Building Safety Bill Debate
Full Debate: Read Full DebateDepartment: Ministry of Housing, Communities and Local Government
Lord Greenhalgh
Main Page: Lord Greenhalgh (Conservative - Life peer)Department Debates - View all Lord Greenhalgh's debates with the Ministry of Housing, Communities and Local Government
Tuesday 29th March 2022
(2 years, 7 months ago)
Lords ChamberRead Full debate Building Safety Act 2022 View all Building Safety Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 125-I(a) Amendments for Report (Supplementary to the Marshalled List) - (28 Mar 2022)
Lord Greenhalgh
“(3A) The different provision that may be made by the regulations by virtue of section 120A(2)(b) includes in particular different provision in relation to—(a) persons who are eligible to be members of a building industry scheme and are not members of that scheme, and(b) other persons.”Member’s explanatory statement
This amendment clarifies that regulations under this Clause may make different provision in relation to persons who are eligible, but not members, of a scheme established under Clause 128 and other persons.
The Minister of State, Home Office and Department for Levelling Up, Housing & Communities (Lord Greenhalgh) (Con)
My Lords, I am very pleased to speak to a group of amendments that will strengthen our solution in law to ensure that the industry pays to remediate all unsafe high-rise and medium-rise buildings for which it is responsible, and contributes to fund the remediation of all cladding on 11-metre to 18-metre buildings. As discussed during our debate in Committee, we need to take action against those unwilling to make these commitments and impose a solution in law to make sure that developers and manufacturers take responsibility for rectifying building safety defects—the polluter must pay.
Amendments 133 to 136 set out a number of changes to the definition of associated persons within the leaseholder protections provisions. Amendment 137 sets out that partnerships are captured within the definition of an associated company and Amendment 139 defines joint ventures. This will ensure that well-resourced companies cannot make use of complex corporate structures to evade their responsibilities. These amendments pierce the corporate veil.
Amendment 179 confers a power to make regulations to require landlords to provide information to a relevant tenant or other prescribed person
I will now speak to amendments we are making to Clauses 128 and 129, which I moved in Committee. As noble Lords may remember, these clauses give the Government the power to establish building industry schemes. We want to use this power to enable us to establish a scheme to distinguish between building industry actors who have committed to act responsibly and make buildings safe, and irresponsible actors who have failed to do so. The amendments tabled on 22 March add detail to those powers, to reflect more clearly the Government’s intentions and to provide Parliament and the public with more information on the purpose of any building industry scheme or schemes we set up, together with indicative examples of the kinds of membership conditions that eligible industry actors may need to meet to be part of a scheme.
We have made it clear that we expect the industry to act now to take responsibility for fixing building safety defects, and our principal objective in establishing a scheme under this power would be to make sure that we can hold industry to account against this and other obligations. Examples of the kinds of membership conditions that may apply to members of a scheme in connection with these purposes include: the remedying of defects in buildings to which an industry actor has a connection; and making financial contributions towards remediation of defects in buildings, including by way of contribution to a general industry fund to pay for remediation.
We may also require scheme members not to use certain construction products made by prescribed manufacturers—for example, cladding and insulation products made by manufacturers who have failed to step up and commit to an industry solution by making a financial contribution to remediating unsafe buildings.
Lord Greenhalgh (Con)
I thank noble Lords who have spoken in this long—a little over an hour on one group—but important debate on ensuring that the polluter pays. I thank the noble Baronesses, Lady Hayman and Lady Pinnock, for Amendment 22, on the levy on social housing. The noble Baroness, Lady Hayman, raised the issues of exemptions from the building safety levy for social housing providers and who the details of the buildings levy will apply to in secondary legislation.
I am pleased to inform the noble Baroness that we are considering an exemption from the levy for affordable housing as a whole, including social housing, housing for rent or sale at least 20% below market rent or sales rates, and shared ownership. The Government recognise that applying a levy to affordable housing would increase the cost of developing affordable housing and would therefore be likely to disincentivise supply, as the noble Baroness said. We consulted on this exemption for affordable housing in our consultation on the levy, which ran from July to October last year.
I hope the noble Baroness understands that her suggestion is under careful consideration and will be addressed in secondary legislation. I will probably have to roughly translate: she should be reassured that the building safety levy will not apply to public housing. That probably makes it a little easier for her to decide what she wants to do.
I turn now to Amendment 200, on the leaseholder protection fund, tabled by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Stunell, which would require the Government to use funds raised by the levy to refund leaseholders who have already paid for safety works. While a noble thing to do, the Government’s primary aim is and should be to protect leaseholders from building safety risks and enable work to be undertaken to ensure this. For this reason, we will not be able to accept the amendment.
On Amendment 221, I thank the noble Baroness, Lady Pinnock, for this amendment. We share her determination to make sure that the industry acts now to take responsibility for fixing building safety defects and that the burden should not fall on leaseholders or taxpayers. The whole tone of the amendment is to get on with remediation and I have great sympathy for that. The principal objective of Clauses 128 and 129 is to make sure that responsible parties pay and to enable us to hold the industry to account. The further amendment I spoke to earlier will make it clear that we can link the scheme to the planning system.
Together, these powers will allow us to monitor compliance of members of the responsible actors scheme and make sure that members take responsibility and act promptly to make buildings safe. We do not believe a 5-year deadline needs to be inserted into the Bill. Our intention is for the measure to achieve its objectives much more quickly. Those that do not meet the scheme conditions may lose scheme membership and may immediately be subject to the planning prohibition, as our amendments make clear. A focus on pace is already built into the Government’s approach. I hope this reassures the noble Baroness that her intention has been more than met by the Government through this Bill, just in another way.
I turn now to Amendment 231 on social landlords and defects, tabled by the noble Baronesses, Lady Hayman and Lady Pinnock. The Bill already makes provision to protect leaseholders from unreasonable costs and allow guilty parties to be pursued. It contains a requirement on landlords to take reasonable steps to pursue other cost recovery avenues before seeking to recover the costs of remediation works from leaseholders. They need to provide evidence to the leaseholders of the steps taken. Social landlords will have to undertake these measures, including pursuing construction companies or installers where applicable.
