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Building Safety (Leaseholder Protections) (England) (Amendment) Regulations 2023

Volume 828: debated on Tuesday 21 March 2023

Motion to Regret

Moved by

That this House regrets that in laying the Building Safety (Leaseholder Protections) (England) (Amendment) Regulations 2023 (SI 2023/126) His Majesty’s Government have not published data on the number of landlords who have benefited from an error which allowed landlords to transfer costs of remedying historical building defects on to their leaseholders; further regrets that His Majesty’s Government have no intention to identify leaseholders affected by that error to advise them to appeal to the First-tier Tribunal to recover costs; and calls on His Majesty’s Government to publish these figures in a spirit of transparency and write to those affected with clear guidance on how to recover costs.

Relevant document: 31st Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

My Lords, the regret Motion standing in my name is critical of the Government’s response to those leaseholders who have been adversely impacted by a government error, which the Building Safety (Leaseholder Protections) (England) (Amendment) Regulations 2023 have recognised. The regret Motion puts the spotlight once again on the plight of leaseholders. Since the awful Grenfell Tower tragedy nearly six years ago, leaseholders and tenants have been at the very heart of the policy response to the crisis in building safety that was so cruelly exposed that night.

The Grenfell Tower inquiry has meticulously gathered evidence of years of malpractice by developers and materials manufacturers. It is clear where responsibility lies for the very significant number of building safety defects. Those not responsible in any way are the innocent leaseholders, who have done everything right and nothing wrong. The Building Safety Act set out the ways for the building industry to rectify past building defects. Those related not just to the removal of dangerous flammable cladding but to the lack of fire breaks, for instance, that were required at the time of construction. The Act also established how the very large costs of remediation were to be funded. In the case of non-cladding defects, there was a cascade of responsible entities. At the bottom of the cascade were leaseholders, who may be required to pay a capped contribution, which was limited to £10,000 outside London and £15,000 in London. These alone are significant sums—for first-time buyers, for instance.

There are still questions to be asked about whether the Government’s attempt to ensure that cladding is fully removed and safety defects are put right is effective in practice. However, the focus of the regret Motion is an error that inadvertently crept into the regulations, which determined how much developers would be required to pay, if at all. It was the intention that a family of associated companies of the developer would be included in the assessment of the value of the companies and, therefore, the ability of the developer to fund the remediation works. The regulations, unfortunately, excluded what have been described as parent and sister companies. This led to one very large developer being able to demonstrate that the special purpose vehicle that had been set up for the development did not of itself have the funds to pay for the remediation of safety defects. If the family of associated companies had been included with that special purpose vehicle, as was the intention of the regulations and of the Act, the developer would have been funding the costs of remediation. As a result of the error, this company was able to avoid paying for the defects and, via the cascade system, was able to pass on part of the costs to the leaseholders.

This is grossly unfair to the leaseholder, and a major company, which had already bypassed building regulations unlawfully in constructing the property, was now avoiding the responsibility of paying for this dangerous and deliberate practice that put profit first and people’s lives in jeopardy. The Department for Levelling Up, Housing and Communities was made aware—and only made aware—when a leaseholder contacted the department to query why they had been asked to pay remediation costs when they knew that the developer in question was a very large one and likely to be within the limits to be able to pay. I am pleased that the department quickly remedied the error, passed these amended regulations and brought them into force the following day, just to make sure that no other developer tried to bypass paying for remediation because of the error. However, there is currently no remedy for those leaseholders who have unwittingly paid towards remediation costs when they should not have done.

The Secondary Legislation Scrutiny Committee asked the department to quantify the numbers of leaseholders who have been forced to pay when they should not have been. Unfortunately, the department was unable to provide a figure and does not seem to have made any attempt to do so.

There is a route for any leaseholder caught out by the Government’s error, and that is to appeal to the First-tier Tribunal—but who knows about that? Leaseholders have been trapped all through this saga by the unscrupulous, immoral and unlawful behaviour of developers and others. The very least the Government can do is to seek out those leaseholders, provide them with the necessary information about how they can recover their costs and support them in doing so. The Secondary Legislation Scrutiny Committee asked whether protection for affected leaseholders could be introduced retrospectively, via primary legislation if necessary, and I too ask that question of the Minister.

This is injustice heaped on injustice. It was a government error, and the Government should do all in their considerable power to put it right. I will listen carefully to the response from the Minister. I hope she will be able to provide all the information that I and the Secondary Legislation Scrutiny Committee are asking for, including the ways in which leaseholders can find retribution. Meanwhile, I beg to move.

My Lords, I shall add a few words of support for the noble Baroness, Lady Pinnock. I stand with a weary sense of déjà vu, looking around at a number of people with whom I have sat as we have worked through building safety and fire safety measures.

What is interesting is that the Government fundamentally tried to grasp this problem. I pay tribute to the right honourable Michael Gove, who has been quite exceptional in taking hold of it and trying to solve it. I say well done to the Government for shifting the main problem in this very troubling area.

Like many noble Lords, I am still finding that people contact me because they are in a dreadful situation. Some of them are going bankrupt because they are simply unable to pay for the remediation work on their properties. This does not just affect big tower blocks; it happens to quite modest blocks of flats in places like St Albans, Stevenage and Bedford, in my diocese.

