Building Safety Bill (Second sitting)

Shaun Bailey Excerpts

Thursday 9th September 2021 Public Bill Committees

[Ruth Cadbury]

Q My question rolls on from the last. The building safety charge is merely for leaseholders; I do not even know whether it depends on whether you are a leaseholder of a private developer, a housing association or even a local authority, and we are just talking about permanent residential housing. There are already many differences, and we already have the current difference in the building safety fund, which only applies for leasehold homes. Even housing associations cannot claim on it for their social rents, so they have to use funding for refurbishment or new build social rent housing to address those deficits. Do the panel members, particularly from the federation and the LGA, feel that if there was an indemnity scheme on freeholders, developers and builders, it would be more transparent and easier to claim, irrespective of who the user is or who the main building manager is, in terms of which sector?

Victoria Moffett: To be honest with you, that is an arrangement that we have not considered at all. Rather than answering on the hoof, we might have to go back and give that some thought. We can certainly do that and write to the Committee.

Councillor Renard: We will also provide a written answer to that. It is a really good question, and we will give it some thought and respond to the Committee.

[Shaun Bailey (West Bromwich West) (Con)]

Q I want to touch on accountable persons. As we discussed earlier with clause 84, accountable persons have to “take all reasonable steps” to ensure safety. I know this might sound like I am asking you to pick your shopping list, but what do “reasonable steps” look like? We have these debates all the time, and I know this is coming out in secondary legislation later. To dovetail into that, on the duty to co-operate, we know there are some quite complex ownership structures. In my patch, we have a situation whereby you will often have a tenant management co-operative, which is an arm’s length body of the council but is a separate organisation in its own right. In that scenario, how do you ensure there is not responsibility shunting? It seems that there is a risk there. In that scenario, how do we ultimately ensure that we have the accountability that the Bill, and the subsequent legislation, is trying to achieve?

[The Chair]

Right, a little package of questions there from our colleague. David, do you want to start? Then I will bring in others.

Councillor Renard: I will address a couple of those. We believe the Bill has some shortcomings when it comes to the issue of accountable persons, and we feel that the Government need to be very clear about where that accountability sits. If there is an arm’s length management organisation, it needs to be clear in the guidance, so we need to have some regulatory guidance. We also think that the regulator needs to give accountable persons adequate time to implement the new system and provide the appropriate guidance. Of course, there is the need to ensure that there are enough accountable people with the right qualifications across the country, so thought needs to be given to whether there are enough skills and how long it will take to get them in place.

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[Kate Osborne (Jarrow) (Lab)]

Q Good afternoon. Broadly, what are your views on the responsible person or persons? What do you think of the responsibilities placed on them? More specifically, is it reasonable to expect all accountable persons to be sufficiently knowledgeable to assume the responsibilities in the Bill?

Liam Spender: I think the whole responsible person regime has not been properly thought out. You cannot see, as parliamentarians, the full detail—that is being developed behind closed doors with industry. You are being asked to put this through without seeing how that very important relationship will work. The fundamental issue with the accountable person and building safety manager is that you would expect to find that regime in a petrochemical refinery, not in a residential building. It is totally unsuited to what needs to be done, massively over engineered, and the cost of it will fall on residents. The Government need to go back to the drawing board and come up with a much more tightly defined set of duties for these people, in order to avoid a situation where we end up with the advice notes, on steroids—which is a real risk.

Giles Grover: I would echo those comments. The difficulty is, again, that the legislation and the guidance are still not really there to help us understand how it will work. There are potentially moral hazards between the roles of those accountable persons—the building safety managers—in terms of how they will coalesce. There might be different accountable persons, or responsible persons, depending on the building. It still feels like there is no effective control. I do not think anybody wants to be an accountable person right now; the competencies required are a pretty wide skill set, and I fear that they will not be able to get insurance. I think we need a lot more work on how the accountable person will interact with the responsible person.

[Shaun Bailey]

Q Thank you so much for coming today, Giles, and for your candour. I want to talk about how the Bill addresses some of the inherent power and structural inequalities that we see, particularly when it comes to the industry. Broadly speaking, we have heard some positive overtures about how we change behaviours and the possibilities that are there. How do you think this Bill should go further to do that? From a personal perspective, I have seen what those inherent inequalities do day to day; I have lived through that. What it sounds like from your responses is that there is a system that needs to be ripped apart. How do you think, within this Bill and subsequent legislation, that can be done?