To help all landlords, including social landlords, the Government are bringing forward an ambitious toolkit of other measures to allow those responsible to be pursued. This includes extending the limitation period under Section 1 of the Defective Premises Act 1972 to apply retrospectively for 30 years. We are also allowing the High Courts to extend the reach of civil liability to associated companies and creating a new cause of action. This will allow manufacturers, distributors and sellers of construction products to be pursued where defective or mis-sold products have been used in the construction of a dwelling, or where further works are carried out to that dwelling, rendering it unfit for habitation. These amendments make it easier for those affected to force those responsible for defective buildings—developers and construction products manufacturers—to pay.
While we are making it easier to pursue third parties, in parallel, we continue to protect leaseholders, so they are not paying for unreasonable remediation costs. The Bill introduces new statutory provisions which provide that cladding remediation costs cannot be passed on to qualifying leaseholders in buildings over 11 metres. The law is already clear that service charges and any increase in cost must be reasonable. Finally, the Government set a rent policy for social housing which determines the maximum amount of rent that social tenants may be charged and the maximum amount by which rents may increase each year. The rent standard prevents unforeseen hikes to tenants’ rents and is enforced by the Regulator of Social Housing.
Turning now to Amendment 232 in the name of the noble Baroness, Lady Pinnock, and the noble Lord, Lord Stunell, the service charge is the means by which fire safety costs would be recovered and the leaseholder protections measures already prevent costs being passed to leaseholders above the permitted maximum.
I now turn to Amendment 233, tabled by my noble friends Lord Young of Cookham and Lord Blencathra, which seeks to impose a duty on local authorities to pursue responsible developers. It imposes requirements on local authorities to remediate buildings with defects and to recover funds from responsible parties. If no funds can be recovered, the Secretary of State would be required to reimburse the local authority.
We have been clear that industry is responsible for remediating defective buildings. We expect developers to remediate buildings they had a role in developing or refurbishing. Where this does not happen, building owners and landlords will have new powers to pursue those responsible. Local authorities will also have powers under our new remediation orders and remediation contribution orders, as will other regulatory bodies. However, to impose a duty on local authorities to fix buildings or pursue responsible parties is not the right approach. This would absolve industry of its duty to resolve the crisis and building owners and landlords of their responsibilities to make buildings safe. It would also place an unacceptable burden on the taxpayer.
The amendment seeks to create a taxpayer backstop by requiring the Secretary of State to reimburse local authorities for costs they cannot recover. We have been very clear that it is wrong to look to the taxpayer for further funding to fix defective buildings. For these reasons, we will not be able to accept the amendment. I want to deal with the specific issue of the remediator of last resort. I understand where my noble friend Lord Young is coming from. We have asked the industry to provide a fully funded solution for both the cladding and non-cladding costs, including fixing their own buildings and contributing to a fund for the very orphan buildings he has highlighted of between 11 and 18 metres that need cladding remediation. The focus of the industry is on fixing its own buildings, and therefore we can begin to be more focused on where we apply taxpayer funds.
Finally, I address Amendments 201, 202, 229, 234, 235, 236 and 237 in the name of the noble Earl, Lord Lytton. Amendments 201 and 202 would hold the Crown liable where properties escheat—that is probably not the right pronunciation—and would prevent liquidators and trustees in bankruptcy renouncing the leases of buildings with fire safety defects. The Bill already prevents freeholders evading liability by simply escheating their properties where they do not want to pay. It also makes provisions in relation to insolvency and bankruptcy. Freeholders will still be liable where they were, or were connected to, the developer, or had a net worth over £2 million per in-scope building on 14 February. As I have said before, taxpayers should not be held liable. For this reason, I will not be able to accept these amendments. Amendment 229 is unnecessary as landlords are already prevented from passing on costs unless they have explored all other routes of funding.
I turn to the important Amendments 234 to 237. These cover building safety cost orders, providing powers to make regulations, stipulating liability and establishing a building safety cost fund. Liability for remediation costs is already set out in the Bill, as are provisions for building owners and landlords to go after associated developers, companies and manufacturers of defective products. For this reason, I will not be able to accept these amendments.
My noble friends Lady Neville-Rolfe and Lord Young of Cookham raised the position of enfranchised leaseholders and asked whether we have made life harder for them via Amendments 186 to 193. I want to be absolutely clear that nothing in the amendments increases liabilities for enfranchised leaseholders. No leaseholder will be worse off; all are measures to make the polluter pays principle apply to enfranchised leaseholders.
I hope that I have gone some way to provide assurances on the Government’s approach.
Lord Young of Cookham (Con)
Before my noble friend sits down, I am really grateful to him for the explanation he has set out but can he tell the House what happens where there is a building and no one has any money— the leaseholders cannot afford it, there is no freeholder and there is no developer or contractor to pursue? Who then puts that building right?
Lord Greenhalgh (Con)
My Lords, in practical terms, we have a £5.1 billion fund, of which we have committed the first stage of £1 billion. We have an additional £4.1 billion for buildings over 18 metres and an additional £4 billion for cladding remediation, yet we are asking industry to fix its own buildings. That gives us the ability to focus on the few buildings my noble friend is talking about, because we have got the developers that built these buildings to go on and fix them in a proportionate way and we do not have to use the core of money that we already have. Noble Lords can test the opinion of the House, but that is a practical way of dealing with the problems—focusing the current funds on those few buildings where that scenario applies.
Baroness Hayman of Ullock (Lab)
Before the Minister sits down, I thank him very much for his response to my Amendment 22. Could he just clarify something, so that I am completely clear on it? Was he saying that the Government will exempt social housing from the levy and that an SI will be brought in? If I am correct in my understanding, I would be grateful for a meeting to discuss the detail of what he proposes will happen.
Lord Greenhalgh (Con)
My Lords, I thank the noble Baroness, Lady Hayman of Ullock, for the opportunity to clarify what I meant. In simple terms, the exemption applies to social housing. With regard to how that is implemented and the means by which we do that, I will be happy to meet the noble Baroness to set out formally how we intend to bring that forward. I have already made that comment in meetings before Report, so it has been made in public. I am happy to make that commitment on the Floor of the House and to work on how we implement that and set it out, either in writing or in a further meeting.
