My Lords, I am grateful to the noble Earl, Lord Lytton, for introducing this group of amendments, for setting the scene for this important debate on building safety, and for putting forward his own solution. I will try to respond to his exhortation to do some heavy lifting.
The question underlying this debate is simple. Have the Government done enough to tackle the problems arising from the Grenfell tragedy or do we need to build on the Building Safety Act 2022 in the light of experience to address unresolved issues? I will argue that further action is essential.
I begin by recognising the progress that has been made by the Government. Some leaseholders have been given legal protection under the Act. Most developers who have been asked have agreed to pay up—well done to the Secretary of State—and the major lenders have agreed in principle to offer mortgages on blocks of flats with safety issues, although this does not seem to be reflected in practice. Good progress is being made with high-rise blocks that are owned by local authorities and housing associations. I know that my noble friend and her predecessor are sympathetic to those who have been in touch with them to discuss the issues that remain.
However, there is still a mountain to climb. A recent survey by the End our Cladding Scandal campaign in last month’s Inside Housing magazine found that
“only 21.8% of leaseholders in dangerous blocks have seen remediation work start. For 44.1%, a date has not even been identified for work to begin … and only around 10% expect them to do so within the next 12 months”.
As the noble Earl, Lord Lytton, has just said, hundreds of thousands of leaseholders face an indeterminate wait for complex remediation, and they cannot move in the meantime.
On top of the estimated 3,500 high-rise buildings which need remediation there are between 6,000 and 9,000 medium-rise buildings which need life-critical safety work. While 43 of the UK’s largest developers have signed up, this covers only about 1,000 blocks. What about the rest of them? Some 90% are reliant on support from the building safety fund, which is slow to release funding, or from leaseholder contributions or from freeholders. The Government’s funding stream for medium-rise blocks is not yet open for bids, but when it is it will cover only cladding removal, despite these buildings having other problems and serious compartmentation defects which need to be fixed. Non-cladding works can push costs up to £100,000 per flat.
The Government’s response, if there is no developer to sue, is to charge the building owner, if the building owner has a stake in the building worth £2 million. However, this involves a complex remediation order under the Act. Can my noble friend say how many have been secured? Initial hearings for a remediation order for blocks in Queen Elizabeth Olympic Park were adjourned in February and are unlikely to commence this year. It is a long and legally complex process. Those who then enforce the process—the fire authorities and the local authorities—must at times deal with intransigent developers, who then challenge the assessment of what work is necessary, building in further delay and cost. Some large freeholders are claiming to have net assets of less than £2 million per building, as the noble Earl, Lord Lytton, said, or that they are not part of a wider group, meaning that they are not liable
under the so-called waterfall provisions. We have seen the unedifying dispute with the well-resourced railway pension fund.
Furthermore, even if you get a remediation order, freeholders are liable only for the costs of qualifying leaseholders. Again, as the noble Earl, Lord Lytton, pointed out, if the non-qualifying leaseholders—the buy-to-let landlords—cannot afford their contribution then remediation of the block simply will not go ahead, and you have deadlock. If the freeholder does not have the funds to pay, the leaseholders must pay up to the cap, which is £15,000 in London, with the balance coming from a yet to be determined government pot; work will not start until this is established.
The position is even worse for those in blocks under 11 metres, whom I and others tried unsuccessfully to protect last year when the Bill went through. They are non-qualifying leaseholders and so have no protection and face uncapped bills. The Government have said these should not need work, as blocks below 11 metres are, in their words, on the whole safe, but the guidance that has been issued says otherwise. At least one building under 11 metres, in Romford, has identical cladding to that at Grenfell Tower—the primary cause of the rapid fire spread. An assessment under PAS 9980, which is the UK national standard, unsurprisingly reached the conclusion that the cladding should be removed. The developers have no liability for work under the Act or indeed under the remediation contract with the Secretary of State, so no help is available to the leaseholders. That is simply indefensible.
In several cases, insurers are insisting on work on buildings under 11 metres going ahead or they will withdraw insurance cover. That leaves the owner with no choice at all. They are actually excluded from the duty to pursue alternative routes for funding; they simply pass the costs on to leaseholders. Against that background, the fire at Richmond House—below 11 metres—burned it to the ground in less than 11 minutes.
