Building Safety Bill (Third sitting)

Daisy Cooper Excerpts

Tuesday 14th September 2021 Public Bill Committees

[Daisy Cooper (St Albans) (LD)]

Q Good morning. If I have understood correctly, you seem quite comfortable with the new framework. You have talked about a smooth transition from one scheme to another, but some of the evidence we have received points to what could be described as a spaghetti bowl of governance. One organisation has questioned specific clauses in the impact assessment whereby the lay board of a right to manage company or commonhold residence could be expected to be simultaneously both the building safety manager and the accountable person who appoints the building safety manager. Other groups have suggested that there could be confusion between the accountable person and the principal accountable person. How should we as a Committee square that circle?

Sarah Albon: I think that some of our comfortable nature is probably from the way we have worked so closely with the Department as the thinking on the Bill has developed. We in HSE have certainly had considerable input and worked very closely with officials in the Department to help to frame the legislation and meet some of the challenges. I guess that part of our comfort is therefore from having worked on it now for a considerable time.

Inevitably, there are various other stakeholders who will have read the legislation for the first time relatively recently and will still be working through how it works. One key thing that we want to do as the legislation goes through and as we ramp up towards taking this role on is working with the stakeholder groups out there and helping them to understand how the legislation is intended to work and will work, how we will work as a regulator and what they need to do to make sure that the various roles within their organisation are appropriately filled and appropriately managed.

As Peter said, we are very clear that the overall responsibility has to sit with the accountable person. There are some other key appointments within the system, and they will need to make sure that they have the right people working for them, working directly in buildings and within their organisation. For us, the key success factor is that the accountable person needs to be the person who genuinely feels accountability for ensuring that the people who live in the buildings for which they are responsible are safe. They need to be able to take action to do that.

[Daisy Cooper]

Q May I clarify one point, just to confirm something? Where any organisation believes that there is a vacuum of accountability, or confusion around accountability, in this new framework, do you believe that that is because they have not had enough time to look at the system, rather than because of a justified observation that there is confusion?

Peter Baker: As a regulator, having absolute clarity over who the duty holders are is key; clearly that is something that you have identified and need to explore through the parliamentary process. In terms of an outcome, it is right that the Bill needs to assign roles and responsibilities absolutely clearly. That is an outcome that I would expect, because at the end of the day I am going to be responsible for enforcing the legislative package.

Having said that, as this is starting to stray into all sorts of areas of building ownership and leasehold law, which is incredibly complex, I can understand—having been involved with MHCLG in developing the package—how difficult the challenge must be for the Bill writers to get this absolutely right. All I can say from my interactions with MHCLG is that it really has wrestled with all the issues and tried to make the duties and responsibilities as clear as it possibly can, but clearly that is something that your Committee will need to explore.

[Daisy Cooper]

Q Our Committee is trying to explore it, but I am wondering what your view is. I am hearing mixed signals as to whether you think that the roles are clear and that other organisations are coming to it later than you because you have been working so closely with the Government, or whether you see that some clarity is still needed from the Government and officials on what the roles and responsibilities are. I was hoping that you might be able to give us your view to inform our consideration of that point.

Peter Baker: My view is that MHCLG has done what it can to make the roles absolutely clear, as the Bill stands. The challenge is making sure, through guidance, support and engagement with all the stakeholders who will be touched by the Bill, that they understand the intention behind it all and the outcomes that we are trying to achieve.

[The Chair]

I think Graham Russell wants to come in.

Graham Russell: I was going to return to the very first part of Ms Cooper’s question, which was about the level of comfort we feel about the arrangements and the situation more generally. I do not think that “comfort” is a word that we have been using very much in either of our organisations about a situation in which, clearly, people have suffered enormously and the regulatory system has not protected people. That is why we are part of the mechanism that will deliver the Bill.

I think that it is incumbent on all of us to make significant change. We need a more robust regulatory system, better checks and a better testing environment, and we need to build the confidence that Peter has spoken about—confidence for residents, but also confidence for the industry that it is doing the right thing. We face a major challenge and the Bill is really important, but it is a framework.

In terms of the complexity of governance, obviously you have probed one particular part of that, but because this is a system that delivers safer outcomes, every part of that system must work. It is incumbent on us to make sure that it works, so we need to fit the different aspects together. From my point of view, that particularly includes local authorities and their ability to work closely on the ground with local suppliers, and the proof of that will be whether we can create and deliver a system and then give people confidence that that system is providing what has not been there in the past.