Liam Spender: Thank you for that excellent question. There are three critical things to address. First, there need to be leaseholder resident representatives on the rule-making bodies. This avoids a situation where industry and Government make rules that suit them, and pass the bill on to leaseholders who are left with the inadequate tool of challenges to the building safety charge and service charge, to contest bills that have already been paid. Secondly, the Government are trying to perform some sort of Frankenstein operation, with the Building Safety Bill, on a system that has had its day—namely, leasehold. There is a fundamental imbalance of power in the leasehold system in favour of landlords. Until you address that, you will not solve the problem of rules being made to suit landlords and bills being passed on to residents with no oversight, and no control. Thirdly, Dame Judith Hackitt identified in her report the culture of box ticking in the industry, the race to the bottom and value engineering—all that sort of stuff. Until that changes, nothing changes; buildings will continue to be built that are not fit for occupation and we will end up repeating the cycle at some point in the future. Those are the three things that need to be changed. I think that the McPartland-Smith amendments go a long way towards changing them, by introducing clear, legal routes to recovery against builders if they do not do their jobs properly.

Giles Grover: I will just echo the comments on the fact that the whole leaseholder structure means that you are still at the bottom of the food chain. There is all this talk about the building safety charge, but, as Liam said, ultimately it is about leasehold law—despite the Government thinking there might be protections in landlord and tenant law, we have seen that there are not the supposed protections there should be, because all the cases are based on the terms of the lease, which are always written against us. There needs to be an overarching look at the fact that it is not just the building safety charge, it is about service charges and how they are levied. There needs to be a bit more control over that, so that there is the actual ability to challenge it, rather than saying, “You can potentially go to the tribunal.” Ultimately, the cases we have seen do that just end up being rebuffed.

I am still concerned about the insurance issues we are facing now. There does not seem to be enough control. We have seen buildings insurance soaring by hundreds of per cent. I am not sure what protections there are against that happening. We have tried to report it to the FCA and the CMA, but are simply told that the responses are not as constructive or helpful as they could be.

Everything needs to be looked at again—even the building safety charge itself. When it was first drafted, I remember a meeting with one of the deputy directors of MHCLG where they said they did not really know much it was going to be. It was an academic exercise. Even the numbers in the current impact assessment say it will be £16 a month. It might be £42 or £26 a month. For existing buildings it should be more. No one really knows. As some industry figures have started to look at it, it might well be hundreds of pounds a month. There needs to be an overarching, holistic look at service charges and building safety charges. That would be the first thing.

To go back to Liam’s point about the McPartland-Smith amendment, that is what we are hoping the Conservatives will look at and realise that, yes, residents must be protected now, because they are the innocent people.

[Ian Byrne]

Q Thank you, Liam and Giles, for the extremely powerful evidence. I really hope you are listened to when we come to the amendment stage of this process. I want to touch on the voice of residents, which we have not really talked about. How important is the engagement of residents to the operation of the occupation phase of the new building regime? Does the engagement process outlined in the Bill do what is required?

Giles Grover: Thank you for the question, Ian. Resident engagement is key. As we saw last night—those of you who watched “Grenfell: The Untold Story”—if there had been sufficient resident engagement in 2015 and 2016, would the events of June 2017 have happened? I do not think they would have. It is important to have resident engagement, but, as we have seen, as lot of these things are very much tick-box exercises. Recently—or not so recently—the National Fire Chiefs’ Council updated its guidance on simultaneous evacuation and interim measures such as waking watch to say that residents should be consulted and cost-benefit options should be explored. That never happens in practice.

What is there actually to make it happen? The Government do not want to legislate for a resident group in each building. I can understand the reasons for that, but what is to stop the responsible person, the council entities, from just saying, “We have tried to engage residents. We put a few flyers up and gave a form out.” There needs to be a more positive obligation on them to actually engage residents than there seems to be now.

