Motion to Approve
That the draft Regulations laid before the House on 7 June be approved.
Relevant document: 9th Report of the Joint Committee on Statutory Instruments (special attention drawn to the instrument)
My Lords, these regulations were laid before Parliament on 7 June and were debated in the other place yesterday, 18 July. They are a key part of the implementation of the leaseholder protection provisions in the Building Safety Act 2022, which your Lordships debated at some length. The regulations are made using powers in Part 5 of, and Schedule 8 to, the Act and introduce the necessary detail to implement the leaseholder protection provisions.
I will start by providing some context and background to the regulations. Before the relevant sections of the Building Safety Act came into force on 28 June, many leaseholders were liable for the costs of historical safety defects in their buildings. They were landed with bills they could not afford to sort out problems not of their own making. Now the provisions have come into force, all leaseholders in buildings that are 11 metres or at least five storeys in height are protected from all remediation costs, whether cladding related or not, where their building owner or landlord is the developer or is connected to the developer.
In addition, qualifying leaseholders in those buildings are protected from all cladding remediation costs. Any non-cladding or interim measure costs—for example, waking watches—will be firmly capped. Where the landlord has a net wealth above £2 million per relevant building or the flat is worth less than the specified amount, £325,000 in Greater London or £175,000 elsewhere in England, they are protected from all historical safety remediation costs. Any costs paid out in the last five years will count towards the caps, and qualifying lease protections will pass on to subsequent buyers.
The House will be aware that the Joint Committee on Statutory Instruments has drawn attention to the content of these regulations. I would like to address the committee’s concerns, but first I will set out some of the background that influenced the Government’s approach. The House will know that the underlying statutory provisions, the leaseholder protections, were added to what is now the Building Safety Act about half way through its passage through Parliament, in recognition of the unfair and intolerable position that many leaseholders found themselves in. They were facing bills often running into many thousands of pounds to fix problems they had played no part in creating.
The leaseholder protections were devised and drafted at pace, drawing on expertise in a number of fields, including proposals put forward by parliamentarians from both Houses. I record my thanks for their time and engagement on this. The Act received Royal Assent at the end of April, and the protections came into force two months later. It was therefore both important and urgent to prepare the two sets of regulations that will enable the protections to take practical effect. That urgency meant that we were not in a position to share the regulations in draft with the Joint Committee, as is the usual practice. That meant the committee and its staff had limited time to get to grips with both the regulations and the underlying primary legislation in what is, in many ways, a ground-breaking piece of law.
None the less, we have engaged with the committee in two rounds of correspondence, culminating in the memorandum and response set out in the appendix to the committee’s report. Some noble Lords will have read the report in full and seen the detail of the committee’s concern and the Government’s response. To summarise, the committee raised a number of technical and legal issues with the instrument in respect of both its drafting and its vires. The Government have considered these issues carefully, including working closely with the First-tier Tribunal about the way it will deal with appeals, and are satisfied that, notwithstanding the committee’s concerns, no issues with the regulations will prevent the process operating successfully.
As I have described, the Government consider it imperative that these regulations come into force before the Summer Recess to alleviate the issues facing leaseholders in defective blocks. We will, of course, monitor closely the progress of cases. If it becomes apparent that changes are necessary, we will come back to Parliament with those proposals. I therefore ask the House to consider the important effect of these regulations and to approve them.
To go into more detail on the instrument, the Act does not set out how leaseholders will demonstrate that their lease qualifies for the protections, nor how liability for historical safety defects will be shared between multiple landlords. That is what these regulations do. They set out the essential detail needed to implement the leaseholder protection provisions in the Building Safety Act. Their effect can be considered in three parts.
The first is the leaseholder certificate. These regulations make provision for leaseholders to provide information relating to their qualifying lease status—that is, the number of properties they own—their property’s last sale price and their shared ownership status. The regulations provide a template certificate, which the leaseholder must complete and which needs to be done just once. The certificate and evidence requirements are intended to be as simple as possible for leaseholders, while also being robust enough to prevent fraud and to assure landlords and lenders of the lease’s qualifying status.
The regulations also set out two trigger points at which the landlord must notify the leaseholder of the need to complete the certificate. These are when a defect is found or the leasehold property is to be sold. But any leaseholder may submit a certificate voluntarily once the regulations are in force—hopefully later this week—and they have the information to hand. These provisions will allow leaseholders to demonstrate whether they qualify for protections under the Act and, if so, what their maximum cap would be.
Secondly, these regulations make provision for the landlord to identify who is liable to pay for the remediation of historical safety defects and how much they are liable for, and to enable them to recover these amounts. They set out formulas which the responsible landlord must use to apportion liability where more than one landlord is connected to the developer or where remediation costs are not recoverable from leaseholders. The effect is that the landlord may recover some costs of remediation from other landlords with an interest in the building, in accordance with the Act.