Lord Greenhalgh
““building industry scheme” means a scheme established under section 128 of the Building Safety Act 2022;”Member’s explanatory statement
This amendment is consequential on the previous amendment to this Clause in the name of the Minister.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on the amendments in the name of the Minister leaving out Clauses 82 to 86 (which remove provision about building safety managers).
The Earl of Lytton (CB)
I, too, commend the noble Baroness, Lady Neville-Rolfe, on this amendment. Given the circumstances of the Bill, the number of variations in it and the sheer number of moving parts involved, a review is essential for precisely the reasons she said, and I support the amendment.
Lord Greenhalgh (Con)
My Lords, I am grateful to the noble Baroness, Lady Fox of Buckley, and my noble friend Lady Neville-Rolfe for this insightful debate.
Amendment 26 from the noble Baroness, Lady Fox, would require a review of the financial impact of the new regime. I reassure the noble Baroness that a review is already required by Clause 152, which provides that:
“The Secretary of State must appoint an independent person to carry out a review of”
the system of regulation of building safety and standards and the system of regulation for construction products. Importantly, the reviewer is not limited and may choose to review connected matters, including the matters mentioned in the noble Baronesses’ amendments.
Similarly, Amendment 246A in the name my noble friend Lady Neville-Rolfe would require a review of the impact of the Act. I apologise for the mix-up that resulted in my addressing this amendment in an earlier group. I will repeat for the record that we believe that this further replicates Clause 152 in the Bill and therefore we believe this is unnecessary.
What I do say to my noble friend is that the Secretary of State has to appoint someone to carry out the review within five years, so that is a long-stop date. I am very happy to meet my noble friend to ensure that we get going with this review at the very earliest opportunity to make sure that that long-stop date is comfortably met. We also need to make sure that this review is substantive and learns the lessons of a new regime in the broadest possible sense and addresses the points raised by the noble Baroness, Lady Fox of Buckley, as well those raised by my noble friend Lady Neville-Rolfe, who has had tremendous Front-Bench experience as well as experience as a distinguished civil servant.
With those explanations, I kindly ask the noble Baroness, Lady Fox, to withdraw her amendment and my noble friend Lady Neville-Rolfe not to press her amendment.
Baroness Fox of Buckley (Non-Afl)
I will withdraw but I will come back to the Minister. I think it is important to come back to the Minister and say if it is within five years, I would like it to be brought forward sooner. I do not know why he does not just accept the two years but let us have the meeting to discuss it. At this point, I will not press the amendment and beg leave to withdraw.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on the amendments in the name of the Minister leaving out Clauses 82 and 85.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on the amendments in the name of the Minister leaving out Clauses 82 and 85.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on the amendments in the name of the Minister leaving out Clauses 82 to 86 (which remove provision about building safety managers).
Lord Greenhalgh
Member’s explanatory statement
This amendment and the amendments leaving out Clauses 83 to 86 in the name of the Minister remove provision about building safety managers.
Lord Greenhalgh
Member’s explanatory statement
This amendment and the amendments leaving out Clauses 82 and 84 to 86 in the name of the Minister remove provision about building safety managers.
Lord Greenhalgh
Member’s explanatory statement
This amendment and the amendments leaving out Clauses 82 and 83 and 85 and 86 in the name of the Minister remove provision about building safety managers.
Lord Greenhalgh
Member’s explanatory statement
This amendment and the amendments leaving out Clauses 82 to 84 and 86 in the name of the Minister remove provision about building safety managers.
Lord Greenhalgh
Member’s explanatory statement
This amendment and the amendments leaving out Clauses 82 to 85 in the name of the Minister remove provision about building safety managers.
Lord Greenhalgh
Member’s explanatory statement
This amendment requires the strategy to be reviewed at times prescribed by regulations.
Lord Greenhalgh (Con)
I am very pleased to move a group of amendments that are focused on ensuring that leaseholders are protected from costs related to historical building safety defects. The package of leaseholder protections eradicates the idea that leaseholders should be the first port of call to pay to fix historical building safety defects. In fact, in drafting these clauses we started with the presumption that leaseholders should not have to pay anything, a sentiment that I know is shared with noble Lords from all sides of this House.
It is only right that building owners and landlords share in the costs of fixing dangerous buildings and we have carefully engineered—
Lord Cormack (Con)
I was under the impression that this was grouped with a whole group of amendments that had been debated and therefore there was no need for a further debate. If I am wrong, of course I apologise.
The Deputy Speaker (Lord Duncan of Springbank) (Con)
I will take the blame for that. I should have said moved formally and that would have encouraged the noble Lord, Lord Greenhalgh, to say “moved formally”. I will accept the admonition on that point. The noble Lord has saved the House some considerable time because I can see the page of that speech now fluttering in the wind.
Lord Greenhalgh
“(c) in prescribed circumstances, consult relevant persons and prescribed persons on the strategy and take any representations made on the consultation into account when next reviewing the strategy;(d) act in accordance with the strategy.”Member’s explanatory statement
This amendment requires the principal accountable person to consult on the residents’ engagement strategy, and to act in accordance with the strategy.
Lord Greenhalgh
Member’s explanatory statement
This amendment is a drafting change.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on the amendments in the name of the Minister leaving out Clauses 82 to 86 (which remove provision about building safety managers).
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on the amendments in the name of the Minister leaving out Clauses 82 and 85.
Lord Greenhalgh
Member’s explanatory statement
This amendment is a drafting change.
Lord Greenhalgh
“Building safety directors of resident management companies
(1) This section applies in relation to a resident management company that is an accountable person for a higher-risk building.(2) The articles of association of the resident management company have effect as if they included such provision as may be prescribed relating to—(a) eligibility for appointment as a director of the company, for a building safety purpose;(b) the appointment of a director for such a purpose;(c) the entitlement to remuneration of a director appointed for such a purpose;(d) the removal of a director so appointed.(3) Subsection (2) has effect—(a) whether or not the provision is adopted by the company;(b) whether the company was formed before or after the coming into force of this section;(c) notwithstanding anything in the company’s articles of association.(4) In this section—“building safety purpose” means the purpose of supporting the resident management company in complying with its duties under this Part or under regulations made under this Part;“resident management company” has the meaning given by regulations made by the Secretary of State.”Member’s explanatory statement
This new Clause makes provision about directors of a resident management company that is an accountable person.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on other amendments to this Clause in the name of the Minister.