Liam Spender: I wholeheartedly endorse all of that. The answer to Ian’s question is that the residents engagement strategy in the Bill is not up to scratch. The problem is that the rules are being made now by statutory instruments in close consultation with industry. There is no amount of resident engagement strategy or vision that can overcome that issue. Once the regulations are made, there will be limited room for manoeuvre. I think there needs to be resident representation on the rule-making bodies to ensure we actually have a genuine residents’ voice, rather than a couple of cul-de-sacs that freeholders, managing agents, responsible persons—whatever title they are being given in the Bill—can lead residents down without there being any meaningful input.

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[The Chair]

Shaun Bailey.

[Shaun Bailey]

Q I just want to come back on the really good question that was asked about resident and tenant representation, because we know that when that is done well, it ensures that people can live in safe communities and make the representations that they need to. We also know what it looks like when it is done horrendously wrongly and the power of a few is collated around a small minority, who seem to dictate what happens for everyone else in a community.

May I just ask you both: where should the driver be to ensure that tenant representation is effective? Should it be prescribed from national Government, in the context of this Bill? Should there be a mix? We have so many different types of ownership and of tenant model; I have three that are utilised in my own local authority alone. How do we ensure that every single person who needs that representation actually gets it, and where should the prescription for that come from—from national Government downwards, or from local government upwards? How do we do that? As you said in response to me before, the core of this is the importance of ensuring that those communities are accurately represented. So I am interested to hear from you both your thoughts on that.

Liam Spender: Thank you for the question and for engaging with the detail on this; as you say, it is vital. There is no one better placed than the people living in buildings to have a view on what is safe and what they think needs to be done to make those buildings safe.

I think there needs to be clearer language in the Bill about taking into account the resident’s voice, because at the moment a lot of the language in the Bill is passive; it is about residents being given information and not particularly good rights of consultation. There needs to be something in the Bill that creates a genuine partnership between the managers and the people living in the buildings.

To reiterate the point that I made in previous responses, residents need a voice on the groups and committees that make the rules, so that from the ground up and from the get-go the rules are shaped by that voice as they are being made, rather than just presented at the other end.

The last point I will make is that there needs to be better and more readily accessible advice for leaseholders and tenants. Perhaps specific programmes can be set up to provide that advice, so that people know where to go to get help when things are not working, and we do not end up with relationships breaking down, and so that we can have a genuine partnership. I think that would be a helpful addition.

I will let Giles add anything that he wants to add.

Giles Grover: I echo all those comments. Again, I have seen for myself the difficulty of engaging all residents; there is the turnover of residents as well, and you might have absent leaseholders. I appreciate that it might be difficult to do it on a statutory basis, but a lot more guidance and help could be provided to those responsible persons. In general, whether at this point there is that engagement with residents, or whether it is about tackling the issues that we are still facing, in terms of fire safety in our buildings, there probably needs to be a lot more partnership with local government and central Government. Local government—local authorities—and the fire service are able to be more reactive. They are on the ground and already have that relationship with the responsible persons and the managing agencies. That whole approach of saying, “Okay, this is what central Government are doing and this is what local government is doing, supported by the fire services,” could actually help drive a lot of it forward. Councillors have that local knowledge, as they are the ones residents turn to directly, as well as their MPs. Engagement with all stakeholders could be a lot better than it seems currently designed to be.

[Kate Osborne]

Q Have you considered or anticipated any possible increases to service charges or rent as a result of the Bill? If so, do you have any idea what that impact might look like to you as leaseholders or tenants?

Liam Spender: I think the simplest answer to the question is that we can expect the cost of living in higher-risk buildings, however defined, to be significantly higher in the future than it is today. We cannot really give any credence to the Government’s estimates that it will be between £9 and £26 a month. If you read the press articles, some of which quote industry figures you will be talking to next week, they are already talking about £500 a year extra just to pay the administrative costs of the new regime. That might not sound like a lot of money, but for some people—particularly shared owners who struggle to get on the ladder—it is make-or-break money. It is a lot of money if you have not got it—that is one way of describing it.

If that sort of burden were being imposed on a company, there would be uproar about it and there would be a great deal more scrutiny of it, but billions of pounds of costs are being loaded on to leaseholders as a result of the new regulatory regime, and the question that needs to be asked is whether we really need to spend that money. Do we really need to spend other people’s money—people who may struggle to pay—on this particular issue? I will hand over to Giles and let him add anything he wants to add.

