Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Committee stage
Monday 24th April 2023 Lords Chamber

The present arrangements are far from suitable for dealing with changing circumstances. For example, if something else came along quite unexpectedly, like Covid-19 did, we could again see massive changes taking place in a very short space of time, when we have not even coped with the knock-on effects from the last change. I hope the Government are going to be reasonable this time around. This is a reasonable amendment that should not be lightly dismissed or ignored in the way that it has been previously.

[The Earl of Lytton (CB)]

My Lords, the noble Lord, Lord Brooke of Alverthorpe, raises a matter which concerns me. I congratulate the noble Baroness, Lady Pickering, on this amendment. I am not, and never have been, a member of the licensing committee, but I am bound to admit that I have enjoyed many of the venues that are facilitated by the licensing process.

My example is a little different, because this is not just a matter of licensing. It concerns the 24/7 use of an urban industrial area not very far from one of London’s major international airports—hence it is 24/7. It is an older industrial estate that had been subject to periodic, sporadic, upgrades of buildings. However, the local authority, in its infinite wisdom, gave consent for a piece of land on the edge of this industrial area, which I think had previously been residential back gardens, to be used for a residential development. This triggered a change of policy within the local authority, such that every time somebody wanted to do anything on the industrial estate—change a roller shutter door, have a better loading canopy or something like that—an hours of work restriction would be imposed, so preventing it being used 24/7. I challenged a local elected member on this, who was unaware of what his council had done and what the implications were.

I accept that that is a different situation from what one might call the shared space of a town centre, but I think it is relevant that we have—sorry to use the awful phrase—joined-up policies in relation to all these things, unless we want situations happening on our high streets such as those to which the noble Lord, Lord Brooke of Alverthorpe, referred to. Later on, we will get to what happens with vacant properties in high streets when—when—we get to the group that is currently number 28 on the Marshalled List before your Lordships. My Amendment 426 in that group is on this issue.

One other issue is what we might call the administrative framework aspect of all this. I think of circumstances to do with the way in which local government or contractors organise such things as waste collection from premises in urban centres; refuse collectors can turn up in the small hours of the morning and cause disruption. I wonder whether we are not sometimes making a rod for our own backs by not thinking ahead about how we organise these things. Some are displaced by concepts such as core time servicing and other such matters relating to our town centres. There tend to be rather individual, single-issue decisions, without looking forwards, backwards or sideways.

I offer a word of caution to the noble Baroness, Lady McIntosh of Pickering, on the wording “can be integrated” in the amendment. The phrase “can be integrated” does not necessarily mean that a new development will be integrated. I interpret “can” as facilitative, “will” as something more demonstrative. If the administrative rollout is subject to all manner of change going forward, without a statement of principles and constant monitoring of the unfolding process, we may end up with decisions made on a “moment in time” principle rather than having the dynamic under constant review and consideration.

There is obviously a resource implication here but, unless we do this, as the noble Lord, Lord Brooke of Alverthorpe, says—given what has happened in just the last few years and post Covid, with the changes in demand, journeys to work and work-life balance—we will not be anywhere near ahead of the curve in getting this right. Other than that, I strongly support the principle of this amendment; I think it a really worthwhile amendment for consideration by your Lordships.

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Moved by

[The Earl of Lytton]

274: After Clause 106, insert the following new Clause—
“Building Safety Remediation Scheme(1) Planning permission must not be granted to any developer or associate responsible for the construction or sale of units in a building with a building safety risk until the Secretary of State has established a Building Safety Remediation Scheme. (2) Schedule (Building Safety Remediation Scheme) makes further provision for the establishment of a Building Safety Remediation Scheme.(3) This section comes into force six months after Royal Assent.(4) “Associate” has the meaning given in section 121 of the Building Safety Act 2022.”Member's explanatory statement
This clause inserts a new Schedule to implement a building safety remediation scheme to ensure that buildings with building safety risks are put right without costs to leaseholders.

[The Earl of Lytton (CB)]

My Lords, in moving Amendment 274, I will speak also to Amendment 318 in my name and that of the right reverend Prelate the Bishop of Chelmsford. In doing so, I draw your Lordships’ attention to my professional interests.

