Read my email to colleagues explaining why it is so important to protect leaseholders in the Fire Safety Bill:
Tomorrow we will vote on the Fire Safety Bill as part of the Government’s response to the Grenfell Fire tragedy nearly four years ago. It is an important Bill which creates a financial obligation on leaseholders to pay their freeholder the costs of remedying any fire safety defects on external walls and doors etc, such as cladding.
To be clear, both us and leaseholders want those responsible to pay. We have never asked the Government to pay for the full costs of remediation, but just to provide a safety net for leaseholders to ensure the fire safety works are undertaken. Only the Government can afford to provide the cashflow to pay for these works up front and only the Government can then introduce the levies on those responsible to claw that money back over the next ten years.
We would urge the Government to accept our amendment or table their own amendment in lieu to protect leaseholders, which we can all support. We want to work with the Government to resolve these issues for leaseholders, instead of our amendment being re-tabled in the Lords and coming back again and again.
What the Fire Safety Bill does:
In essence, the law on fire safety in the common parts of blocks of flats is found in the Regulatory Reform (Fire Safety) Order 2005. The Order is enforced by the fire service. In simple terms, the fire service serves notice on the freeholder requiring certain works to be carried out. The freeholder then has 21 days to appeal to the Magistrates Court, otherwise he must do the works specified in the notice. Failure to comply with the requirements of the Order is a criminal offence. In practice, appeals are rare and the Magistrates Court is very reluctant to second guess the assessment of the fire service as to what works need to be done. This means that the 2005 Order provides a quick and effective method of forcing building owners to make their buildings safe.
Presently, the 2005 Order does not apply to external walls and cladding on blocks of flats and there is considerable ambiguity around how (if at all) it applies to the front doors of flats if those flats are demised to the leaseholder under the terms of the lease. The Fire Safety Bill amends the 2005 Order so that it will apply to the external walls of a building and the front doors of individual flats. This is undoubtedly a good thing as it will create a quick and easy mechanism to force freeholders to remove dangerous cladding and to replace the front doors of individual flats.
There is, however, a problem where the flats are let on long leases. The effect of the Fire Safety Bill will be that leaseholders are forced to pay for this work, i.e. they are forced to pay for works to remedy defective cladding, or other fire safety build defects like inadequate fire breaks. This is because it is invariably a requirement of a long lease that, where the freeholder has to do something to comply with a “direction of a competent authority”, then the leaseholder has to pay for the costs which the freeholder incurs in complying with that direction. So, when the Fire Safety Bill comes into force, the fire service will be able to serve a notice on the freeholder requiring the cladding to be removed or fire safety defect remedied. The freeholder will comply and inform leaseholders that the costs he has incurred in doing those works are the costs incurred in complying with the direction of a competent authority, so that the leaseholders have to reimburse all his costs (cladding, fire safety defects professional fees, etc). Depending on the terms of the lease and the costs involved, this could easily be a requirement for a leaseholder to pay £50,000 within weeks.
The McPartland-Smith amendment will prevent this from happening. If accepted by the Government, it would mean that the freeholder could not pass the costs on to the leaseholders.
What the Treasury Package does:
Despite the massive generosity of the Treasury in providing £5 billion in funds for cladding, it is only one aspect of the fire safety defects currently bankrupting leaseholders today. In buildings above 18 metres, leaseholders will still have to find the funds to fix a plethora of fire safety defects that experts predict could cost them another £5 billion.
Homes between 11 and 18 metres in height or between four and six storeys tall, do not qualify for this new funding. This affects about half of all buildings affected by unsafe cladding. It includes developments such as conversions from office blocks and low-rise blocks with wooden balconies and flammable insulation. Homeowners that fall into this category will qualify for a long-term low-interest loan capped at £50 a month to pay for the costs to remove dangerous cladding. However, they will still have to find the funds to pay for remediating all other fire safety defects.
It is an additional £50 per month on top of increased insurance premiums and interim fire safety measures including; expensive night watch, sprinkler systems, fire safety surveys. Leaseholders are being bankrupted by these costs in all our communities and cannot sell their properties with these debts attached.
Leaseholders in buildings below 11 metres receive no support for help with cladding or fire safety defects. This affects hundreds of thousands of blocks of flats, as the Government changed the guidance in January 2020. They issued a consolidated advice note for Building Owners of Multi-storey, Multi-occupied Residential Buildings. This changed the regulatory guidance and it now applies to any building of any height, instead of buildings over 18 metres. At a stroke, second storey flats, were treated the same as flats on the top storey of buildings over 18 metres for the purposes of fire safety regulation, mortgages and insurance for example.
We cannot abandon leaseholders to the crippling costs of massive insurance premiums, waking watch and remediation of defects which were not deemed unsafe when they bought their property.
The Government has a chance to right the wrongs caused by decades of bad policies while kick-starting the post-Covid economy by reactivating the values of hundreds of thousands of properties that are often people’s first homes and creating the desirable ripple effect for properties up the chain.