Finally, these regulations provide detail on what a person making an application for a remediation order to the First-tier Tribunal must provide as part of their application. Applicants, who can be anyone connected with a building, along with enforcement bodies such as the new building safety regulator or a fire and rescue authority, will need to state under which provision the application is made. They will also need to state the building, its landlord, and the relevant defect. The First-tier Tribunal will then be able to determine whether to require a landlord to remedy particular defects in a building by a specified time.
To summarise, our overall approach to these regulations is entirely consistent with the policy and legal intent of the Building Safety Act and gives full effect to the leaseholder protection provisions in the Act. These regulations serve a very specific purpose, which is to provide the detail needed to implement the leaseholder protection provisions in the Building Safety Act. This will then enable leaseholders to benefit fully from the protections, which came into force last month.
This instrument is necessary to provide the detail needed to implement the leaseholder protection provisions in the Building Safety Act, which are already in force. I hope that your Lordships will join me in supporting the draft regulations. I commend them to the House, and I beg to move.
My Lords, I am grateful to my noble friend for introducing this statutory instrument. I appreciate that she was engaged on other government Bills when the legislation was going through earlier this year. As she explained, the context of this instrument are the clauses in the Building Safety Act which were introduced at a relatively late stage to protect leaseholders from remediation costs following the Grenfell tragedy. That protection was improved during the passage of the Bill, though not as far as some of us would have liked. However, it is good news that the secondary legislation is now being passed to give effect to it.
I have a number of issues to raise about this SI and will quite understand if my noble friend writes to me in response. First, looking at the schedule, there is a form headed “Evidence”, and a leaseholder who believes that he has protection under the SI has to provide a number of documents. One is to show that the dwelling, which is usually a flat, is his or her only principal home on 14 February. Most people have only one home. I wonder what document they must provide to satisfy the landlord that they do not own any other property. Is it a simple assertion, or will the landlord be entitled to expect something else before he accepts liability, and, if so, what? It is quite hard to prove a negative. This is important, because if the landlord can say that the leaseholder has not completed the form properly, the lease is no longer a qualifying lease.
Secondly, during the passage of the Bill, on several occasions I raised the question of leaseholders who had enfranchised and then bought the freehold. I was invited to read the Minister’s lips. Other noble Lords in Committee will remember the exchange. I was assured that they would be treated as leaseholders and not as freeholders, and that they would get protection under the Bill. My noble friend Lord Greenhalgh said:
“They are effectively leaseholders that have enfranchised as opposed to freeholders. I hope that helps.”—[Official Report, 28/2/22; col. GC 262]
That would have been consistent with the policy of successive Governments to encourage leaseholders to enfranchise, and it would be perverse to penalise those who had done so.
Without resurrecting old arguments, when the Bill completed its passage, they were treated as freeholders and not as leaseholders, and so they got no protection under Section 117 of the Act and no protection under the SI. My noble friend Lord Greenhalgh was concerned about this, and I ask my noble friend the Minister whether any action was being taken by the Government to fulfil the commitment that was initially given. I recall that my noble friend Lord Greenhalgh mentioned some consultation on this issue.
Thirdly, related to that, there will be problems where some of the leaseholders are freeholders and others are not. Can my noble friend the Minister say whether, under those circumstances, leaseholders who do not own a share of a freehold can pass on their share of the remediation bill to those who are freeholders? Again, that would be a perverse consequence. Do the Government intend to make regulations under Section 117(3)(d) to deal with any situation of some residents being freeholders and others not?
Fourthly, it seems from the way the SI is drafted that resident management companies and right-to-manage companies can serve notice on landlords without first pursuing the developers. That is contrary to the waterfall we were assured about in Committee. Developers do not seem to be mentioned at all in the statutory instrument, although they are the ones who are meant to be first in the frame. The way the SI is drafted might provide a legal loophole through which developers can escape. I am sure that this was not intended. Can my noble friend provide reassurance on that?
Fifthly, there seems to be a circular process in Regulations 3(4) and 4(3). The former says that a remediation amount claimed under Regulation 3 cannot include amounts that could be included under Regulation 4. However, Regulation 4(3) says that an amount claimed under Regulation 4 cannot include an amount that could be claimed under Regulation 3. Some claims can be made under both or either regulation but, as drafted, they would simply cancel each other and go round and round from Regulation 3 to Regulation 4.
Finally, we need clear advice for leaseholders about bills that they have for service charges that include remediation measures but may not now be payable because of the Act. They are being threatened with court orders and repossession; they need to know whether they should pay their bills.