I have two other amendments in this group: Amendments 320 and 325. They are on a related issue but, given the detail that I need to provide in relation to Amendments 274 and 318, I will do no more than signify my firm support for them and leave the heavy lifting on them to my co-signatory, the noble Lord, Lord Young of Cookham; I thank him very much for agreeing to do that.

While I am talking about the other amendments in this group, let me say that I agree that Amendment 504GJD in the name of the noble Baroness, Lady Hayman of Ullock, is certainly worthy of consideration in terms of providing better passive fire safety measures.

I turn to Amendments 274 and 318. I express my thanks to the Bill team for their engagement; to campaign groups across the country for maintaining awareness of the issues; and to the members of the policy team who have supported me. There are too many of them to name but they know who they are and I am very grateful to them. Most of all, I am grateful to the more than 200 individuals and leaseholder residents’ groups who have written to me over the past four weeks both to support me and to tell me about the tragedies and individual concerns that have beset their lives. It is particularly to give them a voice that I raise this issue today.

Amendments 274 and 318 concern, I believe, matters of great social and economic importance. Despite the Government’s measures in the Building Safety Act 2022, far too many leaseholders remain adversely and significantly affected by serious defects in the original construction of the buildings that they occupy or own. Although the BSA was a significant first step in solving the building safety crisis, it leaves significant numbers of leaseholders without adequate protection from, variously, cladding and non-cladding costs, and much of it is based on extra-statutory commitments of one sort or another. So we have a situation where enfranchised leaseholders and buy-to-let owners with more than three properties are excluded, while residents living in buildings below 11 metres in height receive no protection from non-cladding costs at all.

Correspondents tell me that the Government’s remediation scheme is not working for them and that there is confusion about the process, qualifying interests and building height calculation, with gridlock until all the complex arrangements are in place. The most frequent comment is that owners are still locked into unsaleable properties with waking watch and massive insurance costs, as well as high remediation bills in prospect without any early or firm date for resolution. I now learn that many conveyancers may even be reluctant to take on work involving buildings over 11 metres high because of the complexity and professional risks that face them.

I welcome the announcement that many of the country’s largest developers have committed to remediating buildings that they were responsible for, but I am concerned that their contractual obligations are limited to life-critical fire safety defects, rather than the wider definitions in the Building Safety Act. Furthermore, the developer contract apparently covers only around 10% to 15% of buildings that require remediation and appears to absolve developers of responsibility for those waking watch and other consequential costs.

Statutory liability for remediation itself is placed on landlords but without consideration of whether they have the resources to deal with this issue and are able to cover the costs. The DLUHC impact assessment admits that it has no cost estimates when it states:

“For buildings above 11 metres that have historical non-cladding fire safety defects, there is no reliable data”—


not even estimates—

“on the prevalence, or extent, of these costs”.

However, an Association of Residential Managing Agents survey suggests that the non-cladding remediation costs in buildings above 18 metres are, on average, £25,671 per flat and, in buildings below 18 metres, £38,184 per flat. There appears to be no data on the sub-11-metre block remediation issues. We do not know how many we are dealing with. By my reckoning, more than 200,000 individual flats are significantly affected in England alone. Others have arrived at higher totals. So my first question for the Minister is: will she be kind enough to tell us what figure her department is working to?

Some landlords have the resources to meet these remediation obligations but it is not universal. Several large groups are in fact thinly capitalised or have significant indebtedness. For example, the three groups that comprise what is known as the Long Harbour fund appear to have relatively modest net assets, while the Consensus Business Group has significant borrowings from insurer Rothesay Life. They are unlikely to have the free cash to fund remediation works as well as servicing their bondholders and lenders if the incidence of defects and the average remediation costs, to which I have referred, are totted up.

As noble Lords will know, freeholds are typically valued by capitalising the sum of the net ground rents. In value terms, however, they are small by comparison with the collective of leaseholds. High remediation liabilities may make them worse than valueless. So if landlords’ interests are negative and they become insolvent—bear in mind that some of them are dealt with through special purpose vehicles—these freeholds, with their negative value, are likely to be disclaimed by liquidators and escheat to the Crown, with all the delays and uncertainty that that entails. I foresee a legal limbo with unsaleable flats; although this would be unprecedented at scale, it is far from improbable, yet nobody in DLUHC admits to having done the calculations to assess the impact.

