To ask the Secretary of State for Levelling Up, Housing and Communities, whether his Department is taking steps to help ensure that property developers are not able to avoid responsibility for cladding and other remedial costs by (a) liquidating, (b) declaring bankruptcy and (c) repurchasing the freehold under a new company.
The Building Safety Act 2022 provides that where a building's freeholder is - or is linked - to the original developer, they must meet costs associated with historical building safety defects in full and cannot pass on these costs to leaseholders.
The Act refers to the position as at 14 February 2022, so any future buyer of the freehold will assume the same liabilities of the previous freeholder. As such, freeholders will not be able to simply sell off their buildings or transfer them to new companies to evade liability.
Should the freeholder declare insolvency, the Act contains provision allowing the appointed insolvency practitioner to apply to the court to require companies associated with the freeholder, such as the parent company, to meet the costs of remediation.
The Act also grants powers to the High Court and the First-tier Tribunal allowing them to extend specific liabilities for one company to associated companies, preventing developers and freeholders from evading their responsibilities by using complex corporate structures such as special purpose vehicles.
The Government has agreed with 45 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. In these circumstances, the ownership of the particular property will be irrelevant, as the liability to remediate is with the developer group, even if the particular subsidiary that did the development becomes insolvent.