--- Later in debate ---

[Daisy Cooper]

Q Good morning to both of you. This is a question for Richard. In paragraph 11 of your written evidence, you said:

“We all know that these problems have been caused by historic regulatory failures, dating back decades. We need to be careful that the solution doesn’t simply absolve the Government of its responsibilities and pass them on to consumers, whether that’s existing or future residents.”

If that is not the solution, then what do you think the solution should be?

Richard Silva: Thank you for the question. It goes to the heart of our role in this sector. As a freeholder, we do not develop, build, design or sign off on these buildings. We effectively, under the new regime, take ownership of them post gateway 3, when they are fit for occupation. The Bill, in many respects, is an excellent starting point and provides a good framework for looking forward. The problem is, what are we going to do about the existing stock that is in a mess? Our view is, simply, that there are three areas where this should be addressed.

The Government should be commended for trying to fix a problem that successive Governments have caused through a defective regulatory regime, whether that is from a construction perspective, or by signing off on materials and building systems. In that context, I think the Government should underwrite the process of fixing the existing stock.

That is not to say that taxpayers should foot the bill for everything. The Government should take responsibility —they are starting to do that through the presentation of this Bill—and then look at recourse from those who created the mess. The Government’s culpability lies in the regulatory regime and the failure there, although there are bad actors in the construction industry and the product manufacturing industry, and the Government should go after them to recoup as much of the investment as needed to bring existing stock up to standard.

There is a final and third point that will be less popular from a leaseholder perspective, but it is important to articulate. When investigations are made into an unsafe cladding system in a defective building, and the cladding is taken off, other historical problems will be identified. Not all of those are caused by shoddy workmanship or defective materials; they may be due to a lack of investment in the life cycle and maintenance of those buildings. We advocate a mandatory reserve regime—a bit like in the States—in which a periodic assessment is carried out independently, not by the managing agent or building owner, which in this context could be a commonhold association, a residents’ management company or right-to-manage company, or a freeholder, but by an independent assessor, who looks at short, medium and long-term requirements for reserve funding and regular life cycle maintenance for that building. The leaseholders then contribute to that over the super-long term, based on various apportionments under the service charge regime.

This is a long-winded answer, but it is an important point. For example, every 25 years, a block of flats will need a new roof; it is not a building safety issue, but a maintenance issue. If someone lives in that block for 20 years and then sells, but no provision has been made, is it fair for the buyer to be hit with a massive bill a few years later, when they have not enjoyed the life cycle of living there? Anyone who owns a property should make that provision, and it should be mandated as opposed to voluntary.

[Mike Amesbury]

Q Does the Bill ensure that key stakeholders in your industry, rather than the leaseholders, are paying their fair share for a mess that was created over a series of decades?

Richard Silva: If you are referring to whether building owners should pay to fix the existing stock, a distinction should be drawn between the responsibility for maintaining the existing stock and the liability to pay; I covered the liability to pay in my previous answer. The responsibility should absolutely lie with the accountable person, under the new regime. Historically, the accountable person has been either the freeholder, where there is a two party lease, or, where the building is resident-controlled—as roughly two thirds of our portfolio is—the RMC or the RTM. In the future, when the Law Commission’s proposals are brought into legislation, it could be the commonhold association. They are responsible, with emphasis on the word “responsibility”, for the maintenance and repair of buildings. It is a complicated answer, but it does go to the Building Safety Bill, and the question of who will be accountable in the future.

It is an interesting debate. We have to ask ourselves whether members of an RMC or a commonhold association have time, expertise and willingness to do that work. Certainly, our research suggests that people do not want to do it, for a whole bunch of reasons. Forget criminal and civil liability—it is about having the time. People have other things to do. In the context of the Bill, among the wider Government reforms on leasehold, we need to focus on the fact that the role of the freeholder will become redundant. That is unambiguous from the leasehold reform agenda proposed. That means that the work done by my building safety team—it includes chartered fire engineers and surveyors—for the leaseholders and at no cost to them, save a modest ground rent, will become redundant. So this part of the Bill needs to be really carefully looked at. Who wants to do this role, absent the professional landlord?

Kieran Walker: I would be inclined to agree with Richard on the accountable persons piece, moving forward. If I understood the question correctly, you are really asking whether costs are fair and proportionate for historical issues and for historical defective buildings. It is very difficult to answer, if I am honest with you. As has been mentioned already this morning, you have some really good practice going on in the industry in terms of the developers and construction companies, and you have some culprits in there as well. We know that as a trade body and as an industry. Similarly, the manufacturing process and the manufacturing companies also have some culprits.