Lord Greenhalgh
“30DA Liability for remuneration of building safety director of resident management company etc(1) This section applies to a lease of premises which consist of or include a dwelling in a higher-risk building if—(a) the landlord is an accountable person for the building,(b) the landlord is—(i) a resident management company within the meaning of section (Building safety directors of resident management companies) of the Building Safety Act 2022, or(ii) an RTM company within the meaning of Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (right to manage), and(c) the tenant is liable to pay a service charge.(2) The lease has effect—(a) as if the matters for which the service charge is payable under the lease included remunerating any director of the landlord appointed for a building safety purpose (insofar as this would not otherwise be the case), and (b) where the lease contains different methods for apportioning different relevant costs (within the meaning of section 18), as if it provided that any costs for which the tenant is liable by virtue only of paragraph (a) to be apportioned in the same way as costs incurred in connection with insuring the building.(3) In this section—“building safety purpose” means the purpose of supporting the landlord in complying with its duties under Part 4 of the Building Safety Act 2022 or under regulations made under that Part;“landlord” includes any person who has a right under the lease to enforce payment of a service charge;“service charge” has the meaning given by section 18;“tenant” includes any person who has an obligation under the lease to pay a service charge.”Member’s explanatory statement
This amendment makes provision for the recovery from tenants of costs incurred by a residents’ company in remunerating a director of the company, appointed in connection with its building safety duties.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on the second amendment in the name of the Minister at page 119, line 36.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on the removal of the building safety charge as a separate charge.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on amendments to Clause 115 removing the building safety charge as a separate charge.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on the amendment in the name of the Minister leaving out Clause 82.
Lord Greenhalgh (Con)
My Lords, I was a little slow in rising to introduce the government amendments. I was, perhaps, a little punch drunk after the length of the debate today.
It is only right, and I am sure we all agree, that building owners and landlords should share in the cost of fixing dangerous buildings. We have carefully engineered this Bill to ensure that those responsible, and otherwise those with the broadest shoulders, will be the first who are required to pay. Where there is no party that clearly should pay in full, and only in this scenario, our approach spreads the costs fairly and equitably and, above all, ensures that the most vulnerable leaseholders are protected. These measures are a robust and unprecedented legislative intervention, reversing the existing legal presumption that leaseholders must bear the costs of historical building safety defects.
The Government have listened to the comments raised by noble Lords, and we have tabled amendments which go even further in protecting leaseholders. Before I set out the detail of these further protections, I would like to be clear that the protections we are putting in place are extensive and, as noble Lords will be well aware, that these must remain in balance with the demands placed on landlords and building owners in ensuring that building safety defects are fixed and paid for where no wrongdoing on their part has taken place. There is an element of fairness here that we need to deliver. The Bill changes the private contract between the landlord and the leaseholder by stating that leaseholders will not pay any costs except in certain circumstances. Government can do this if it is in the general interest to do so, provided there is a fair balance between all the parties. Therefore, we need to make sure that the Bill is both proportionate and fair to all parties.
As I have said, leaseholders need to be protected, and we have brought in the most wide-ranging and expansive set of protections ever seen, allowing the courts to look through to associated companies to find both who is responsible and who has funds to remediate properties as there is no point in having money while properties remain unsafe. However, we are also aware that not all landlords were involved with the developer or have deep pockets, and we need to make sure that we consider the issue of building safety from all sides. We have therefore legislated on the side of the landlords by providing numerous robust routes for recovery of funds from those truly responsible: developers and the manufacturers of defective construction products.
To be clear, and bearing in mind my noble friends’ proposed amendments, let me put their minds at rest. The Bill makes it very clear that leaseholders will not pay anything in the majority of cases. These are where the landlord is the developer or is linked to the developer, where the landlord is wealthy and, finally, where the leaseholder’s property is valued at less than £325,000 inside London and £175,000 outside.
Where these absolute protections do not apply, the leaseholder’s contributions will be heavily capped. On leaseholder contribution caps, it is important to bear in mind that these caps are a maximum that leaseholders can be charged, not a target, and that, as above, they apply only where the landlord is not linked to the developer and cannot afford to pay in full. In addition, costs paid out in the past five years, including for interim costs such as waking watches, will count against the caps. Overall, we consider that in most cases leaseholders will not have to pay the full capped amount and many will pay nothing at all. Nevertheless, the Government agree it is critical that those leaseholders who are least likely to be able to afford to contribute towards historical remediation costs receive the greatest protection. That is why we have tabled amendments to provide that any qualifying lease with a value below £175,000, or £325,000 in Greater London, will be protected from all costs relating to non-cladding defects and interim measures. This is in addition to the protections for cladding remediation costs, which apply to all qualifying leases, and to all leases in buildings owned by or connected to developers.
Amendment 164 sets out that the value of a qualifying lease at the qualifying time is to be determined by the most recent sale price on the open market, prior to 14 February this year, uprated in accordance with the UK House Price Index published by the Office for National Statistics. Uprating values for this purpose will be set out in legislation.
Amendments 118 and 119 expand the definition of “enfranchised buildings” to ensure that all types of enfranchised buildings are covered.
We have listened very carefully to concerns about leaseholder affordability in the small number of cases where leaseholders are paying up to the caps. That is why we have tabled Amendment 166, to double the repayment period from five to 10 years. For leaseholders whose property is not below the threshold and whose building owner or landlord is not liable for the full remediation costs, Amendment 166 will mean that with regard to the capped costs the monthly repayments will be halved.
We have also listened carefully to those who were worried about buy-to-let investors who may be holding leasehold properties instead of a pension. As a result, we have amended Clause 121 to provide that people owning up to three UK properties qualify for the protections. As before, the principal home will always qualify, irrespective of how many additional properties are owned.
As well as going further to protect leaseholders, we have tabled a number of amendments which add key detail to the measures. We are clear that developers must fix the buildings they developed. That is why we have tabled Amendments 141 to 143 to Schedule 9, which clearly state that, where the landlord is or is linked to the developer, they will not be able to pass costs on to any leaseholder. This includes non-qualifying leaseholders such as commercial leaseholders and those with more than three UK properties. We have also tabled Amendment 145, which extends the definition of a developer to include persons who were in a joint venture with the developer. If you commissioned the work, you will also count as the developer.
