Background
Last year, following a consultation with developers and the Home Builders Federation, 49 developers signed the building safety repairs pledge ("the Pledge") committing to remediate life critical fire safety defects in buildings over 11 metres that they have played a role in developing or refurbishing over the last 30 years in England.
On 30th January 2023, the Department for Levelling Up, Housing and Communities ("DLUHC") issued a draft agreement which seeks to contractually oblige developers to fulfil promises made under the Pledge ("the Contract").
The Secretary of State for the DLUHC, Michael Gove, imposed a 6-week deadline for signing the Contract, expiring Monday 13th March 2023 and the Building Safety Act 2022 ("the BSA") empowers the Secretary of State to implement significant consequences for developers that do not sign the Contract.
Obligations for developers under the Contract include:
- To identify and assess relevant buildings to understand whether remedial work is required as soon as reasonably practicable after entering into the Contract;
- To carry out and complete the works at the developer’s own cost, as well as procuring suitably experienced and qualified sub-consultants, sub-contractors or suppliers to carry out the works;
- To keep residents informed of progress; and
- To reimburse taxpayers where public money has been used to fix unsafe buildings.
Relevant provisions in the BSA and consequences
The DLUHC seeks to ensure compliance with the Pledge and, according to its letter to developers on 30th January 2023, plans to:
- Set up the 'Responsible Actor' scheme ("RAS"), with the intention to block developers who do not enter into the Contract from carrying out developments and receiving building control approval – regardless of planning stage;
- Take steps to warn investors and customers of the risks arising from continuing their commercial relationship with such developers; and
- Review its own commercial relationships and engagements with such developers.
The RAS will be introduced under sections 126-127 of the BSA, whilst sections 128-129 enable the Secretary of State to impose consequences for those that could be, but have chosen not to be, members of the scheme.
S.126 and S.127: Building Industry Scheme
The BSA enables the Secretary of State to establish a scheme for the purpose of upholding building standards and safety. The regulations to establish the scheme will outline those who may be members of the scheme and conditions on membership which may include:
- The remedying of building defects to relevant buildings;
- Making financial contributions towards meeting costs associated with remedying defects;
- Providing information to the Secretary of State; and
- Setting a standard of competence or conduct of any individual connected with a member.
The legislation requires the Secretary of State to publish a list of all members of the scheme, whilst enabling the publication of those who are eligible but not members of the scheme (referred to as 'naming and shaming' by the Government).
S.128 and S.129: Prohibition on Development
Section 128 of the BSA permits the Secretary of State to issue regulations to prohibit certain persons from carrying out the development of land in England. It is intended that a prohibition granted under the regulations will apply even if planning permission has previously been granted.
Section 129 of the BSA enables the Secretary of State to introduce regulations imposing a prohibition upon building control. This may prohibit applying for and receiving building control approval and receiving a final certificate in relation to the works carried out.
Government action so far
Following the expiration of the deadline, the DLUHC published a list of developers that have either signed or not signed the Contract. This followed a threatening statement made by the Secretary of State, Michael Gove:
"To those developers that have failed to sign the contract without good reason, let me be very clear – we are coming after you. If you do not sign, you will not be able to operate freely in the housing market. Your investors will see that your business model is broken – only responsible developers are welcome here."
Implications and developer response
The Contract provides extensive obligations for developers and carries significant financial implications. Many developers will be considering whether they can recover remedial costs from parties involved in the initial design and construction of the developments which, considering the age of many of the developments subject to review, will be no easy feat.
The deadline has passed, and many housebuilders have now signed. The Government plans to publish more information on the RAS and how it will affect non-signatories shortly.
This blog is part of a series published by Howard Kennedy LLP on the Building Safety Act. For more information, please contact Tom Hilton, Sharon Stark or Stuart Duffy. For other blogs, please click here.
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