It is difficult, therefore, to nail down whether costs are fair and proportionate. Obviously, as of next year, our industry will feel the impact of the residential property developer tax, as well as the building safety levy. Time will tell whether that is fair and proportionate. Obviously, the building safety levy is subject to consultation at the moment. I think that closes in mid-October and we are busily compiling responses to it. Within that scenario, some companies, responsible persons and organisations will pay part of, some of or none of the building safety levy, while others will pay the full residential property developer tax as well.

Time will tell whether costs are fair and proportionate, but I certainly think that things are moving in the right direction in respect of the Bill itself and in terms of levying costs.

--- Later in debate ---

[The Chair]

We will now hear oral evidence from Councillor Jayne McCoy, deputy leader of Sutton Council and chair of the Housing, Economy and Business Committee of London Councils, and from Andrew Bulmer, chief executive of the Institute of Residential Property Management. For this session, we have until 11.25 am. Please will the witnesses introduce themselves for the record, starting with Andrew, remotely?

Andrew Bulmer: Andrew Bulmer, chief executive of the Institute of Residential Property Management. The IRPM is a professional body of 5,000 members who are qualified to various levels from level 2 to level 4. They manage big scary residential buildings, both leasehold and in the build-to-rent sector. We do not have firms as members. Our membership is confined to individual professionals.

Councillor McCoy: Good morning, I am Jayne McCoy. I am here representing London Councils.

[Daisy Cooper]

Q Good morning and thank you for joining us. In the light of what you may have heard from leaseholders and other people who are affected by this crisis, do you believe that the scope of the Bill is sufficient?

[The Chair]

Who do you want to go first?

[Daisy Cooper]

Jayne first, please.

Councillor McCoy: London Councils feels that the scope of the Bill needs to be expanded. We think that the focus on height is a rather rough approximation of risk. As we know from experiences in Bolton, in Samuel Garside House in Barking and Dagenham, and in my ward, Worcester Park, we have had fires in buildings under 18 metres that would have resulted in loss of life if it had not been for luck—it was a matter of minutes. We know that there are fire safety risks in buildings under 18 metres. We think that height should not be the only approximation for risk.

We think all new buildings—so all heights—should be covered by the Bill. For remediation purposes, we think a risk assessment tool should be applied to look at the holistic assessment of a building. I think a tool is being developed in response to the Fire Safety Act that could be adapted and used for this measure.

Andrew Bulmer: In conjunction with the Fire Safety Act and noting that this Bill now extends its tentacles to below 18 metres for some limited functions—fire risk assessments and identification of a responsible person—the scope of the Bill is wider than it was and I feel it is a good place to start.

[Mike Amesbury]

Q What is missing from the Bill? This question is for both of you.

Councillor McCoy: A lot of additional clarification is needed regarding the accountable person, the building safety manager and their responsibilities. A lot of detail is required. We need that detail and clarification because the industry, including councils in particular, needs to gear up to meet those responsibilities. Until they know what those responsibilities are, they cannot effectively gear up and commit the resources.

In particular, I would talk about the skills within building safety management. There is a lack of skills out there at the moment. There is a lack of resource out there at the moment. We cannot recruit as a council. My council cannot recruit to building control at the moment because people are not out there. Until we have clarification about what the skills are, and a framework for that, we cannot build up the capacity and skills needed. I would also flag that councils need the resources to be able to do that, because an awful lot of burdens are falling on councils.

Andrew Bulmer: I concur with the councillor. There is a lot of detail in the regulations, especially when it comes to the role of the building safety manager. We would like to see the regulations brought forward. They can either go in the Bill or be introduced promptly. Until then, we are operating a little one-handed. We are anxious to prepare and gear up for this, but without that information we are struggling.

That is one thing that is missing from the Bill; the other is protection for leaseholders from historical building safety defect costs. We understand that the Bill has to be written in a way that allows the reasonable costs of safety maintenance going forward to be recovered. That is fair and reasonable, but at the moment there is no protection for leaseholders from existing building safety failures that they did not cause.

[Ruth Cadbury]

Q The previous panel had a representative who owns the freehold of a lot of blocks. Andrew, you represent the property management sector. Both of you have painted a picture of the Bill causing investors to leave freehold ownership. In your submission, you said that the legislation as drafted could mean that there is nobody willing and able, particularly within residential management organisations, to take on the responsibility of residential management. I think you said that the freehold interest could revert to the Crown. What should be in the Bill to prevent that from happening?