I will leave others to mention the issues raised by the Joint Committee’s report, but the Explanatory Memorandum says that guidance will be issued. In view of the speed with which the SI has been prepared, and in view of some of the issues that I have raised and other noble Lords may raise, guidance will be essential if the ambiguities and uncertainties in the statutory instrument are to be addressed. Can my noble friend the Minister give a date for when the guidance referred to in the Explanatory Memorandum will be produced?
Subject to those remarks, I hope that the statutory instrument receives approval.
My Lords, it is always a pleasure to follow the forensic approach of the noble Lord, Lord Young, to the details of any piece of legislation but particularly this statutory instrument. It is important, as he pointed out. At this point, I again remind Members of my interests as a councillor and a vice-president of the Local Government Association.
The principle of this SI is positive news for leaseholders. As we have heard, in blocks of five or more storeys or above 11 metres, the news is good. I want to ask the Minister something, although I appreciate that she may not be able to answer all our questions; perhaps she could just write and confirm. Can she confirm that the very different funding packages, which are outlined partly in the Explanatory Memorandum and in more detail in the impact assessment, will fund all the work that is going to be required? The impact assessment makes it clear that the Government have no idea of the extent of the non-cladding remediation work that will have to be done. That is not a surprise because, until you take the cladding off, it is not clear what needs to be done. It would be good to know that all that work is covered by the various funding packages that have been put together. I am pleased to see that the measures include protecting leaseholders from having their service charges raised to fund some of the remediation costs. So there is positive news in this SI but, as the noble Lord, Lord Young, has said, there are questions that remain.
I will continue to raise questions about those leaseholders and tenants in blocks of four storeys or fewer, or under 11 metres. They may still have flammable cladding or fire safety defects in their blocks. What assurance can the Government give us, because they are excluded from this SI, that they will be able to sell their properties at a fair price even if no work is done, because that is what the Government are anticipating? The risks are low, and no work will be needed; therefore, they will still be able to have a fair price for their properties. We have never seen a risk assessment for those who live in properties below 11 metres in terms of fire safety. Again, it would be good to see that. We have been told the risk is lower, but how low is it? What is the risk?
The second big thing is the timeliness of this remediation work. My Twitter feed is full of concerns from leaseholders as cladding is removed, plastic sheeting is put round and then no work is done for six months. That is not acceptable. It has been five years since the dreadful Grenfell tragedy exposed all these construction failures. Leaseholders and tenants have been living in a state of anxiety and concern since then through no fault of their own, as I and many others have constantly said.
The impact assessment published alongside the SI makes it clear that there can be no assessment of the value of fire safety remediation to be done as there is no adequate data. What then can the Minister say to leaseholders and tenants about how quickly the Government anticipate the work being concluded? If the Minister is able to provide regular updates of remediation work, that would be very welcome.
Finally, there have been some reports of some developers challenging the extent of their liability. What assurance can the Minister provide on the deals with the 45 developers referenced in the impact assessment? If the developers take that to court, are the Government fully assured that they will lose? Otherwise, the whole funding package for remediation work will fall apart. I hope that the Minister, who has been put in this impossible position, can perhaps write and let us have some answers to those questions.
My Lords, the Building Safety Act made provisions for the remediation of certain defects to buildings following the Grenfell tragedy and, in certain circumstances, gave protections to leaseholders from the costs. The regulations before the House make provisions for how leaseholders can secure those protections. Labour welcomes these regulations and, throughout the passage of the Act, called for leaseholders to be better protected from the costs of fixing historic defects to their homes.
I must say to the Minister that just as the noble Lord, Lord Young of Cookham, the noble Baroness, Lady Pinnock, and the Joint Committee have raised concerns, we are concerned about the rushed nature of these regulations today. It spells chaos, but when you have had 60 Ministers resign, including the Minister for this department, I understand what is going on here.
We want to ask the Minister to be more clear about how the scheme will operate. Given that many leaseholders are still living in buildings with extensive defects, this should include urgent information on when it will be fully operational. There are also still technical questions remaining over how retrospective protections will come into force, especially given that the Cabinet Office guidance makes it clear that you cannot implement retrospective law unless the Attorney-General and Solicitor-General have both approved it.
As leaseholders continue to suffer without any real guidance or information, Ministers must act with great urgency to give people security in their homes and ensure that there are no further delays. We on these Benches support this measure today. However, we have concerns about the rushed nature of bringing it through. What continuing conversations and consultations will the Minister have with the Joint Committee to ensure that its concerns are addressed?
I thank noble Lords on all sides of the House for their contributions and their kindness in suggesting that I might like to write if I find that I cannot or have not answered anything when I have had a look at Hansard tomorrow. However, I shall take this opportunity to provide further detail on some of the points that have been raised.