We have also tabled Amendment 152, which will amend Schedule 9 to provide that where the landlord meets the contribution condition—defined as having a total net worth of more than £2 million per in-scope building as of 14 February 2022—they will not be able to pass any costs on to qualifying leaseholders. The calculation for net worth will be set out in regulations and will take into account parent and associated companies. This will ensure that those who have used complex corporate structures, such as special purpose vehicles, cannot evade liability where they can afford to meet the costs of remediation.
We are also amending Clauses 120 and 122 on the definitions for relevant buildings, landlords and works. These amendments will extend provisions to include work undertaken to remedy a defect and will clarify that buildings that are leaseholder-owned are out of scope because, in such buildings, the leaseholders are effectively the freeholders as well. With Amendment 121, we set out how the height of an in-scope building and its number of storeys will be calculated.
Amendments to Clauses 122 and 136 cover further definitions, including clarifying that associated partnerships are included, as the noble Earl, Lord Lytton, raised in Committee. Amendment 169 to Schedule 9 inserts a new definition of cladding remediation, which now means the removal or replacement of any part of a cladding system that forms the outer wall of an external wall system and is unsafe.
Amendments 170 and 171 provide that the landlord cannot pass on costs to a qualifying leaseholder relating to professional services, in addition to legal costs. Amendment 177 provides that certain leases are taken to be qualifying leases without the tenant providing a certificate, unless steps are taken. It also provides that landlords are taken to have met the contribution condition unless they provide a certificate proving otherwise. This means that the legal burden will be on the landlord to prove that they are entitled to pass on capped remediation costs.
The amendments also make minor technical and consequential amendments to clauses to ensure the provisions work as intended, remove extraneous powers and commence the provisions two months after Royal Assent.
It is right that leaseholders be protected from extortionate costs of remediating historical building safety defects, in a manner that balances the demands placed on landlords and building owners, where no wrongdoing on their part has taken place. I ask your Lordships to welcome and support this significant and important set of amendments, which go further to protect leaseholders and provide that fair balance.
Baroness Pinnock (LD)
My Lords, this is probably the most important group of amendments we are considering today, because it is absolutely at the heart of the building safety scandal that started nearly five years ago with the loss of 72 people in the Grenfell fire. I always think it is worth remembering that: 72 people died and the lives of many families were changed for ever, and that happened because of systemic and long-term failures in the construction industry.
It is also worth remembering that leaseholders since that time have found themselves under the enormous pressure of anxiety when they receive invoices, maybe for £100,000 or more. Some of them have not been able to cope with that level of anxiety, thinking that nothing would change, and have chosen bankruptcy as a consequence and therefore lost everything they had saved and worked for. For some whom I have heard about, sadly, this pressure may have contributed to something even worse: in the face of the bills and a long dark tunnel with no solution, they ended their lives. That is the backdrop. That is the tragic impact this has had on individuals across the country, and which has brought us to this place. This set of amendments is at the heart of those concerns.
I first raised my worries about leaseholders being liable for all the costs of cladding, removal and remediation of all the fire safety defects when the Fire Safety Bill was first debated in 2020. Unfortunately, I did not succeed in amending it at that stage, but what has happened since has been remarkable—the number of people on all sides of the House who have taken up the cudgels to argue the case, rightly, for justice for leaseholders. I give enormous credit to the cladding campaigners from all groups and different cities around the country who have got together and done the investigation, found the facts and put the case to the Government, who, to their credit, have listened and made the changes we have seen today. I think there are over 200 government amendments to the Bill today.
The question of justice for leaseholders is still at the heart of the Bill, and I contend that the Government still have not gone far enough in fulfilling what the Secretary of State and the Minister have said: that they should not pay a penny. They have done everything right and nothing wrong. They should not pay anything towards this remediation, because the flammable cladding, sometimes knowingly, was put on buildings, as was exposed in the Grenfell inquiry. Shoddy construction, sometimes deliberate, to cut corners and save costs, has also been exposed during the Grenfell inquiry.
I want to speak to Amendment 156 in my name and that of my noble friend Lord Stunell, but also to Amendment 155 in the name of the noble Baroness, Lady Hayman, and to Amendments 158 and 159 in the names of the noble Lords, Lord Young of Cookham and Lord Blencathra, and the noble Baroness, Lady Hayman, to which I have added my name. They focus on trying to solve the problem of justice for leaseholders, who should not pay a penny.
Unfortunately, the Minister has said today that “the majority” will not pay. Well, if the majority will not pay, the minority will—and the minority should not, because none of this is of their making. My Amendment 156 seeks to establish that what the leaseholder should pay is a peppercorn—a grand, historical way of saying zero, zilch. I thank the noble Lord, Lord Young of Cookham, for his support for Amendment 155 in the name of the noble Baroness, Lady Hayman, which uses the word “zero”. I use “peppercorn”, but they get to the same place, and he has acknowledged the justice of this case.
Baroness Hayman of Ullock (Lab)
My Lords, this has been an extremely important debate in which we have covered some of the critical issues still outstanding in the Bill. I thank the Minister for the introduction to the amendments. Many of them are good, but we believe there are still problems that need to be sorted out.
I will be brief. I thank the noble Earl, Lord Lytton, for his introduction to Amendment 115. If he decides to divide the House, he will have our support on that amendment.
I turn to my Amendment 155. It is really important that we take account of the principle that has been referred to by other noble Lords: there should be no cost to people who have done nothing wrong. It is not the fault of leaseholders that they have been left with these huge costs. We believe it is desperately unfair to force them to pay a penny, which is why my amendment has the word “zero” in it. As mentioned by the noble Baroness, Lady Pinnock, we must not forget the strain on the mental health of leaseholders. They need clear and proper support, and they are relying on your Lordships to do the right thing by them. To me, this is a moral question. Should leaseholders pay costs that, for many, will still be huge despite the caps proposed by the Government? They are blameless; they should pay nothing.
I thank the noble Lord, Lord Marks, and the noble and learned Lord, Lord Hope of Craighead, for clearly laying out the legal position. It has been important for me to hear that from them, and the detail that they have provided, having had discussions with the Government on their concerns about the ECHR. I also thank the noble Lords, Lord Young of Cookham and Lord Blencathra, and the noble Baroness, Lady Pinnock, for their support.
