Prohibition on passing remediation costs onto leaseholders and tenants

Fire Safety Bill – in a Public Bill Committee at 3:15 pm on 25th June 2020.

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“The owner of a building must not pass the costs of making any remedial work attributable to the provisions of this Act on to any leaseholders or tenants of that building.”—

The purpose of this new clause is to stop freeholders passing on remediation costs to leaseholders and tenants, such as through demands for one-off payments or increases in service or other charges.

Brought up, and read the First time.

Photo of Daisy Cooper Daisy Cooper Liberal Democrat Spokesperson (Justice), Liberal Democrat Spokesperson (Digital, Culture, Media and Sport)

I beg to move, That the clause be read a Second time.

New clause 3, by my own admission, is a rather blunt instrument—I put that down to the fact that I joined the Committee at rather short notice last week. I would not want to invite the law of unintended consequences, which the new clause does slightly, and prohibit people from paying towards something that might actually help them to move house if they wanted to do so. The purpose of the new clause is to seek to draw the Government’s attention to the question of who has financial responsibility. It is one that we discussed this morning, and to which there were no clear recommendations or answers from those who gave evidence.

The Bill puts the onus for fire safety on the building owner, but not enough has been said about who should take the financial burden of the measures that follow. The fact is that, despite the responsibility of the freeholder, building insurance premiums that residents may have paid for years, valid nuclear new build warranties, financial burden—all those things—it has been shifted and shirked, and ultimately the financial burden seems to land upon their tenants and leaseholders.

In my constituency of St Albans, one residents’ association has been told that every individual leaseholder will probably face extra charges of around at least £20,000 each per flat. Some of their service charges have already increased sixfold since the tragedy of 2017. Those service charges have increased in preparation for the necessary works, and I hope that the Government will agree that in a property market that is already so financially challenging, with the pandemic recession just ahead of us, to be hit by a further bill of £20,000 is completely unacceptable and, for some, completely impossible.

More needs to be done to protect those leaseholders, and others like them around the country, from being totally and utterly financially crippled. We heard from the National Fire Chiefs Council that disputes over the liability for remediation costs are very likely without access to funding. We heard from the L&Q Group this morning that the Government should exhaust all options before passing the costs on to leaseholders, and that that needs to be done ideally through Government support. There seemed to be a lot of consensus that without Government support we will end up with very complicated lease arrangements.

My constituents, and many others around the country, are in a completely impossible position. They are struggling to, or cannot, extend their mortgage to pay this large one-off fee. However, they also cannot sell their flat without the EWS1 certificate. They feel trapped in an unsafe building, while having to try to find the funds to pay the escalating service charges that they simply cannot afford. That simply cannot be right.

Photo of Sarah Jones Sarah Jones Shadow Minister (Home Office) 3:30 pm, 25th June 2020

I want to put on record our support for the notion that leaseholders have been incredibly hard done by in recent years. They are championing their cause through incredibly powerful campaign groups, and we have heard over the past three years of the costs that have been put on them to remove cladding. It is extraordinary. In new clause 4, I try to ensure that they are not part of the definition of the responsible person in the legislation.

I agree with the premise of the new clause proposed by the hon. Member for St Albans, but having been the shadow housing Minister for three years, looking at the issues of leasehold and freehold and working with the Law Commission and with lawyers to try to unpick some of the legal issues, I think that it would be a challenging new clause to accept as it is, without significant compensation having to go to freeholders. I think the hon. Lady is probably right to describe it as being a blunt instrument, but I agree about the impossible position of leaseholders being faced with more costs when they are struggling so much.

Photo of Andrew Slaughter Andrew Slaughter Labour, Hammersmith

I applaud the hon. Member for St Albans for bringing the matter to the Committee’s attention, although the new clause may not quite be the way to deal with the issue in law. I say that because although Government have made funds available in a drip by drip way—it is quite a substantial amount of money, so perhaps drip by drip is the wrong phrase—it is an inadequate sum to deal with the necessary remediation.

The way in which the funding relating to ACM and other types of cladding has been announced to social landlords and then private landlords has not only created some degree of confusion, but meant that there are huge gaps in terms of accessibility to funds to leaseholders and freeholders for carrying out remediation work. Therefore, landlords—not the worst landlords, necessarily; in some ways, it could be the better ones—are seeking to deal with remediation works in relation to blocks that do not fall within the fairly restrictive criteria that the Government have set. They are saying, “Yes, we will remove cladding, or do other works, but it isn’t covered by the Government’s building funds at the moment. We will therefore look, with section 20 notices or in other ways, for leaseholders to carry the costs.”

