Building Safety (Leaseholder Protections) (England) (Amendment) Regulations 2023

Debate between Baroness Pinnock and Lord Bishop of St Albans

Tuesday 21st March 2023 Lords Chamber

[Baroness Pinnock (LD)]

My Lords, the regret Motion standing in my name is critical of the Government’s response to those leaseholders who have been adversely impacted by a government error, which the Building Safety (Leaseholder Protections) (England) (Amendment) Regulations 2023 have recognised. The regret Motion puts the spotlight once again on the plight of leaseholders. Since the awful Grenfell Tower tragedy nearly six years ago, leaseholders and tenants have been at the very heart of the policy response to the crisis in building safety that was so cruelly exposed that night.

The Grenfell Tower inquiry has meticulously gathered evidence of years of malpractice by developers and materials manufacturers. It is clear where responsibility lies for the very significant number of building safety defects. Those not responsible in any way are the innocent leaseholders, who have done everything right and nothing wrong. The Building Safety Act set out the ways for the building industry to rectify past building defects. Those related not just to the removal of dangerous flammable cladding but to the lack of fire breaks, for instance, that were required at the time of construction. The Act also established how the very large costs of remediation were to be funded. In the case of non-cladding defects, there was a cascade of responsible entities. At the bottom of the cascade were leaseholders, who may be required to pay a capped contribution, which was limited to £10,000 outside London and £15,000 in London. These alone are significant sums—for first-time buyers, for instance.

There are still questions to be asked about whether the Government’s attempt to ensure that cladding is fully removed and safety defects are put right is effective in practice. However, the focus of the regret Motion is an error that inadvertently crept into the regulations, which determined how much developers would be required to pay, if at all. It was the intention that a family of associated companies of the developer would be included in the assessment of the value of the companies and, therefore, the ability of the developer to fund the remediation works. The regulations, unfortunately, excluded what have been described as parent and sister companies. This led to one very large developer being able to demonstrate that the special purpose vehicle that had been set up for the development did not of itself have the funds to pay for the remediation of safety defects. If the family of associated companies had been included with that special purpose vehicle, as was the intention of the regulations and of the Act, the developer would have been funding the costs of remediation. As a result of the error, this company was able to avoid paying for the defects and, via the cascade system, was able to pass on part of the costs to the leaseholders.

This is grossly unfair to the leaseholder, and a major company, which had already bypassed building regulations unlawfully in constructing the property, was now avoiding the responsibility of paying for this dangerous and deliberate practice that put profit first and people’s lives in jeopardy. The Department for Levelling Up, Housing and Communities was made aware—and only made aware—when a leaseholder contacted the department to query why they had been asked to pay remediation costs when they knew that the developer in question was a very large one and likely to be within the limits to be able to pay. I am pleased that the department quickly remedied the error, passed these amended regulations and brought them into force the following day, just to make sure that no other developer tried to bypass paying for remediation because of the error. However, there is currently no remedy for those leaseholders who have unwittingly paid towards remediation costs when they should not have done.

The Secondary Legislation Scrutiny Committee asked the department to quantify the numbers of leaseholders who have been forced to pay when they should not have been. Unfortunately, the department was unable to provide a figure and does not seem to have made any attempt to do so.

There is a route for any leaseholder caught out by the Government’s error, and that is to appeal to the First-tier Tribunal—but who knows about that? Leaseholders have been trapped all through this saga by the unscrupulous, immoral and unlawful behaviour of developers and others. The very least the Government can do is to seek out those leaseholders, provide them with the necessary information about how they can recover their costs and support them in doing so. The Secondary Legislation Scrutiny Committee asked whether protection for affected leaseholders could be introduced retrospectively, via primary legislation if necessary, and I too ask that question of the Minister.

This is injustice heaped on injustice. It was a government error, and the Government should do all in their considerable power to put it right. I will listen carefully to the response from the Minister. I hope she will be able to provide all the information that I and the Secondary Legislation Scrutiny Committee are asking for, including the ways in which leaseholders can find retribution. Meanwhile, I beg to move.

[The Lord Bishop of St Albans]

My Lords, I shall add a few words of support for the noble Baroness, Lady Pinnock. I stand with a weary sense of déjà vu, looking around at a number of people with whom I have sat as we have worked through building safety and fire safety measures.

What is interesting is that the Government fundamentally tried to grasp this problem. I pay tribute to the right honourable Michael Gove, who has been quite exceptional in taking hold of it and trying to solve it. I say well done to the Government for shifting the main problem in this very troubling area.

Like many noble Lords, I am still finding that people contact me because they are in a dreadful situation. Some of them are going bankrupt because they are simply unable to pay for the remediation work on their properties. This does not just affect big tower blocks; it happens to quite modest blocks of flats in places like St Albans, Stevenage and Bedford, in my diocese.

On the particular problem that the noble Baroness has mentioned, it is extraordinary, when the Government have already committed themselves to doing so many things on this—not least reforming the leaseholder system, which we will watch with great interest—and troubling that this unintentional problem, which is having a devastating effect on some people, is seemingly not being addressed. It would be a huge help if we could simply get the figures published to find out how many people are being affected by what seems to be an error and then try to help those people to find a remedy.

This is a terrible scar on the whole industry. We need to find ways to work with those who have unintentionally found themselves caught up in this and are quite desperate. That is supported by, as the noble Baroness has mentioned, the point made by the Secondary Legislation Scrutiny Committee that we need that data. I add my weight to the points that the noble Baroness, Lady Pinnock, has made today, and I hope we will see some movement.