Leaseholders: Safety Remediation Costs

Earl of Lytton Excerpts

Thursday 4th November 2021 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I am delighted that the noble Lord, Lord Stunell, has secured this debate. His party, with cross-party support, has spear- headed the cause of those caught up as blameless home owners in the wake of fire safety measures following the Grenfell tragedy. Like him, I am a member of your Lordships’ Built Environment Select Committee. I declare my professional involvement with property and construction. My focus is particularly on property economics, leasehold issues and the sheer level of collateral damage being inflicted on an entire home ownership sector.

So I am glad to have this opportunity to speak on the matter once again, because the problems have not gone away, nor has the ruination of people’s lives and finances due to failures to construct buildings to a standard of safety and competence we should expect. It is not as if the required standards of the past 40 years have gone away, or that overarching principles of safe construction have been abandoned; rather, there has been attrition in the oversight of those charged with the solemn duty to comply with them together with what is termed “value engineering”.

You could not get away with constructing a car to unsafe standards, so why permit a building constructor to plead the principle of caveat emptor on a far more important element in people’s lives? Unsafe buildings cause deaths. The Motion in the name of the noble Lord, Lord Stunell, refers to safe housing. Yes, indeed, one’s home should be a place of sanctuary, of occupation on one’s own terms, of security, and is often the embodiment of the owner’s entire capital asset. Destroy the safety, security, comfort, predictability and confidence that this embodies and you do much more than create some remediable, physical or financial loss. It results in trauma of impossible and inescapable proportions for individuals and households, and a loss of faith in the sector and in what the Government are doing about it.

As we have heard, this has gone far beyond the cladding issue alone. Investigations have revealed a raft of omissions and defects in construction that, had they been known about at the time, would not have passed the regulatory material suitability or code of practice standards when a building project was approved and subsequently implemented. It is a fundamental truth that those home owners now faced with unsaleable properties, eye-watering service charges and remediation costs purchased in good faith and had no part in the creation of those defective buildings. It is also the case that the identity of those responsible for construction deficiency is, in most cases, known.

So, while I advocated the Government getting ahead of the curve and leading the way on this very complex issue, with many economically powerful players, I did not mean to suggest that the taxpayer should bail out the home owners. Of course, there is a role for a compensatory fund and a levy, and the Government are acting on this but only for the limited capacity of the most at-risk buildings. That leaves a gap between the scope of what the Government set out to do and the extent of the problems, as we now know them.

I believe that the Government should be the instigator and driver of a more encompassing framework. Here I pay tribute to the comments of the noble Lord, Lord Young of Cookham, because much of what I say will dovetail with them. The framework should ensure that those responsible are indeed held to account, that home owners are thereby accorded relief from their resultant woes and that confidence is restored.

In the last five months, I have had many discussions with Steve Day, an inspirational campaigner who is well known to the Minister and who was faced with a huge remediation bill on an east London flat. Due in large part to his persistence, a group colloquially termed the “polluter pays” movement has grown up and garnered very considerable support. I wish to address the principles behind it this afternoon. It borrows from the principles in the Environmental Protection Act, seeking to make the polluter—or, in this case, the developer or constructor and his team responsible for the works—liable for the consequences of their failures. It differs from the EPA in that it would not try to apportion individual responsibility in some proportional manner but would provide joint and several liability on the developer or builder and leave those who are responsible to sort it out among themselves, after the Government have recovered the money.

It would make the first point of recourse for appeals to the First-tier Tribunal to keep things out of the mainstream courts as far as possible, thus discouraging economic might from bullying much weaker parties. It would attach parent company liability by a device customarily used by the Competition and Markets Authority, when treating a company and its subsidiaries as a single liable entity. It would remove the protection of special purpose vehicles, which developers have often used to try to ring-fence, if not actually escape, liability.

The polluter pays principle asks the Government to employ industry experts to check whether builders built to the required standards, including manufacturers’ instructions. If not, it then places the burden of proof on constructors to evidence that their installations met building regulations in force at the time of construction. If they do not have the evidence or they broke the building regulations in force at the time, they would need to put their hands in their pockets. As we have seen all over the media and in professional reports, there has been widespread non-compliance with construction standards, despite the fact that there is a very profitable housebuilding sector—so I believe that a large recovery potential is in fact there.

The polluter pays principle would also provide a way forward for proportionality in risk assessment, providing for the full range of property types, building heights, defect categories, and so on. It would draw on a vastly greater resource than the Government currently propose under their levy, and it would not impose a blanket levy on the many good and conscientious builders and their development teams. But it needs government to get ahead of the current freefall in risk-averse reactions and broker a pan-sector approach.

As a consequence, if this was taken forward, it would in fact set in place a legacy that would restore confidence and counter the perversity of the race to the bottom in construction standards and the culture of getting away with things if you can, rather than doing a good job and going that little bit further.

I fervently hope that, given the information, background, purposes and mechanics, the Government will see fit to incorporate this into the Building Safety Bill as an amendment of their own. If so, I will strongly support it; if not, I shall argue for one to be incorporated notwithstanding. I put it to the Minister that, in all justice and morality, this demands action. The problems of damage to market confidence, sector economics, social fabric, and personal health, well-being and life chances simply cannot be allowed to persist. This is a systemic failure that must not be allowed to persist. I know he has listened to the polluter pays argument, but I now ask him to take it forward.