I confirm that I intend to divide the House on Amendment 155. If it fails to pass, I will be happy to support the noble Lords, Lord Blencathra and Lord Young, on Amendment 158.
Lord Greenhalgh (Con)
My Lords, I spoke to the government amendments as I hoped it would assist the House to have the Government’s views. With the permission of the House, I will now speak again in reply to the points raised by noble Lords on the non-government amendments that they have tabled.
Amendments 155 to 160 and Amendments 162 to 163 deal with leaseholder contribution caps. I thank noble Lords for their contributions and constructive approach, but I am afraid that the Government will not be able to accept these amendments. It is important to bear in mind that leaseholder contributions apply only in certain circumstances, and even then, only when a series of other steps have been exhausted. The caps do not apply at all in relation to cladding defects, nor do they apply where the value of the flat is less than £175,000 outside Greater London and £325,000 inside.
The caps only apply where the building owner or landlord is not linked to the developer and cannot afford to pay in full, where the developer cannot be made to fix their own building, and where the building owners have exhausted all reasonable steps to recover costs from third parties. Leaseholder contributions will only apply where there is no clear developer or wealthy landlord to meet the costs in full, and the party responsible for defective work cannot be identified. The Government consider that this will occur only in a minority of circumstances.
Where there is no party that clearly should pay in full—and only then—our approach spreads the costs fairly and equitably across those with an interest in the building and ensures above all that the most vulnerable leaseholders are protected. The Government’s latest amendments go even further in protecting leaseholders. Where the freeholder or landlord is not at fault and cannot pay to meet the costs, we need to ensure a proportionate approach that takes into account the interests of all parties. That is why our approach spreads the costs equitably among all relevant parties with an interest in the building.
The amendments tabled by the noble Baronesses, Lady Hayman and Lady Pinnock, and—
Lord Cormack (Con)
Can my noble friend quantify how many people he expects will be paying? What is the maximum amount they will pay?
Lord Greenhalgh (Con)
I cannot quantify the exact amount people will pay, but it is fair to say that we have set out a fundamental system of protection that admittedly does not go as far as the zero or peppercorn proposed in opposition amendments, but it does go a considerable way to ensuring that leaseholders are the last in line to pay, as opposed to the first.
As I said, the amendments tabled by the noble Baronesses, Lady Hayman and Lady Pinnock, and the noble Lord, Lord Stunell, seek to reduce leaseholder contributions to zero or a peppercorn. Where there is no clear party that must pay, it would not achieve a fair balance between relevant parties to transfer the costs in full to the freeholder or landlord. I appreciate that that opinion seems to vary from that of noble Lord, Lord Marks of Henley-on-Thames, but that is the government position.
Amendments tabled by my noble friends Lord Young and Lord Blencathra propose to reduce the leaseholder contribution caps, and another amendment proposes alternatively that the contribution is 1% of the lease value. The Government have already taken significant and far-reaching steps to protect leaseholders, protecting those in lower value properties and doubling the repayment period to 10 years. On that basis, I ask the noble Lords not to move their amendments.
Government Amendment 164 provides for the value of a lease to be determined without the need for a valuation. It allows for the value of the lease to be determined by uprating the most recent sale price prior to 14 February 2022. The uprating, which will be set out in regulations, will ensure all properties are compared on a level playing field. The uprating will be based on a metric called the house price index which tracks house prices. This will allow properties to be assigned a nominal present-day value.
Amendment 165, tabled by my noble friends Lord Young and Lord Blencathra, proposes that the value of the lease would be based solely on its most recent sale price. I am afraid the Government will not be able to accept this amendment as it would put leaseholders who have purchased their properties more recently at a significant disadvantage. The Government consider it important that properties are compared like for like, irrespective of when they were last sold. On that basis, I ask my noble friends not to move to their amendments.
I will turn now to Amendments 123 and 124, which deal with the definition of a qualifying lease. The Government have already tabled amendments which will see people with a total of up to three UK properties eligible for the protections. Amendment 123, tabled by my noble friends Lord Young and Lord Blencathra, proposes to increase this to a total of up to five UK properties. Amendment 124, tabled by the right reverend Prelate the Bishop of St Albans, proposes to increase the total to six for individuals in receipt of a state pension. I am afraid that the Government will not be able to accept these amendments.
As I have previously discussed, it is important that the Government take a proportionate approach and ensure that our measures are fair to all parties. This includes considering where certain groups of leaseholders are likely, on average, to be able to afford to contribute to the costs of remediation. The Government need to focus their protections on those who need it most, primarily leaseholders living in their own homes and those who have moved out and are subletting. We also recognise concerns about people with small numbers of additional properties, and that is why we are ensuring those with up to three UK properties will be protected.
Lord Greenhalgh
Member’s explanatory statement
This amendment removes the power to make supplementary provision, in consequence of the proposed new Clause after Clause 120 in the name of the Minister.
Lord Greenhalgh
“Section 120: height of buildings and number of storeys
(1) This section applies for the purpose of section 120.(2) The height of a building is to be measured from ground level to the finished surface of the floor of the top storey of the building (ignoring any storey which is a roof-top machinery or plant area or consists exclusively of machinery or plant rooms).(3) When determining the number of storeys in a building—(a) any storey below ground level is to be disregarded;(b) any mezzanine floor is to be regarded as a storey if its internal floor area is at least half of the internal floor area of the largest storey in the building which is not below ground level.(4) In subsection (2) “ground level”, in relation to a building, means—(a) the level of the surface of the ground immediately adjacent to the building, or(b) where the level of the surface of the ground on which the building is situated is not uniform, the level of the lowest part of the surface of the ground immediately adjacent to it.(5) For the purposes of subsection (3) a storey is “below ground level” if any part of the finished surface of the ceiling of the storey is below the level of the surface of the ground immediately adjacent to that part of the building.”Member’s explanatory statement
This new Clause sets out how the height of a building, and the number of storeys, is to be calculated.
Lord Greenhalgh
Member’s explanatory statement
This amendment provides that a lease may be a qualifying lease if a relevant tenant owns no more than two dwellings (excluding their interest under the lease).