We are right to draw attention to this point, and I hope that the Minister will respond to it. He has been reading out his ministerial brief, which is all to the good because we need to put it on the record, but it would be quite good for him to respond to some of the points spontaneously made by Opposition Members.

Photo of Michael Tomlinson Michael Tomlinson Government Whip

My hon. Friend has done both

Photo of Andrew Slaughter Andrew Slaughter Labour, Hammersmith

I say that because, in the previous debate, there were issues to do with the speed at which the process is going, and I do not think the Minister responded to my points about that nor to those about the qualifications of assessors. If he intends to resist the new clause, which I suspect he probably is, he needs to deal with the issue of leaseholders who, faced with the prospect of bills, cannot then be advised “Go to the Government funds”, because such funds are not available for those purposes.

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

I call on the Minister to read out his brief. [Laughter.]

Photo of Kit Malthouse Kit Malthouse The Minister of State, Home Department

Sir Gary, the hon. Member for Hammersmith knows the impositions put on Ministers of the Crown as to what they can and cannot say in public. Legal interpretations emanate from their words, such is the importance of the things that we say in this place, and many legal cases have been decided on the words, imprecise or otherwise, of a Government Minister in a Committee such as this, so we try very hard to be precise. I should point out that, although I previously had responsibility for this portfolio when I was Housing Minister, I am covering for a Minister who is shielding at the moment. Hence I have to make sure that the words I use are broadly those that he would use as well.

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

Mr. Slaughter is going to apologise.

Photo of Andrew Slaughter Andrew Slaughter Labour, Hammersmith

I was seeking to flatter the Minister. We not only want to hear from the civil servants; we also want to hear from him.

Photo of Kit Malthouse Kit Malthouse The Minister of State, Home Department

Notwithstanding the fact that the hon. Member for St Albans obviously recognises that this blunt instrument, as she put it, might result in unintended consequences, not least driving a coach and horses through the notion of privacy of contract, which is a fundamental part of our economy and legal system, I recognise her aspiration and the obvious concern and distress that there has been across the country among people who have been caught in the nightmare. As the hon. Member for Croydon Central knows, as Housing Minister for 12 months I wrestled with that issue and lobbied the then Chancellor of the Exchequer with increasing ferocity that the Government should step in to assist, which we have now done. My efforts, along with those of my right hon. Friend James Brokenshire, who was then the Secretary of State for Housing, Communities and Local Government, managed to secure the first £600 million of the £1.6 billion now pledged for remediation of various types of cladding.

I should point out that the funding does not absolve the industry from taking responsibility for any failings that led to unsafe cladding materials being put on buildings in the first place. We still expect developers, investors and building owners who have the means to pay to take responsibility and cover the cost of remediation themselves without passing on the cost to leaseholders. We committed in a recent Government response to the building safety consultation to extend the ability of local authorities and the new regulators to enforce against building work that does not comply with the building regulations from two years to 10 years. Further details will be set out in the draft building safety Bill when it is published next month. The new regime in that Bill is being introduced to prevent such safety defects from occurring in the first place in new builds and to address systematically the defects in existing buildings. Moreover, as part of any funding agreement with Government, we expect building owners to pursue warranty claims and appropriate action against those responsible for putting unsafe cladding on the buildings. In doing that we are not only ensuring that buildings are made safe and that residents feel safe, and are safe, we are ensuring that the taxpayer does not pay for the work that those responsible should fund or can afford.

I appreciate the intent of the new clause, particularly to protect leaseholders from the very high cost of removing and replacing cladding. That is why we have made £1.6 billion available to cover the costs, particularly where experts say that they represent the highest risk, and we are working with industry to identify what funding structures would be most appropriate to help cover the cost of further remediation work. Leaseholders should not have to face unmanageable costs. The Secretary of State for Housing, Communities and Local Government will provide an update on the work when he presents the draft building safety Bill to Parliament before the recess. I ask that Members recognise the complexity of this policy area, which cannot be solved, I am afraid, through the new clause. Indeed, it would make owners who, in some cases, would include leaseholders, responsible for funding any and all remediation work. For example, service and maintenance charges would at present meet the costs of safety work required as a result of routine wear and tear, such as worn fire door closers. Under the new clause, those costs would fall to building owners. I hope that hon. Members will agree there are more effective ways of achieving the same aim, which we all share, and I therefore hope this clause can be withdrawn.

Clause, by leave, withdrawn.