Building Safety Reform in England & Wales
Following the Grenfell tragedy in June 2017, the Government commissioned an independent review of the current building regulations and fire safety which came to be known as the Hackitt Report. The Report identified a number of key issues within the current regulatory framework:
- Addressing building safety risks - unclear roles and responsibilities in respect of accountability for the safety of a building throughout its lifecycle;
- Contractual allocation of risk - ambiguity over where responsibility lies in the event things go wrong and to what extent parties are required to cooperate;
- Regulatory compliance/ enforcement - inadequate assessment of competence of those working on high rise and complex residential buildings; and inadequate regulatory oversight and enforcement tools.
In response to the Hackitt Report, the Government proposed new legislation in the form of the Building Safety Bill, aimed to represent the biggest change to building safety legislation for nearly 40 years. The Bill was introduced to the House of Commons on 5 July 2021 for its First Reading, and received Royal Assent on 28 April 2022.
Addressing building safety risks
One of the difficulties currently faced by residents is that it is not always obvious who bears responsibility for fixing issues with the fabric of the building.
The Act looks to address this issue by ensuring that for all higher risk buildings there is at least one ‘accountable person’ with an ongoing duty to assess the safety of the building and take such steps as are necessary to ensure the building is safe, including works to the fabric of the building. The ‘accountable person’ is anyone who holds a legal estate in possession in the ‘common parts’ of a higher-risk building, or anyone who is subject to a repairing obligation in respect of any of the common parts. This could therefore include a landlord, a management company, or the occupiers of a building (if they share ownership of the freehold).
The Act only provided a de minimis requirement for at least one accountable person. It does not prescribe who the accountable person should be, which may lead to dispute as to who is required to take on these new responsibilities.
The Act provides for the accountable person to take all reasonable steps to prevent a building safety risk materialising. The question therefore arises as to who bears responsibility for the costs of such steps to be undertaken by the accountable person. There is nothing in the Act which prevents such charges being passed to tenants pursuant to the express terms of their leases. In fact, the Government made it clear that remedial costs are not included in the building safety charge and therefore, the Act will not relieve leaseholders of the costs of remedial works to the fabric of the building.
Contractual allocation of risk
The Government’s stated objective was that ‘It is only right that those who commission building work and who participate in the design and construction process take responsibility for ensuring building safety is carefully considered throughout the project and the building is fully compliant with building regulations, thereby ensuring that residents are safe and feel safe.’
As such, the Act provides for dutyholders in the design and construction phase including the Client, the Principal Designer and the Principal Contractor. The dutyholders will need to comply with their responsibilities under the Bill such as competence, collating and maintaining information required to be provided to the new Building Safety Regulator and the mandatory reporting of structural and fire safety issues, which could cause a significant risk to life safety.
However, there are no significant changes to the standard allocation of risk and the Act fails to provide the framework of cooperation between the parties involved in a construction project as envisaged by the Hackitt Report. Secondary legislation will set out how multidisciplinary teams, including fire and building safety experts, will work together to ensure building safety.
The Act aims to extend the leaseholders’ right of action against developers up to 30 years under the Defective Premises Act 1972. Whilst this is meant to have retrospective application, it will arguably make little difference in practice. For example, leaseholders would still be faced with the need to fund lawyers and experts to investigation the state of the building and the original contractual documentation and specification in order to pursue potential defendants which may not have any assets or insurance to respond to the claim.
The limitation extension, coupled with the new dutyholder requirements, has created the ‘perfect storm’ for those seeking appropriate insurance protection. In particular, the extended liability for historic work will likely result in PI insurance providers excluding cover for historic work. Some consultants working on fire safety remediation projects are already experiencing increased difficulty in sourcing appropriate PI cover which typically contains exclusions relating to combustibility, and if they do obtain it, it is in exchange for considerably higher premiums, the cost of which inevitably ends up being passed onto the leaseholders paying for the works.
The new dutyholder requirements will only end up exacerbating these existing issues and the insurance industry will need to grapple with quantifying and risk-assessing a dutyholder’s uncertain exposure under the new regime. This will inevitably lead to an increase in exclusions and a hardening of an already challenging market.
In order to address the inadequate assessment of competence of those working on high rise residential buildings, the Act provides for powers to make regulations regarding competence requirements, including a requirement on Principal Designers, Principal Contractors and anyone carrying out any design or building work to be competent for their roles. There is also a duty on those who appoint them to take reasonable steps to ensure that the people they appoint meet this requirement.
However, there is a lack of detail surrounding the competence needed for specific roles or sectors. Instead, it is expected that the industry will set the competence frameworks for each sector and role, based on a national framework. This has inevitably created a period of uncertainty across the industry.
There is no doubt the new Building Safety Act and its associated legislation will bring about widespread changes to the construction industry. Whilst the Act does to some extent address the issue of managing building safety risks by allocating responsibility to an ‘accountable person’, it fails to address the main difficulty currently faced by leaseholders who will still carry the financial burden of rectifying any defects affecting the fabric of their building. Similarly, the Act aims to provide more clarity surrounding the contractual allocation of risk, but misses the opportunity to introduce a new culture of cooperation as envisaged by the Hackitt Report.