I go first to the noble Baroness, Lady Pinnock. She asked whether non-cladding remediation work would be covered by the provisions. The various apportionment provisions in the regulations will apply to non-cladding remediation works. She also asked what happens when developers might challenge the extent of their liability. We are confident that the provisions will survive any legal challenge, but the department may indeed take forward some court cases itself in order to prove this.
The noble Baroness also asked me what happens with buildings under 11 metres, and I know this is a common concern of many. We remind your Lordships that building owners should ensure that residential buildings of any height are safe, as it is their long-standing legal responsibility to do so. We have no evidence of systemic risk in low-rise buildings, and although we recognise that height should not be the only factor determining the level of risk in buildings, experts generally recognise that height is an important factor. Any mitigation work needs to be appropriate and proportionate to the level of risk. Less expensive mitigating measures, such as fire alarms, are likely to be more appropriate and proportionate for buildings under 11 metres.
My noble friend Lord Young asked a number of questions that I would like to respond to. He asked first how leaseholders will be required to prove that a flat is their sole or primary residence. Leaseholders will be required to provide information in the form of a short deed of certificate in relation to their qualifying lease status, their property’s last sale price and their shared ownership status. As my noble friend said, proving a negative for other properties is a challenge; that is why the certificate itself carries a formal legal status. This one-off process will enable landlords to calculate their liability for historical safety defects under the Act. The certificate is set out in the schedule to these regulations and will be available to download from the GOV.UK website in the next few days. We will also be issuing comprehensive guidance and digital tools for leaseholders that set out this process in further detail.
My noble friend asked about enfranchised buildings. I remind the House that there is a distinction between resident-managed blocks, which are protected, and resident-owned blocks, which are not. As flagged up during debates in this House, it does not help leaseholders in enfranchised buildings if the leaseholder protection provisions in Part 5 of the Building Safety Act apply to leaseholder-owned and commonhold buildings. This is because leaseholders, in their capacity as freeholders, would still have had to pay the remedy for the safety defects in their building.
Following this, my noble friend asked about buildings where only some of the leaseholders own the freehold. This scenario was one of the reasons why we did not include leaseholder-owned buildings in the protections, as doing so would be unfair to those leaseholders, as my noble friend described. I remind the House that the Building Safety Act 2022 provides other routes for redress, which apply equally to leaseholder-owned buildings for buildings with relevant safety defects, enabling them to pursue those directly responsible for defects through the courts. These are now available for longer and in a far greater range of circumstances, including a course of action relating to product manufacturers and the provisions enabling associated companies to be sued. On next steps, I assure the House that the Government will very soon launch a call for evidence to understand better the particular issues facing leaseholder-owned buildings and their residents.
My noble friend also asked about resident-managed buildings and whether we have in some way let developers off the hook. I can categorically say that we have not. Developers will be liable to pick up historic building safety costs in resident-managed buildings, just as in other buildings. We have agreed with over 47 residential property developers that they will fix life-critical fire safety defects, including cladding, in all buildings above 11 metres that they had a role in developing or refurbishing in the past 30 years. The provisions relating to resident management companies and the like ensure that building owners are in the loop when it comes to getting work done. It will be up to them rather than the residents to pursue developers where the pledge does not apply.
My noble friend then asked if regulations 3(3) and 4(3) create some sort of loop. I can reassure your Lordships that they do not. There cannot be a circumstance whereby amounts could be claimed under both regulations. Under regulation 3, if the landlord is or is associated with a developer, they will be required to pay all remediation costs. If that is not the case, regulation 4 will apply to test whether the landlord or building owner meets the contribution condition. If they do, again, they will be required to pay all remediation costs, so a situation simply cannot arise where claims could be made under both regulations, because if a building owner were to meet the requirements of regulation 3 first, there would be no need to make a claim under regulation 4, and the same applies in reverse.
Finally—I am glad to say—in answer to my noble friend’s question about whether the Government will be producing guidance, as the Explanatory Memorandum does indeed suggest, to support the operation of these regulations and the leaseholder protections as a whole, subject to the House approving these regulations, the Government will be publishing on Thursday, to coincide with their coming into force, a comprehensive package of guidance for leaseholders, landlords and building owners. The draft package of guidance, which has been shared with the leaseholder groups to ensure its usability, will be accompanied by an online tool that will use the data from the certificate in the schedule to these regulations to enable qualifying leaseholders to determine the maximum they will have to pay in respect of non-cladding costs.
If I have not answered any questions, I will of course get back to noble Lords in writing, but in conclusion, these regulations are vital to ensure that the leaseholder protection provisions in the Building Safety Act are fully implemented, enabling landlords to apportion historical safety remediation costs and leaseholders to demonstrate their qualifying lease status, so that leaseholders can fully benefit from the protections that the new legislation affords them. I am glad that noble Lords are joining me in supporting these regulations and I beg to move.
House adjourned at 8.02 pm.