Here is quote from a letter from a leaseholder in one such building:
“I am a leaseholder in a building well under 11 metres. We are three storeys high with 10 flats. We are therefore excluded from any support from the Government, yet our freeholder/managing agent is taking us to court on Friday to ask them to agree to us having to pay for the cost of remediation—a £26,000 service charge in 2022 per leaseholder. We are told the freeholder does not have the means or obligation to pay for these works that we need to reduce the annual insurance premium. We are told that the only way to pay for these works is via the leaseholder and that we will be legally responsible to fund the money and pay it upfront so that the management agent has the means to pay for works.”
There are also reports of other leaseholders in buildings under 11 metres being forced to pay for remediation as a condition of continued insurance cover.
Last year, I was promised a case-by-case review of these blocks, but the evidence presented to the Select Committee in another place on 13 February this year said:
“We have not seen any progress with the case-by-case review in respect of under 11 metre buildings”.
The position for leaseholders in blocks of flats who have followed the policy of successive Governments and enfranchised by buying the freehold is also indefensible. Despite repeated commitments given to
me by the Minister at the time that they would be treated as leaseholders and would therefore be entitled to protection under the Act, the Bill treats them as freeholders and penalises them for enfranchisement. This is what I was told in Grand Committee by the then Minister:
“They are effectively leaseholders that have enfranchised as opposed to freeholders. I hope that helps”. [Official Report, 28/2/22; col. GC 262.]
My amendment to deliver that commitment on Report was resisted, and enfranchised leaseholders remain outside the protection available to other leaseholders.
There is an enfranchised block in Manchester with serious non-cladding defects, and there was a fire in a flat there last year. The enfranchised company, which is actually the leaseholder, is required by law to resolve these as soon as possible. Government policy is that blocks should enfranchise, but those who do are excluded from protection.
Looking at the picture as a whole, three years on from funding being made available, only 28 eligible buildings had been signed off by the Building Safety Fund by the end of last month, out of a potential 3,500 or so buildings eligible for support. In the meantime, most leaseholders are still unable to sell and move on with their lives. Despite six high-street lenders announcing in January that they would offer mortgages on flats with issues as long as the leaseholder protections were in place, this is just not happening on the ground. In the meantime, insurance costs have soared and service charges have escalated.
Freeholders and managing agents are refusing to withdraw service charges for items such as waking watches in buildings covered by the Act, but which were issued before the Act came into force. They also rushed to issue fresh demands on leaseholders before the Schedule 8 protection came into effect on 28 June last year. Leaseholders incurred the substantial costs of waking watches and increased insurance before the Act was implemented, but clause 6 of the final contract with developers excludes this. If money is to be recovered, the leaseholders have to litigate.
There are also early reports—the noble Earl, Lord Lytton, may have touched on this—of conveyancers saying they will no longer accept instructions to work on sales of leasehold flats in buildings of any height. That is because certain lenders—I have heard Nationwide mentioned—are imposing requirements on them to check the statements made in landlord and leaseholder certificates, which they are unable to do.
The original proposal of the Select Committee in another place was that there should be a comprehensive building safety fund, fully funded by government and industry, and the Government should establish clear principles regarding how the costs should be split between the two. Where we are sits uneasily with commitments given by Ministers last year. Last year, Michael Gove said:
“leaseholders are shouldering a desperately unfair burden. They are blameless, and it is morally wrong that they should be the ones asked to pay the price. I am clear about who should pay the price for remedying failures. It should be the industries that profited, as they caused the problem, and those who have continued to profit, as they make it worse”. [Official Report, Commons, 10/1/22; cols. 283-84.]
The then Minister wrote to noble Lords on 20 January last year, when the Building Safety Bill arrived in your Lordships’ House. Under the section headed “Protecting Leaseholders from Unnecessary Costs”, he said:
“The Secretary of State recently announced that leaseholders living in their homes should be protected from the costs of remediating historic building safety defects”.
Then there was the Statement on building safety made in the other place by the Secretary of State on 10 January last year:
“First, we will make sure that we provide leaseholders with statutory protection—that is what we aim to do and we will work with colleagues across the House to ensure that that statutory protection extends to all the work required to make buildings safe”. [Official Report, Commons, 10/1/22; col. 291.]
As I have tried to show, where we are falls well short of the commitments given, but it is not too late for the Government to act. My amendment is a peg on which to hang the debate. I end with the two questions I started with. Are the Government satisfied with the current position? If not, what do they propose to do about it? I know my noble friend is sympathetic to the case I have made. I know that many leaseholders are watching this debate and hoping for a positive reply.