Examination of Witness

Building Safety Bill – in a Public Bill Committee at 3:40 pm on 14th September 2021.

Alert me about debates like this

Eric Leenders gave evidence.

Photo of Philip Davies Philip Davies Conservative, Shipley 3:57 pm, 14th September 2021

Q We will now hear from Eric Leenders, managing director of personal finance at UK Finance. I just remind everybody that we have until 4.30 pm for this session. Eric, would you introduce yourself for the record?

Eric Leenders:

Certainly. My name is Eric Leenders. I am the managing director responsible for personal finance at UK Finance. I am also a non-executive director, senior independent director and chair of the risk committee at the Buckinghamshire Building Society and a non-executive director of Registry Trust Ltd. I think it would be helpful for the record to also record that one of my staff, a senior adviser in my team, is a non-executive director on the New Homes Quality Board, which of course has some relevance to and may bear on the conversation we will have in just a minute.

Photo of Philip Davies Philip Davies Conservative, Shipley

Thank you. The sound is still a bit faint, so if you could make a point of speaking up, we would all be grateful. We are going to start with Shaun Bailey.

Photo of Shaun Bailey Shaun Bailey Conservative, West Bromwich West

Q Thank you for being here today. I want to go back to a point that was touched on in our earlier session about market culture. The narrative that we have seen painted so far is that the present structure is pitting freeholders and developers against tenants and creating structural inequality. From your perspective, how far does the Bill go to balance that out when it comes to safety? Particularly thinking of your members and the stakeholders that you deal with, how far do you think the Bill goes and how much further should it go to try to address that and balance the playing field?

Eric Leenders:

I think our primary interest, like the rationale for drafting the Bill, is to ensure adequate safety and protection for homeowners, so we all buy into that. To the extent that the Building Safety Bill gives voice to homeowners and perhaps particularly to leaseholders, we think it is very important. There are some details of the Bill we are likely to come on to discuss where other experts can support homeowners and leaseholders, particularly regarding safety standards. Our primary interest as lenders, of course, is to ensure that homeowners, particularly those who require mortgage finance, are able to afford the borrowing they take on, and that includes potential remediation costs if they are necessary for particular properties. Work in the Bill and work undertaken by the Ministry of Housing, Communities and Local Government outside the auspices of the Bill are helpful in that regard.

Eric Leenders:

Experts are probably better placed to consider the dimensions of the Bill, but I did mention the work that the MHCLG has done, which looks to support those who have been classified as cladding prisoners. I understand that in working through the detail of the support for those in properties of 11 to 18 metres, it was found that there could be some complexities in the security arrangements for any lending and the allocating of responsibility for any lending to a property or an individual or leaseholder and so on. The Bill could provide a platform for some of those technicalities to be worked through so that there is a sound legislative footing.

Photo of Rachel Hopkins Rachel Hopkins Labour, Luton South

Q I have questions about whether the Bill provides adequate means of redress for residents who want to challenge elements of the building safety charge. Is the provision requiring payment of that charge within 28 days reasonable?

Eric Leenders:

Yes, and I think there are also some protections for leaseholders where the amount of remediation exceeds £250. That is welcome. The 28 days is potentially challenging—I am thinking of the staff in our organisation paid on a monthly 31-day cycle—so there could be a little more time for individuals to pay. Salaried individuals in particular are predominantly likely to look in the Bill for support. Increasing that timeline might be helpful.

Photo of Ian Byrne Ian Byrne Labour, Liverpool, West Derby

Q Eric, given the scale of potential mortgage defaults because of the debts being unfairly loaded on to leaseholders, what would that outcome mean to the health of the housing market?

Eric Leenders:

That is quite a difficult question to answer. The first point to make is that the housing stock is of the order of 28 million to 30 million properties, and only about 9 million have mortgages; you could perhaps add another couple of million for buy-to-let properties, so about a third of the overall housing stock would be affected. The composition of the housing stock is about much more than the most at-risk properties. What the Bill looks to address, based on the input from the fire experts, is a risk-based approach that would potentially look to address higher risk properties above 18 metres—there are probably about 1,400 or 1,500 of those properties in the UK. The impact on the overall market might be relatively modest, but the chief point is that for individual homeowners and those that have mortgages—those constituents—the impact is significant and is more than financial. It also has an emotional consequence as well.

Photo of Marie Rimmer Marie Rimmer Opposition Whip (Commons)

Q Are the Government right to introduce a new building safety charge on residents by which building owners can recover the costs of building safety measures?

Eric Leenders:

We see two sides to this. One element is the extent to which there is a discrete building safety charge; the other is the extent to which that is combined perhaps with a service charge. There are pros and cons to both approaches. The overarching issue for lenders is the extent to which the pre-existing commitments—not just the loan commitment but individual household budgets—would remain affordable if there are additional remediation costs. As I mentioned, I know that the MHCLG team has been very thoughtful about that consideration in relation to introducing loan support for properties between 11 and 18 metres. There might be some read-across in the context of the detail of the Bill.

Photo of Marie Rimmer Marie Rimmer Opposition Whip (Commons)

Q Does the Bill protect leaseholders from unaffordable costs?

Eric Leenders:

I think it goes some way to doing that. It is quite difficult for me to give you a direct answer on that specific question, because clearly one issue is cladding external wall systems and, equally, we are aware that there could be remediation requirements around, say, fire systems and internal remediation works as well. I am unfortunately unable to give you a categoric answer on that point.

Photo of Marie Rimmer Marie Rimmer Opposition Whip (Commons)

Q The Government say that the purpose of the service charge is to cover the ongoing costs of the new regime, not historical costs. Do you think that is explicit in the Bill as drafted, and could the Bill permit building owners to recover historical costs through the service charge?

Eric Leenders:

That is a very astute observation. We have found that aspect of the Bill quite complex and technical. To the extent that the intent is to avoid those retrospective costs, one dimension that we have been considering and have not necessarily been able to clarify is where a property was built prior to the enactment of the Bill but the issue was identified after its enactment. Some further scrutiny is probably required on that aspect. Our overarching view would be that it should be very clear for homeowners and leaseholders to understand where they might have a potential liability, and therefore this retrospection point is really quite important in that context.

Photo of Marie Rimmer Marie Rimmer Opposition Whip (Commons)

It is not clear, then. Thank you very much for that.

Photo of Philip Davies Philip Davies Conservative, Shipley

If there are no further questions, I thank you, Eric, on behalf of the Committee for your time and for your evidence.