The Polluter Pays Principle: good news for UK leaseholders with ongoing cladding issues?

More than four-and-a-half years after the tragic Grenfell Tower fire, many leaseholders of flats in England are still living in unsafe buildings and paying increasing insurance costs and service charges. This is in addition to the great difficulties such owners have in trying to sell their homes.

Costs of remediation work to remove and replace unsafe cladding can reach into the millions. An analysis by The Building Cost Information Service, (BCIS) can be found here: https://www.rics.org/uk/products/data-products/insights/cladding-remediation-costs/

In March 2020, the Government committed to provide financial support to remediate unsafe cladding on residential buildings over 18 metres tall or more than 6 storeys in height by creating The Building Safety Fund. In February 2021, the amount for this fund was increased and the Government also announced a loan scheme for leaseholders in flats between 11-18 metres in height. The loan scheme offered long term, low interest loans ensuring leaseholders’ repayments would not be higher than £50 a month.

However, 9 months later in November 2021, the scheme was paused by Mr Gove, Head of the Department for Levelling up, Housing and Communities, who was generally opposed to the principle of leaseholders having to pay anything towards the remediation costs. On 10 January 2022, Mr Gove announced that this cost will now become developers’ responsibility and is expected to be in the region of some £4 billion.

Mr Gove has given developers until early March 2022 to agree a plan of action that will fully fund the remediation of unsafe cladding on buildings between 11-18 metres in height. The Government wants an open and co-operative meeting with the largest members of the industry, trade bodies and leaseholders to discuss the safest and quickest solutions to moving forward with remediation work so that all buildings are safe.

If developers do not co-operate, Mr Gove has indicated that the Government will take action to fulfil this, suggesting the introduction of some tough measures including restricting developers in relation to access to government funding and future procurements, a potential windfall tax, the use of planning regulations and even bringing developers to court. Further measures will include passing laws and establishing a regulatory framework to enforce it.

Whilst this is a step in the right direction for many leaseholders, there are still concerns over the voluntary nature of the contributions from developers, and the length of time it may take to enforce and secure these contributions. It is likely that the process will take years, rather than months. 

Additionally, with indications that it may take until the end of 2024 to remove cladding from buildings over 18 metres, there is still no relief on the financial burden for leaseholders of associated costs until the cladding is remediated.

There is, however, a body of opinion that indicates that this step is better than taking no step at all.

For more information see: https://www.gov.uk/government/news/government-forces-developers-to-fix-cladding-crisis

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