Leasehold and Freehold Reform Bill

Lord Empey Excerpts

Committee stage
Wednesday 1st May 2024 Lords Chamber

[Lord Empey (UUP)]

I am most grateful to the noble Baroness for giving way. She mentioned a list of people who had a degree of responsibility. One of them, of course, is building control. My experience of building control in local authorities is that they can be extremely pernickety and difficult, and can enforce very high standards. All of us, in our different cities, will have seen examples of absolutely grotesque omissions and failures. But is it not the case that a local authority has a statutory liability, through building control, and that that, in and of itself, could and should be a source of remedy for a person who finds themselves in this position? On top of that, is there not an incentive for a developer, having built a structure and sold on the units, to wind up and move on to a different company to build the next one? We end up with people slipping out of the net entirely.

[Baroness Thornhill (LD)]

The noble Lord has hit on a point; in some estates, you build one building that might just meet the requirements, and then more and more are built, and it expands the problem. I agree with a lot of what he said. I was trying to point out that we tend to say it is all on the developers, but I think this is a systemic failure of a series of accountable people. That is what I am trying to say.

Ultimately, I am saying that, sadly for democracy, this is yet another state failure—like WASPI, blood contamination and Windrush, to name but a few. The harsh reality is that the impact of this is felt every day by some people, and is growing: when a leaseholder decides that they want to reinsure or somebody decides that they want to sell, suddenly they are faced with, “Wow, I didn’t realise that there was all of this”. Therefore, the number of people affected is actually growing.

I will end on what my noble friend Lady Pinnock always says: leaseholders have done nothing wrong and everything right. Excellent campaigning from groups such as End Our Cladding Scandal and the non-qualifying leaseholders group has helped us achieve the progress we have made on remediation support. We owe it to them to keep pressing the Government on making sure that all leaseholders are protected from the costs of a situation they did absolutely nothing to cause.

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The noble Earl, Lord Lytton, asked what would happen to buildings that needed remediation if the landlord went into insolvency. An application for a remediation contribution order can be made by an interested party under Section 124 of the Building Safety Act to recover contribution costs of remediation from a past landlord, a developer or a person associated with those entities, including a person associated with the current landlord. It follows that a leaseholder or other interested person would be entitled to apply for a remediation contribution order even if the current landlord was insolvent. As any proceedings would not be against the current landlord, the insolvency of the landlord does not preclude this course of action. If an application for an order is successful, the tribunal has the power to order that payment is made directly to a specified person.

[Lord Empey (UUP)]

On that matter, if a company was responsible for defective property and the company became insolvent, am I to understand that the directors of that company would be capable of recommencing building another property? Or is the Minister saying that the individuals could be followed through the courts for remediation, rather than being able to sidestep their responsibilities?

[Baroness Scott of Bybrook (Con)]

My Lords, that is an interesting and very legal point. Rather than speaking off the top of my head, I would like to get it right and write to the noble Lord.

I move to Amendments 96, 97, 99 and 100. I thank my noble friend Lord Young of Cookham for these amendments. Amendments 96 and 99 would extend the leaseholder protections to buildings under 11 metres and to collectively owned leaseholder buildings. It is generally accepted that the risk to life from historic fire safety defects is proportionate to the height of buildings. As this risk is lower in buildings under 11 metres, such buildings will require remediation only in very exceptional circumstances. Given the small number of buildings that have required this—it is three across the country; the developers have remediated two of them and we are in negotiations on the third to get that remediation done—our assessment remains that extending the leaseholder protections to these buildings is neither necessary nor proportionate.

Where leaseholders in buildings under 11 metres face remediation costs, it is important, as I have said so many times at the Dispatch Box, that they contact the department immediately and we will look into that individual building on a case-by-case basis. If necessary, we will write to the building owner to seek assurances that any proposed works are necessary and proportionate, and that the rights to redress are being fully utilised.

The Government understand that some leaseholders in these buildings are still facing higher insurance premiums, with insurers citing building safety as the reason for the increase. The Association of British Insurers and its members have stated that premiums should reduce where buildings comply with building regulations. We expect insurers to honour their commitments and make sure that premiums are priced fairly and appropriate to the level of risk.

Regarding collectively owned leaseholder buildings, the Government made the decision that the leaseholder protections in the Building Safety Act would not apply to these buildings. As a result, people would still have to pay to remedy the safety defects in their building as owners. Residents who own the freehold would have to pay not only their portion of remediation costs but for any residents who did not participate in the purchase of the freehold.

Since the Building Safety Act, the Government have continued to examine the situation faced by collectively owned leasehold buildings. For instance, the Building Safety (Leaseholder Protections) (England) Regulations 2022 provide owners in these leaseholder-owned buildings with access to remediation contribution costs. We have listened and we have acted.

I turn to Amendment 97. The existing leaseholder protection package is designed to maintain a fine balance between leaseholders’ and freeholders’ rights. The amendment distorts the balance disproportionately in favour of leaseholders and risks unfairly benefiting one group of investors, leaseholders, to the detriment of another—the freeholders.

Regarding Amendment 100, our intention has always been to protect individuals living in their own homes, rather than those who have purchased property for financial or commercial reasons. Changing the leaseholder protection regime so that it is linked to a share of ownership, rather than individual properties, would also introduce an unnecessary level of uncertainty and complexity into the protections.