My fear is that the Government’s approach creates new credit risks for lenders, particularly in relation to buy-to-let portfolios. If excluded leaseholders are unable to pay their share of the remediation costs, schemes of remediation risk simply being stalled. In such circumstances, leases could be forfeited, widening out their lender security unless extra capital is given. Such a forfeiture would providentially give landlords a windfall gain. Historically, few leases have been forfeited because rebalancing the mortgage has been the preferred course of action. However, it is one thing to have a debt of a few thousand pounds on a service charge in arrears; it is another thing to have the much more costly and complicated scenario of remediation costs, which may run into tens of thousands of pounds. I do not believe that historical forfeiture data gives an accurate picture of the new scenario going forward. Credit risk and mortgage interest recalibration are likely to have impacts on the wider financial system and, in turn, effects on other derivatives and insurance policies. I believe that this is something that has some way yet to unravel.

This is not only about the free market; it is about the social sector as well. Many shared equity owners have told me that, although they have a minority equity stake, they are being made responsible for a 100% share of the remediation applicable to their unit of occupation. That seems grossly unfair. Amendments 274 and 318 would avoid all this and provide for an alternative, comprehensive solution to the building safety crisis that protects all leaseholders from past and future issues.

Amendment 274 would mandate the Government to establish a building safety remediation scheme—BSRS. Amendment 318 would create a new schedule setting out guidance for its key features, all intended to dovetail with the principles of the existing building safety fund. The intention is to protect all leaseholders—indeed, all owners of buildings of whatever height and tenure—from the costs of remediating buildings that are unsafe in their construction and the interim safety measures in circumstances where they are entirely innocent of the causes of these defects.

Where a building constructed since 1992 did not comply with the regulations in force at the time, strict joint and several liability for remediation of all material building safety defects would be placed on a developer and principal contractor. If neither is able to pay, or if a building met the regulations that were in force at the time of construction but is now seen as unsafe, which can happen, remediation funding would come from a much wider levy on the construction industry and materials providers as a whole, rather than just developers, as is currently proposed by the Government. Once a significant effect is established, there is no need for property owners to apportion blame; the industry can sort that matter out for itself.

Remediation will be carried out to standards under the BSA to avoid concerns about remediators effectively policing themselves and, worse, using their own selected approved inspectors. These may be the same firms that previously signed off things that they should not have.

Noble Lords will excuse me for not explaining Amendment 318 line by line given its length, but I seek brevity. Anyone wanting further detail can go to a resource at tinyurl.com/earloflytton. The approach has been scrutinised by a leading construction counsel, a planning KC, parliamentary counsel and other legal minds, as well as by building control, construction and fire safety practitioners. I am extremely grateful to them all for their input. It has attracted support from Ted Baillieu, former state premier of Victoria, Australia, and co-chair of the Australian cladding task force. This matter is attracting international interest around where we go with these sorts of defects. It has also attracted the interest and support of other organisations, including the Association of Mortgage Intermediaries, ARMA, the British Property Federation, the Intermediary Mortgage Lenders Association, NAEA Propertymark, the National Residential Landlords Association, and many others.

Developers should have been the first stop in the Government’s waterfall principle that we discussed just over a year ago. The BSRS bolts on to the existing government commitment, gives leaseholders and lenders more certainty of remediation, and puts them in a greater degree of control. However, it does not just deal with the present crisis. It covers similar situations in the future, and will, I believe, make short-cutting in building standards unworthwhile going forward. We all know that the race to the bottom on quality must cease. The BSRS provides a necessary layer of protection, especially as the Building Safety Act specifically excludes enfranchised leaseholders and commonhold unit owners from all its protections.

The Government do not have the money to solve the problem and are, at present, as I see it, unprepared to place the responsibility on the construction industry that has created this situation over decades of marking its own homework. I believe that the proposals I am advancing would deal with this. Echoing what one commentator said to me last week, if we do not get this right then the taxpayer could end up meeting the entire cost and we will go on building homes badly. We cannot allow that to happen.