Lord Greenhalgh
Member’s explanatory statement
This amendment ensures that subsection (4)(b) does not apply to Scotland (as the word “ownership” suffices for property in Scotland).
Lord Greenhalgh
Member’s explanatory statement
This amendment is a drafting change.
Lord Greenhalgh
Member’s explanatory statement
This amendment is a drafting change.
Lord Greenhalgh
““joint venture” includes a partnership (as defined by section 123);”Member’s explanatory statement
This amendment defines “joint venture” for the purposes of the Schedule.
Lord Greenhalgh
“No service charge payable if landlord meets contribution condition
3A_(1) No service charge is payable under a qualifying lease in respect of a relevant measure relating to any relevant defect if the landlord under the lease at the qualifying time (“the relevant landlord”) met the contribution condition.(2) The contribution condition is that the landlord group’s net worth at the qualifying time was more than N x £2,000,000,where N is the number of relevant buildings within sub-paragraph (3).(3) A relevant building is within this sub-paragraph if a member of the landlord group was, at the qualifying time, a landlord under a lease of the relevant building or any part of it.(4) For the purposes of this paragraph—(a) “the landlord group” means the relevant landlord and any person associated with the relevant landlord;(b) the net worth of the landlord group at the qualifying time is to be determined in accordance with regulations made by the Secretary of State.(5) The Secretary of State may by regulations amend the amount for the time being specified in sub-paragraph (2).(6) This paragraph does not apply if, at the qualifying time, the relevant landlord was—(a) a private registered provider of social housing (as to which see section 80 of the Housing and Regeneration Act 2008),(b) a local authority (as defined by section 29), or(c) a prescribed person.” Member’s explanatory statement
This amendment provides that no service charge is payable under a qualifying lease in respect of a relevant measure relating to any relevant defect if the landlord met the condition mentioned in the paragraph (relating to net worth).
Lord Greenhalgh
(a) £325,000, if the premises demised by the qualifying lease are in Greater London;(b) £175,000, in any other case.(2) For the purposes of this paragraph the value of a qualifying lease at the qualifying time is its value determined in accordance with paragraph 6 and regulations made under it.”Member’s explanatory statement
This amendment provides that no service charge is payable under a qualifying lease in respect of a relevant measure relating to any relevant defect if the value of the lease at the qualifying time is less than the amount mentioned in the amendment.
Lord Greenhalgh
(a) the value of the qualifying lease at that time is to be determined as if the tenant’s total share at that time was 100%;(b) ”Member’s explanatory statement
This amendment provides that where the qualifying lease is a shared ownership lease the value of it at the qualifying time is to be determined as if the tenant's share at that time was 100%.
Lord Greenhalgh
“(6A) The regulations may in particular provide that, except in prescribed cases, the value of a qualifying lease at the qualifying time is to be determined by—(a) ascertaining the consideration given on the latest disposal of the qualifying lease on the open market to have been made before that time, and(b) if that disposal occurred before 2022, uprating the consideration in accordance with the regulations.”Member’s explanatory statement
This amendment mentions the kind of provision that may be made by regulations under paragraph 6(6).
Lord Greenhalgh
“(1) A relevant service charge which would otherwise be payable under a qualifying lease is payable only if (and so far as) the sum of—(a) the amount of the service charge, and(b) the total amount of relevant service charges which fell due in the period of 12 months ending with the day on which the service charge fell due,does not exceed one tenth of the permitted maximum.”Member’s explanatory statement
This amendment removes the existing power to make regulations, and provides that a service charge in respect of a relevant measure is payable only so far as the total of such service charges in any 12 month period does not exceed one tenth of the permitted maximum.
Lord Greenhalgh
Member’s explanatory statement
This amendment is a drafting change.
Lord Greenhalgh
Member’s explanatory statement
This amendment provides that an order may be made in respect of a partnership.
Lord Greenhalgh
Member’s explanatory statement
This amendment provides that a person acting as an insolvency practitioner in relation to the company may apply for an order under this Clause.
Lord Greenhalgh
Member’s explanatory statement
This amendment is a drafting change.
Lord Greenhalgh
Member’s explanatory statement
This amendment is a drafting change.
Lord Greenhalgh
Member’s explanatory statement
This amendment has the effect of allowing regulations to require notifications to be given about development other than notifications relating only to the proposed beginning of development.
Lord Greenhalgh
“(1A) The descriptions of persons which may be prescribed include in particular persons who—(a) are eligible to be members of a scheme established under section 128, and(b) are not members of that scheme.”Member’s explanatory statement
This amendment provides that the descriptions of persons in relation to whom regulations may impose a building control prohibition under this Clause include, in particular, persons who are eligible to be members of a scheme established under Clause 128 but are not members of that scheme.
Lord Greenhalgh
Member’s explanatory statement
This amendment has the effect of applying this clause to Wales.
Lord Greenhalgh
“Order for information in connection with building liability order
(1) A person of a prescribed description may apply to the High Court for an information order.(2) An “information order” is an order requiring a specified body corporate to give, by a specified time, specified information or documents relating to persons who are or have at any time in a specified period been, associates of the body corporate.(3) An information order may be made only if it appears to the court—(a) that the body corporate is subject to a relevant liability (within the meaning of section 132), and(b) that it is appropriate to require the information or documents to be provided for the purpose of enabling the applicant (or the applicant and others) to make, or consider whether to make, an application for a building liability order.(4) In this section—“associate” has the meaning given by section 133; “building liability order”: see section 132;“prescribed” means prescribed by regulations made by the Secretary of State;“specified” means specified in the information order.”Member’s explanatory statement
This new Clause provides that a person prescribed by regulations may make an application to the High Court for an order requiring a body corporate to give information relating to persons who are associates of the body corporate and sets out when the High Court may make the order.
Lord Greenhalgh
Member’s explanatory statement
This amendment is a drafting change.
Lord Greenhalgh
Member’s explanatory statement
This amendment clarifies that a home created by, for example, extending an existing building will be a “new build home” for the purposes of the new homes ombudsman scheme.