Regarding cessation certificates, it is not clear what effect such a certificate would have or how a landlord would know when to serve one. The responsibility for the costs of fixing historical building safety defects should rest with those responsible for creating them. The Building Safety Act was clear that, when this is not possible, responsibility for remediation should be shared between stakeholders in the property. Concentrating responsibility on a single group would risk a number of unintended consequences, including freeholders becoming insolvent. Taken together, the changes made by this amendment would therefore complicate the regime unnecessarily and slow the progress made towards the remediation of buildings.

I thank the noble Baroness, Lady Thornhill, who spoke on behalf of the noble Baroness, Lady Pinnock, to Amendment 102 about the reporting requirement for building safety remediation. The Government are committed to accelerating remediation and protecting affected residents. The total number of buildings reported to have started or completed remediation works in England has more than doubled since the end of March 2023. Along with monthly updates, Ministers have also committed to providing the other place and those interested with regular updates on progress, the latest of which was provided on 26 March.

My noble friend Lord Young of Cookham asked about ACM cladding. Another noble Lord mentioned pathways. I realise that pathways do not mean delivery, but, importantly, all residential buildings in England taller than 11 metres have a pathway to fixing unsafe cladding, either through taxpayer-funded schemes, developer-funded schemes or social housing provider-led remediation. This protects leaseholders from these costs. In addition, 99% of high-rise buildings with unsafe Grenfell-style ACM cladding identified before 2023 have been made safe or have work under way to make them safe. The proportion of buildings remediated continues to shift as more buildings are being identified and 90% of all high-rise buildings with ACM cladding have been made safe or have work under way on them.

My noble friend Lord Young also brought up the issue of decanting. The Government amended the Bill in the other place to make it explicit that the costs of alternative accommodation for residents, when they are decanted from their homes to avoid imminent threat to life or of personal injury, or because remediation works cannot take place while residents are in occupation, can be recovered. They can recover those costs through a remediation contribution order, which is an important change to the Bill.

The department continues to take steps to support applicants to start on site more quickly. Local authorities, fire and rescue authorities and the Health and Safety Executive can take enforcement action against those not progressing remedial works. Where building owners are failing to make acceptable progress, those responsible should expect further action to be taken.

Some 55 of the largest developers signed legally binding contracts committing to remediate, or to pay to remediate, life-critical fire safety defects in 1,500 buildings over 11 metres that they had a role in developing in England over the 30 years to April 2022. Together with the building safety levy, this will see industry contribute an estimated £6 billion. The department publishes information on developer progress based on quarterly returns submitted by developers, and this is available. I make it clear that the introduction of new reporting requirements involves time and cost, which need to be balanced against the need to continue our progress in building remediation. So I ask the noble Baroness not to press the amendment.

I thank the noble Baroness, Lady Taylor of Stevenage, for her Amendment 105. Similarly to Amendment 97, it would open the door to changes which distort that balance disproportionately in favour of one group, to the detriment of another. It is important that legislation provides clarity for leaseholders, freeholders and the courts. The Government believe that having definitions of qualifying and non-qualifying leases in primary legislation provides greater certainty to all interested parties—an important consideration given that this is a pivotal part of the legislation for so many people across the country.

I thank the noble Earl, Lord Lytton, for Amendments 105C to 105G, which seek to make several changes to the building safety regime and, in the case of Amendment 105G, the insolvency regime. Amendment 105C would rewrite the developer remediation contract by statute. This would unfortunately serve to create operational legal confusion about what developers’ obligations are, which buildings need to be identified and remediated, and what standards this should be done to, resulting in delay and litigation. I hope the Committee agrees that the Government should instead focus on holding developers to account for remediating unsafe buildings as quickly as possible.

On Amendment 105D, it is right that the Government have worked with major developers that have built defective buildings to secure binding commitments to remediate, worth an estimated £3 billion. However, I do not believe it would be fair also to target these specific developers to pay a disproportionate share of other remediation costs for buildings that they have no connection with. That is why we are focused on setting up the building safety levy to contribute funds to our programmes to remediate buildings over 11 metres. The levy is estimated to raise a further £3 billion over 10 years, or more.

We have had much debate on the merits of Amendment 105E, and I gave my views on Amendments 96, 97 and 99. As I mentioned, relatively small numbers of residential buildings under 11 metres or five storeys require remediation. These buildings are considered to be at low risk of historical fire defects, and I maintain that this change would disproportionately and unfairly place the obligation for remediation of non-life-threatening defects on freeholders. Meanwhile, extending protection to leaseholders who have not purchased the freehold would place the financial burden of remediation entirely on leaseholders who own a share of the freehold, making it less likely that these buildings will be remediated.

As for providing leaseholder protections to leaseholders who own more than three dwellings, I reiterate the points raised earlier. Landlords owning a number of properties are likely to have these as investments, and a fair balance needs to be met. The Building Safety Act was not designed to benefit investors; it is to help individuals living in their own homes.

On Amendment 105F, removing qualifications for passing on costs for defects in service charges would widen the scope of the leaseholder protections considerably. This would risk the burden of remediation costs falling disproportionately on landlords, whether or not those landlords are also some or all of the leaseholders in the building. The amendment also provides for members of a building industry scheme to cover remediation costs. I have already mentioned my concerns with the similar approach in Amendment 105D.