All that apart, this is a fundamental matter of justice and equity. It is about protecting the innocent and vulnerable from the cost of failures by profitable enterprises—businesses that would be held liable for their actions in any other mercantile circumstances that one might conceive of. Indeed, the most basic function of government should be the protection of the citizen and society. Meanwhile, my mailbox continues to be filled with tales of individual tragedy, lives on hold, unsellable property, finances in disarray, fear of imminent bankruptcy, careers and retirements wrecked, mental health threatened, weddings shelved, the starting of families put off, forced evacuations—25 blocks is the tally since 2017—and much more misery besides. This crisis is not over until everyone is protected. I beg to move.

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[The Earl of Lytton (CB)]

My Lords, this has been an extremely interesting debate. I thank all noble Lords for their contributions on this group of amendments.

I thank the noble Lord, Lord Young, for covering all the technical bits that brevity forced me to omit; I am grateful to him for that. The right reverend Prelate the Bishop of Guildford gave an outstanding and thought-provoking commentary on, among other things, corporate motivation and where that should sit in the rules-based order.

The noble Baroness, Lady Fox, asked me some specific questions. I will give it a go in terms of giving her a brief response, but if she wants more information then I ask her to let me know because I may need to write to her. She asked me about the potential damage to the construction industry. My belief is that the construction industry should be able to build its way out of the liability—admittedly, probably at a lower profit margin, but that should be a viable option for it, so I do not see this as being a total loss. One of her later points was about market damage. The best estimate at the moment is that about 10% of the blocks are affected, which effectively means that 90% of them are built to good standards and do not present a problem. The risk is that if we do not deal with those forthrightly, and if the Government’s programme is not continually ahead of expectation, the rotten apples will end up infecting a much wider cohort than would otherwise be the case.

The noble Baroness also picked me up on the demonisation of the term “polluter pays”. I hope that I avoided using that term in referring to the building safety remediation scheme, but I know that outside it has attracted that moniker. That is of course a reflection on the environmental liability; coming further forward in time from that strict liability, we have a more direct example. It is of health and safety, particularly on construction sites. The strict liability that was imposed under that regime substantially improved the rate of death and injury in construction. I believe the same focus that this liability would generate is applicable here, bearing in mind that we are talking about vulnerable people in their own homes and that they are asleep and unconscious for maybe 25% to 30% of the time. They really need to know that that is their safe haven and not to feel threatened in it by issues of safety or finance, such as not being able to transact their property.

I thank the noble Baronesses, Lady Hayman of Ullock and Lady Pinnock, for their support. The noble Baroness, Lady Pinnock, has been an absolutely doughty supporter of the principle throughout. I pay tribute to that, as I do to my noble friend Lord Cromwell for his contribution. I am most grateful.

I thank the Minister for her response but I am disappointed. The fact of the matter is that a very large number of flats are excluded. There is no prospect of any early protection from costs that their owners are not responsible for. Litigation against freeholders is all very well, provided that the freeholders were those who were responsible for the problem in the first place. But if they are not, because they just happen to be from a pension fund that picked it up along the way, no doubt relying on the same sign-off and building warranties as all the occupiers, then I have to say that this looks like the Government plucking at low-hanging fruit for the purposes of PR and marketing. I am sorry, but I do not buy the principle that letting others off the hook should necessitate going after people who may themselves be, beyond peradventure, innocent.

The Minister also referred to the comment made just over a year ago saying that the amendment I moved then, of which I hope this one can be regarded as a new and upgraded version, was not cost effective because it would require a building-by-building assessment. But you do not establish anything unless somebody goes and looks at the building on an individual basis; I know that as a surveyor. I have looked at hundreds of buildings in my professional life and that is where it starts. The Government’s own approval to any sub 11-metre matters is described as being on a case-by-case basis, so what is the difference?

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[Baroness Taylor of Stevenage (Lab)]

My Lords, I shall also speak to Amendments 277, 280 to 281B and 282 in the name of my noble friend Lady Hayman and in mine. I shall also make some comments in relation to Amendments 276, 278 and 279, in the name of the noble Earl, Lord Lytton, and Amendment 281C in the name of the noble and learned Lord, Lord Hope of Craighead.