Giles Grover: It is difficult to consider it, because last year it slightly changed. Last year, it included the historical remediation costs, and there were some vague, wide-ranging, heavily caveated figures about what it might be. Those figures are still heavily caveated. I suppose the difficulty I have is thinking about the future building safety charge when I have to pay a lot more already. A lot of people are already paying hundreds of pounds, so it is hard to have this conceptual thought about what may be put in place when they are already facing hundreds of pounds a month. Until there is more clarity about what it actually is, until there is more control over the building safety charge, and until the problems I am facing right now and the thousands of pounds I have to pay right now are resolved, I will not really consider it fully.

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[Daisy Cooper]

Q I have a question about statutory instruments. One of the issues that many of us are trying to grapple with is what should be in primary legislation and what should be in secondary legislation. We have heard from representatives of the Cladding Action Group and other leaseholders that they want to have a voice when it comes to fleshing out the statutory instruments. At the moment, they see it as a stitch-up between the Government and the industry. On the other hand, we have received evidence from industry bodies that this is a necessary evil, because they think they will have to flesh out some of these things as they go, and the critical thing for them is to ensure that there is sufficient scrutiny of statutory instruments. I would welcome your view on where you are on that spectrum. Do you see the process moving forward by giving residents a voice or having further scrutiny?

Justin Bates: There is probably no way of doing this without significant SIs, because to legislate at the level of detail that you probably need, you would have a 10,000-page Bill—you guys would still be in Committee at Christmas. There is also a value to doing it by SI for an element of future-proofing, because it will be easier to update it as things change. I do not see why you could not have at least a draft of the SIs to accompany the Bill, to be considered as part of the scrutiny. One assumes that the thinking as to what will be in the SIs must be reasonably advanced. The moment you have them, this Committee or some other Committee is as well placed as anyone else to do that kind of scrutiny and to bring in the leaseholder and external voices. At the risk of sounding like a typical lawyer, I suspect I am sitting somewhere in the middle.

Giles Peaker: I think I would agree. There are very significant operational elements of this Bill that will be done by statutory instrument, so we are largely in the dark about the way in which it will play out and operate, inasmuch as we have no idea what will be in the SIs. The difficulty with scrutiny of SIs is, I suppose, a parliamentary problem rather than a legal one, but I support Justin’s suggestion that at least drafts, indications or outlines of where the SIs will be going would be significant at this point.

[Shaun Bailey]

Q I am slightly repeating what I asked earlier, but on clause 84 of the Bill and reasonable steps, from your perspective as lawyers, is there a way to scope the drafting of this legislation, either through primary or secondary legislation, so that we limit the need for judicial intervention later on? The phrase “reasonable steps” always strikes fear into me, and we could end up just going round and round. Is there scope there to try to define that, either in the body of existing precedent or from what we know from a policy perspective, to try to scope that definition of reasonable steps in respect of this legislation?

Giles Peaker: I suspect that would be a matter for guidance; guidance would not necessarily avoid the risk of litigation on the issue, but it would mitigate it. The risk for all involved, particularly those who will end up paying for it, is that “reasonable steps” will be seen to be taken as doing every single thing possible to avoid any prospect of being sued or losing one’s insurance, and with that sort of risk avoidance there is a clear risk, particularly when you are looking at potential criminal liability in some aspects. We need some sort of clear guidance on the extent of “reasonable steps”. The difficulty is, of course, that you are looking at a wide range of potential safety issues, and I do not think you could draw a bright line under every single one. Inevitably, without something beyond clause 84, the accountable person will be running scared of what the potential consequences for them will be, if they do not do literally everything.

Justin Bates: The phrase “reasonable steps” is one that the draftsman of this Bill really likes, because it crops up in quite a few places. Contrast clause 84 with clause 124, inserting proposed new section 20D(9) into the Landlord and Tenant Act 1985. That is the one about how you regulate service charges, and in that one the Secretary of State is giving himself a power expressly to issue guidance about what will be reasonable steps. I cannot see that he has done the same in clause 84. He is making the accountable person go back to the prescribed principles, but prescribed principles are not the same thing as guidance. I do not see why you could not add a new subsection (6) to clause 84, stating that the Secretary of State may issue guidance from time to time about what constitutes a reasonable step for these purposes. That would be quite useful—and if you wanted to make him lay it before the House before it takes effect, you could even scrutinise it.

[The Chair]

Practical solutions.