Andrew Bulmer: I will lead with that one, Chair. I think that question was directed at me. I will come back to what needs to be in the Bill. The commentary behind this is that there is a clear and understandable push through the Law Commission and through the work being done by Government to vest the freehold or commonhold interest or the management of the development in the hands of the residents themselves, who thereby have democratic control over their development, and we find the logic of that compelling. The challenge is that it means those residents will be in charge of their own affairs. We can see in the example of Miami—the building that collapsed there—that the residents association was challenged in terms of its competence to manage the building safely. That does not mean that we abandon the adventure. I think we progress with it, but we progress with our eyes open and that means we have to support those directors.

I would like to see a support mechanism for directors who wish to actively manage their own affairs, so they can feel supported and get guidance where they need it. There would also need to be support for those directors in terms of quality assurance of their suppliers. For building safety managers, for example, it is important there is some form of a register of quality assurance. We would like to see the managing agents they will depend on being regulated as per Lord Best’s RoPA report.

In the Bill, there would need to be the option for directors to decide if they choose—purely optional—to appoint an external director to take on the role of the AP or principal accountable person. The danger is that lay directors will look at the risks involved, and they will all step back and not take up directorships. That is already happening and is already a significant problem.

Every property manager will tell you that it is difficult to get directors to come forward these days as the responsibilities become clear. When the responsibilities of the Building Safety Bill are made clear to those directors, we expect it will be difficult to get people to take up those responsibilities voluntarily, unpaid and without the necessary expertise or competence to fulfil them. The ability to appoint an external director would be likely to mean overriding the articles of association of the development and implying covenants into the leases to enable the external director to be paid for. It would require protections for leaseholders from a director who went rogue. These provisions would need to be in the Bill to enable leaseholders to outsource their responsibilities to a professional if they chose to do so.

[Daisy Cooper]

Q We received evidence this morning from witnesses from the Health and Safety Executive. They described how they had been working closely with Government officials in developing this new framework. They said they had received assurances from the Government that they will get the resources and staff they need and they seemed to think that, on the whole, most of the new roles created under this framework were reasonably clear. That seems to me to be in reasonably stark contrast to some of the evidence we are hearing now. I am interested to hear from Jayne in particular on behalf of London Councils whether you have also enjoyed a close working relationship with Government officials in developing this framework, and whether London Councils have been given any assurances that they will receive the staff and resources they need to implement this new system.

Councillor McCoy: Yes, London Councils and the Local Government Association have worked with MHCLG all through the process since the Grenfell Tower tragedy to help shape the legislation. Obviously, a lot of the time we are responding to things, but we are trying to feed in and push. I would flag up at this point that London Councils would like to see a wholesale review of the building regulation framework.

At the moment, the Bill addresses and improves the existing regulation. We have been pushing quite hard for a wholesale review across all the legislation, which is a bit more in line with the Dame Judith Hackitt report. However, we have been working closely throughout to assist and get the best out of this, and, yes, we have been working with the Health and Safety Executive. We are quite pleased with our progress so far and the way it has been coming across to the HSE.

We would like to see a requirement that the HSE works with the local authority’s building control regulator, local councils and the fire authority in the first instance—that they call on their expertise—because that helps us as London Councils to build our capacity and resources. That is important, as are the resources to go with it, and I do not think we have had any firm commitments to those resources. We keep making the case that we are going to need to bring those resources forward. I would just emphasise that making this Bill deliverable and achieving its aims of improving building safety cannot be done without the staff and skills required, and we cannot upskill without the funding to do that. To make it practically deliverable, it needs to be fully funded.

[Ruth Cadbury]

Q You may have already covered this in your submission, Andrew Bulmer. We have covered the knowledge required for the responsible person, but is there a risk of duty holders struggling to access professional indemnity insurance?

Andrew Bulmer: The wider comment on the PI insurance market is that it is in serious difficulty, and has been for some time. Any professional who is giving advice on building safety, especially fire safety matters, is having their premiums either severely increased, cover withdrawn entirely, or significant restrictions placed upon them, so accessing any professional on a fire safety matter at the moment is problematic. You used the phrase “duty holder”: if that were to refer to an RMC, for example, I cannot comment on PI insurance for RMCs. I think that is something that requires further investigation.