making up at least 30% of leaseholders’ insurance premiums on average. The FCA also identified concerning obstacles faced by some leaseholders in trying to understand or challenge their insurance bills. This is not acceptable, and we must act.
I can confirm today that I will take action to ban the unacceptable practice of managing agents, landlords and freeholders receiving commissions and other payments from insurers and insurance brokers. I will replace these payments with more transparent fees and over the coming year I will press insurance brokers, managing agents and freeholders to change their practices as a matter of priority. I will also arm leaseholders with more information, enabling them to better scrutinise costs. I will also ensure leaseholders are not subject to unjustified legal costs and can claim their legal costs back from their landlord. These steps will ensure that leaseholder insurance costs are fairer and more transparent and will rebalance the legal costs regime to give leaseholders greater confidence to challenge their costs.
I am pleased to see that the FCA has committed to investigating broker practices and consulting on regulatory changes to further protect and empower leaseholders. While this is a positive first step, leaseholders require meaningful change to ensure that they are better protected in the future. Leaseholders also need insurance premiums to reduce significantly and urgently, but it is clear that the quality of data in the insurance sector must improve to make this possible. I expect the FCA to ensure that industry implements its new data collection code for fire safety, to report on what actions it will take to ensure a fairer and more competitive market by the summer and to continue monitoring this sector.
I also welcome continuing work by the insurance industry on launching a UK-wide scheme to reduce the most severe premiums for leaseholders in buildings with significant fire safety issues, but I must stress the urgency: leaseholders need this support now.
Transforming the built environment
We are creating a culture of high standards that will transform the sector and ultimately the built environment, working closely with those who do that building. Together we will put standards and safety first, and must recognise that when these interests of those who live in homes and those who build them are aligned, everyone will benefit in the long run. The Government will play their part in that not only through clear regulation, but through leadership that holds wrongdoers to account.
The new Building Safety Regulator will oversee this culture of standards. The Government will be taking forward an ambitious programme of secondary legislation over the next year to set the regulator on firm foundations. Building owners and managers should already be preparing for the first requirement due to come into force soon—the requirement to register higher-risk buildings with the regulator. I will be working closely with the regulator to ensure that we have the world-leading regime that residents and leaseholders deserve, and I look forward to approving their first strategic plan in the coming months.
A copy of the contract will be deposited in the Library of both Houses and is available at: www.gov.uk.