Lord Greenhalgh
“New build home warranties
(1) This section applies where a person (“the developer”) carries out a development in England that results in the creation of one or more dwellings (“new build homes”).(2) The developer must, at the time of or before granting or disposing of a relevant interest in a new build home—(a) provide to the purchaser a new build home warranty for the new build home, and(b) provide to a prescribed person a new build home warranty for any common parts.(3) A “new build home warranty” for a thing is an arrangement, satisfying any requirements under subsection (4), under which—(a) the developer agrees, in specified circumstances, to remedy any specified defect (or any defect) in the thing occurring in a specified period, and(b) a prescribed person obtains the benefit of a policy of insurance relating to specified defects (or any defects) in the thing.“Specified” here means specified in the arrangement.(4) The Secretary of State may by regulations impose requirements about new build home warranties, including in particular requirements as to—(a) the kinds of defect which the developer must agree to remedy;(b) the circumstances in which the developer must agree to remedy a defect (including the minimum duration of the period mentioned in subsection (3)(a));(c) the developer agreeing to meet prescribed costs incurred by a person occupying a new build home, where works to remedy a defect are carried out;(d) the policy of insurance (including risks that must be covered, the minimum amount of cover, the minimum duration of the period of cover, and the maximum amount of any excess);(e) the solvency of the insurer or underwriter;(f) the standard of service provided by or on behalf of the insurer in relation to the policy;(g) the ability of a person who has the benefit of the warranty to transfer that benefit to another person. (5) The regulations must provide that the period of cover under the policy of insurance must be at least 15 years beginning with the day on which the relevant interest is granted or disposed of.(6) In this section—“carries out a development”: the reference to a person carrying out a development is to undertaking or commissioning—(a) the construction of a building, or(b) the conversion of, or carrying out of any other works to, a building,with a view to granting, or disposing of, relevant interests in one or more dwellings created as a result of the construction, conversion or carrying out of works;“common parts”, in relation to a new build home, means any part of a building, where—(a) that part is provided for the use, benefit and enjoyment of the residents of the new build home and the residents of other dwellings (whether alone or with other persons), and(b) the right to use that part is conferred in connection with the grant or disposal of the relevant interest in the new build home;“defect”: any reference to a defect includes, in relation to land, contamination;“prescribed” means prescribed by regulations made by the Secretary of State;“purchaser” means the person to whom the relevant interest is granted or disposed of;“relevant interest” means a legal estate which is—(a) an estate in fee simple absolute in possession, or(b) a term of years absolute granted for a term of more than 21 years from the date of the grant.”Member’s explanatory statement
This new Clause imposes, on a developer of new build homes, a requirement to provide a “new build home warranty” complying with the requirements imposed under the clause.
Lord Greenhalgh
“Liability relating to construction productsLiability relating to construction products: general definitions
In this section, section (Liability relating to construction products) and (Liability for past defaults relating to cladding products)—“the 1991 Regulations” means the Construction Products Regulations 1991 (S.I. 1991/1620);“the 2011 Regulation” means Regulation (EU) No. 305/2011 (regulation laying down harmonised conditions for the marketing of construction products);“the 2019 Regulations” means the Construction Products (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/465);“construction products regulations” means regulations under paragraph 1 of Schedule 12;“construction product requirement” means a requirement under—(a) construction products regulations,(b) the 2011 Regulation, or(c) the 2019 Regulations;“relevant building” means—(a) a building which consists of a dwelling, or(b) a building which contains two or more dwellings;“relevant interest”, in relation to a building in England and Wales, means—(a) in a case where the building consists of a dwelling, a legal or equitable interest in the building, and(b) in a case where the building contains one or more dwellings, a legal or equitable interest in—(i) the building, or(ii) any dwelling contained in the building;“relevant interest”, in relation to a building in Scotland, means—(a) in a case where the building consists of a dwelling, any right or interest (including a servitude or heritable security) in or over the building, and(b) in a case where the building contains one or more dwellings, any right or interest (including a servitude or heritable security) in or over—(i) the building, or(ii) any dwelling contained in the building;“requirement” includes a prohibition or restriction.”Member’s explanatory statement
This new Clause contains definitions relevant to the next two new Clauses tabled by the Minister.
Lord Greenhalgh
“(2) Construction products regulations may under paragraph 20(1)(c) make consequential provision amending section (Liability relating to construction products), which may in particular include the omission or amendment of subsection (2)(b) and (c) of that section.”Member’s explanatory statement
This amendment is to enable construction product regulations to make consequential amendments to the Clause relating to liability in respect of construction products.
Lord Greenhalgh
“(4) Where—(a) a relevant company is an accountable person for a higher-risk building (within the meaning of Part 4), and (b) one or more (but not all) directors of the relevant company have been appointed for a building safety purpose and are entitled to remuneration from the company,this section, so far as relating to Part 4, does not apply in relation to a director who is not entitled to remuneration from the relevant company.(5) In subsection (4)—“building safety purpose” means the purpose of supporting the relevant company in complying with its duties under Part 4 or under regulations made under that Part;“relevant company” means—(a) a resident management company within the meaning of section (Building safety directors of resident management companies),(b) an RTM company within the meaning of Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (right to manage), or(c) a company that is a commonhold association within the meaning of Part 1 of that Act (see section 34).”Member’s explanatory statement
This amendment provides that, in relation to certain residents’ companies, this Clause - so far as relating to Part 4 - does not apply to unpaid directors if there are paid directors, appointed for a building safety purpose.
Lord Greenhalgh
“(da) sections (New build home warranties) and (New build home warranties: financial penalties) (new build home warranties);”Member’s explanatory statement
This amendment provides for the new Clauses on new build home warranties to bind the Crown.
Lord Greenhalgh
Member’s explanatory statement
This amendment is consequential on the removal of the power to make regulations under Clause 120(2)(c).
Lord Greenhalgh
“(da) sections (Costs contribution orders: general definitions) to (Costs contribution orders: assessments) (costs contribution orders);”Member’s explanatory statement
This amendment secures that the new Clauses relating to costs contribution orders extend to the whole of the United Kingdom.
Lord Greenhalgh
“(za) sections 119 to 127 and Schedule 9;”Member’s explanatory statement
This amendment provides for the provisions on the remediation of certain defects to come into force two months after Royal Assent.
Lord Greenhalgh
Member’s explanatory statement
This amendment is a drafting change.