Building Blocks: Draft Regulations for the Responsible Actors Scheme
On 25 April 2023, the government published draft regulations pursuant to sections of the Building Safety Act 2022. The regulations establish a Responsible Actors Scheme (the "RAS"), with the aim of ensuring that developers remediate and/or contribute to the cost of remediating fire safety defects in buildings which they have developed over the last thirty years.
The developer remediation contract, as discussed in our previous passle (click here to view), is at the heart of the RAS. Members of the RAS will be required to enter into the developer remediation contract and, as discussed in greater detail below, there will be severe consequences for parties who do not enter into the contract and those who fail to comply with its terms.
What is a relevant building?
In the regulations, a relevant building is defined as a building which:
- Is a residential building;
- Is at least 11 metres high and located in England; and
- Has been developed or refurbished during the period starting on 5 April 1992 and ending on 4 April 2022.
Who is eligible for the RAS?
The regulations state that a person is eligible for the scheme if they satisfy one or more of the criteria set out in regulations 7, 8 or 9 (each discussed below) and is not considered to be a registered provider of social housing or a wholly-owned subsidiary of a registered provider of social housing.
Regulation 7, residential property developers
The criteria in this regulation is satisfied if:
- The developer's principal business is residential property development;
- They have been responsible for the development or refurbishment of one or more relevant buildings; and
- They satisfy the profit condition set out in regulation 11 (discussed below).
Regulation 8, buildings eligible for remediation funds
The criteria in this regulation is satisfied if:
- The developer has been responsible for the development or refurbishment of two or more buildings which have been assessed as being eligible for funding under one of the following funds established by the Secretary of State:
- The Private Sector ACM Cladding Remediation Fund;
- The Social Sector ACM Cladding Remediation Fund; or
- The Building Safety Fund; and
- They satisfy the profit condition in regulation 11.
Regulation 9, voluntary eligibility
This criteria is satisfied if:
- The developer has been responsible for the development or refurbishment of one or more relevant buildings;
- At least one of those buildings would require remediation under the self-remediation terms, if the developer were subject to those terms; and
- The developer wishes to become a member of the scheme.
Regulation 11, profit condition
The "profit condition" is satisfied if the developer's average adjusted operating profits (as defined at regulation 11) for the financial years ending 2017, 2018 and 2019 was £10 million or higher.
In consideration of the broad effect of the regulations, if you are a developer in England who has been involved in residential property development over the past thirty years, there is a high possibility that the scheme applies to you.
Conditions of the RAS
As stated above, members of the RAS are required to enter into the developer remediation contract, which will oblige members to:
- Identify relevant buildings which contain fire safety defects;
- Undertake at their own cost or procure at their own cost, the works necessary to remediate or mitigate the fire safety defects; and
- Reimburse the government for funds provided to property owners to remediate defects.
Members can have their membership revoked if they fail to comply with the above obligations or the other requirements of the contract.
There are severe consequences for eligible parties who do not enter into the remediation contract and for those who have their membership revoked. Consequences can extend to persons under the control of the prohibited developer, which seeks to ensure that prohibited developer's businesses cannot continue through other subsidiaries.
The consequences include a prohibition from carrying out major development of land in England. This is likely to include the provision of dwellings where the number of dwellings to be provided is 10 or more and the provision of buildings where the floor space to be created by the development is 1,000 square metres or more. Such persons will also be prohibited from applying for building control approval, accepting initial notices and issuing final certificates.
The cumulative effect of these measures is to restrict prohibited parties from accessing the development market.
The regulations enable certain exceptions from the prohibitions, which include:
- Developments relating to critical national infrastructure;
- Instances where parties exchanged contracts for dwellings before the developer was prohibited;
- Permitting purchases and owners of dwellings to obtain a regularisation certificate for unauthorised building work under certain conditions; and
- Emergency repair works.
The exceptions are limited and in light of the government's focus to remediate buildings as quickly as possible and punish developers who do not comply, it will be interesting to see how many exceptions the Secretary of State grants.
The regulations carry severe consequences and prevent developers from "side-stepping" the scheme through its subsidiaries. The overall effect of the RAS is to commit developers to remediate fire safety defects and, as highlighted in the explanatory notes, the government's plan is to extend the scheme to include further parties in the future.
This blog is part of a series published by Howard Kennedy LLP on the Building Safety Act. For more information, please contact Shade Mushayandebvu, Stuart Duffy or Mark Pritchard. For other blogs, please click here.