The increasingly acrimonious circumstances in which planning is often discussed, debated and granted has significantly increased the burden of enforcement. This is combined with a contraction of local authority planning teams due to reductions in local authority funding, which is putting increasing burdens on the planning process, as we have already debated today in Committee. Our amendments are in recognition of that and to ensure that timescales, fines and practices are developed in a way that is proportionate to the current circumstances.

As one brief example, most local councillors will be familiar with their weekly planning list having a number of certificate of lawfulness applications—they are a particular bugbear of mine. These mean that the applicant has not applied for the appropriate permissions in advance and, having now built out their development, is only now seeking the approval of the planning authority. There is little if any appropriate sanction for this behaviour, which seems grossly unfair to all those who take the necessary steps to submit their applications properly in advance of building.

It is fair to say that such developers face the risk of the planning authority turning down their retrospective application, and there have been notable examples of authorities requiring buildings and/or alterations to be taken down. However, with the powers of enforcement diminished, both in this respect and for straightforward breaches of planning, simply by the lack of resources to deal with enforcement, the danger is that we continue to see from the worst offenders a cavalier approach taken to the planning process.

Amendments 275 and 277 in the name of my noble friend Lady Hayman of Ullock are designed to draw attention to the fact that it may be necessary to foreshorten the extended time limits for the enforcement of planning controls where there is a significant impact on the environment. We appreciate that the 10-year window is necessary for raising issues relating to planning enforcement, but it will be important that all involved in development understand that, if enforcement relates to an issue where substantial harm is being caused to the environment, planning officers will expect these to be dealt with more quickly. We hope this amendment will give them the power to do so. The amendment aims to prevent a delayed response from developers, not to limit the amount of time planning controls can be exercised over environmental matters. This should be 10 years, as for all other matters.

We have discussed previously in Committee the need for rapid digitisation of the planning process, where that has not already been done. Amendment 280 is a probing amendment to ensure that this is the case for the enforcement aspects of planning as well.

As in other parts of the Bill, we believe that new burdens may be imposed on local authorities in relation to enforcement. Amendment 281 in my name is to flag up again that there will be a need for an overall assessment of all parts of the Bill to understand the likely financial impact on local authorities. We have received previous assurances from the Minister on new burdens funding. It would be good to know that relevant professional and representative bodies will be consulted on this important issue as quickly as possible after the Bill passes into law, so that no undue financial burdens are placed on already hard-pressed local authorities.

As we have discussed in previous clauses, the financial burden of planning does not fall proportionately on the developer, which is true of enforcement too. Amendment 281A in the name of my noble friend Lady Hayman of Ullock is included to ensure that we do not inadvertently create an enforcement fine regime where it is more cost effective for the developer to breach planning rules and guidelines because the cost of non-compliance is less than the profit they are likely to make from any breach.

My Amendment 281B seeks to introduce a very important provision that would prevent developers applying for an exemption to the provisions in a planning application to deliver affordable housing in a development. We are all very familiar with the long wrangles that planning authorities are having over viability. Our concern is that, if this exemption from enforcement clause were to apply to the delivery of agreed affordable housing, it would simply be another get-out clause in the armoury for developers, with their significant legal firepower, to avoid providing much-needed affordable housing.

Clause 116 is concerned with ensuring that the planning process works as efficiently as possible and makes best use of digital technology. My Amendment 282 seeks to set the purpose of this in the Bill, so there can be no doubt that it is the intention to avoid delays wherever possible.

Amendment 276 is in the names of the noble Earls, Lord Lytton and Lord Devon. Just as our amendments recognise the importance of a shorter enforcement period for environmental issues, it recognises the importance of changes of use to a dwelling house. We agree that, where enforcement relates to somebody’s home, a shorter time period than 10 years would be preferable.

Amendment 278, in the names of the noble Earls, Lord Lytton and Lord Devon, recommends consultation with affected parties on extending the time limits for planning enforcement from four years to 10 years. We would always support such steps, as professional bodies and local government representative bodies can be essential consultees in ensuring that all consequences are understood from the outset and that any unintended consequences can be predicted and mitigated.

On Amendment 279, in the names of the noble Earls, Lord Lytton and Lord Devon, we will be interested to hear the Minister’s response on whether it is the intention for the provisions of the Bill to be retrospectively applied to developments which, under current legislation, have reached the time limit for enforcement. Is the legislation to apply only to enforcement for developments started after the commencement of the Act? Will there be a transition period, or will it automatically apply to all developments that have reached the current four-year limit?

Amendment 281C in the name of the noble and learned Lord, Lord Hope of Craighead, seeks to insert in the Bill the explanation of the purpose of Clause 113, as is contained in the Explanatory Notes. We have had a number of examples during our examination of this Bill where the absence of these explanatory clauses could potentially cause ambiguity in their interpretation. Therefore, we support this sensible move to insert the explanatory clause in the Bill. I beg to move my amendment.

[The Earl of Lytton (CB)]

My Lords, probing Amendment 276, and Amendments 278 in 279, are in my name and that of the noble Earl, Lord Devon, who is regrettably unable to be with us today. Apart from declaring an interest as a property owner, I must also explain that I have in the past been threatened with enforcement proceedings—so guilty as charged, or perhaps not guilty as charged. I am very grateful to a number of planning practitioners who explained some of the finer points of all this to me.

These amendments relate to Clause 107 and refer to what is known as the four-year rule. The current position is that, if works to a property have been undertaken more than four years previously, the owner is immune from enforcement action by the local authority. The equivalent period for changes of use, which of course may be harder to spot, is 10 years. A minimum of 10 years unchallenged enjoyment of both works and change of use is required before a lawful use certificate can be claimed. If you like, the entitlement at that stage becomes absolute.

I should add that, for works or changes of use to a listed building or, I think, for one in a conservation area, time does not run against the enforcing authority, and so protection of heritage is not an issue. Furthermore, works of development that are done secretively or by concealment are, I believe, also not protected by the four-year rule. So the building of a house within the confines of an agricultural barn, as happened in one rather infamous case, would not escape.

The system has operated for many years, quite successfully as far as I know. In the most recent review of the arrangements, the four-year cut off remained unamended. My own sense is that, if works have not been spotted after four years, it is quite unlikely that they will be spotted more readily in years five to 10. Indeed, one might conclude that, if it is that unobtrusive, it should scarcely be a planning concern anyway. It is more likely that it will crop up to ensnare an unwary owner who makes a subsequent application and some historic non-compliance is spotted at that stage.

The four-year rule also recognises that planning is complex, with many pitfalls for the unwary, and that it is not necessary or desirable to micromanage planning uses of land and buildings. For instance, erection of deer fencing, construction of ponds and the placing of certain structures on land may in some cases require consent but in others they do not. A movable item nearly always does not trigger a planning issue but leaving it in the same place for too long does.

Many households think that a permitted development right absolves them of the need for any consent at all. I believe it is government policy to reduce burdens on householders. Furthermore, where a local planning authority has issued what is known as an Article 4 direction, removing permitted development rights for certain types of development, owners may not be aware of this or be made aware, even in a purchase situation. As in one instance which occurred in my professional career, a shopkeeper might find that they are subject to enforcement procedures for displaying an internally illuminated sign fixed to the interior of their shop window glass, but not if it is a foot or two further back. The rules are opaque, convoluted and may be interpreted differentially per authority. As I see it, the four-year rule served to prevent this becoming a more serious issue.

But Clause 107 would remove this protection. I know of no justification for doing this, nor any public consultation that underpins that decision to include it in the Bill. I think that most householders, and possibly quite a few lenders, would view this with concern. But the removal would have, in my opinion, a somewhat more sinister side-effect. I know of instances whereby an annoyed builder has set out to shop a property owner who did not award him a contract of works, or shopped the successful contractor—or a neighbour averring to the authorities that works in non-compliance are taking place, either because of neighbourly detestation or, as in one case known to me, because the neighbour took umbrage about the builders’ vehicle parking and plant-unloading arrangements in the street outside their home. So to leave the door open for an additional six years to this sort of risk of a snooper’s charter is socially, economically and administratively undesirable.