On the particular problem that the noble Baroness has mentioned, it is extraordinary, when the Government have already committed themselves to doing so many things on this—not least reforming the leaseholder system, which we will watch with great interest—and troubling that this unintentional problem, which is having a devastating effect on some people, is seemingly not being addressed. It would be a huge help if we could simply get the figures published to find out how many people are being affected by what seems to be an error and then try to help those people to find a remedy.

This is a terrible scar on the whole industry. We need to find ways to work with those who have unintentionally found themselves caught up in this and are quite desperate. That is supported by, as the noble Baroness has mentioned, the point made by the Secondary Legislation Scrutiny Committee that we need that data. I add my weight to the points that the noble Baroness, Lady Pinnock, has made today, and I hope we will see some movement.

My Lords, clearly what we are talking about today is building safety and the importance of leaseholder protections. That is at the core of everything.

We have discussed, on a number of occasions now, the terrible events that happened at Grenfell Tower along with similar incidents that brought to light the significant issues surrounding building safety and the appalling impact that it can have on the lives of those who have lived, and continue to live, in affected properties. The safety of the homes that we live in has to be of the utmost importance to all of us, and it is the responsibility of the Government to ensure that buildings are safe and secure for those who live in them. So the Government’s Building Safety Act, as the right reverend Prelate the Bishop of St Albans said, is an important step towards improving building safety and ensuring that incidents such as Grenfell cannot happen again. However, we still need to ensure that leaseholders who have been bearing the brunt of the cost of remediation works are properly protected and can continue to make their homes safe.

It was extremely disappointing, to say the least, as we have heard, that there was an error in the previous instrument that led to an unintentional exclusion of parent and sister companies from being considered as associated with the landlord—the noble Baroness, Lady Pinnock, went into detail on this. The Secondary Legislation Scrutiny Committee confirmed in its report that at least one parent company was able to avoid liability and then pass it on to leaseholders as a result of the error. When we think of all that leaseholders have been through, the Government should never have allowed these costs to be passed on to any leaseholder, even by accident. I am sure the Minister would agree.

Clearly, we welcome the fact that this error has been picked up and is being corrected, but I, too, emphasise the concerns expressed by the Secondary Legislation Scrutiny Committee about the lack of data that both noble Lords who have spoken have mentioned. We need to know how many landlords may have benefited from this mistake and how many of them have passed this on to leaseholders. If the Government want to properly sort this out, we need that information.

The Minister, Lee Rowley MP, said in response to the committee when it asked what had happened to affected leaseholders

“we thought it likely that any affected leaseholders would have been able to recover their additional costs through the Tribunal before an Act was passed”.

But the department, DLUHC, does not seem to be planning to identify and alert any affected leaseholders to the possibility that they can appeal to the First-tier Tribunal to recover costs. Not everybody knows what their rights are and what they are entitled to, so that support should be there.

Further, Lee Rowley said in reply to the letter from the chair of the SLSC, the noble Lord, Lord Hunt of Wirral, that the department

“will continue to work to ensure that our existing processes, that have long been in place, continue to provide high quality, correct legislation in the future”

and he referred to

“discussions within the Department regarding the collective desire to minimise the risk of this happening in the future”.

It is important that that recognition is there, but I share the committee’s disappointment that there is no commitment to any practical steps that the department could take to improve quality assurance and avoid similar errors in future.

One reason I particularly wanted to draw attention to this is that there have unfortunately been numerous SIs from Defra over the past couple of years where there have been errors that have needed to be corrected, which has meant that the SIs have then come back to us. This is not an isolated incident across government. Apart from the problems and difficulties that a faulty piece of legislation can cause, the Government keep saying that they are short of parliamentary time. If they got the legislation right in the first place, perhaps we could all work better and more efficiently.

My Lords, I thank the noble Baroness, Lady Pinnock, for securing this important debate to discuss the Building Safety (Leasehold Protections) (England) (Amendment) Regulations 2023. I also pay tribute to the Secondary Legislation Scrutiny Committee for its careful consideration of the regulations and to the right reverend Prelate and other noble Lords who have contributed to this discussion.

As noble Lords will know, the regulations correct an error in a previous instrument to ensure that, when assessing liability for the costs of remediating relevant defects, the consideration of the net worth of a landlord group for the purpose of the contribution condition includes parent and sister companies, as originally intended.

The department does not collect data on leaseholders who are liable to pay for the remediation of historical safety defects, not least because it is not a centralised process. We have, however, been made aware by leaseholders and, indeed, parliamentarians, of a very small number of cases where landlords state that they did not believe they met the contribution condition because of this unfortunate and unintended error. As I say, to date these cases are small in number, but of course we must say sorry to those people, because it will affect them, however few they are.

Due to the caps for qualifying leaseholders in relation to non-cladding remediation and interim measures, the maximum amount such qualifying leaseholders could have been charged is limited to £1,000—or £1,500 in Greater London—over the past year. Landlords are already required to produce a new landlord certificate which complies with these regulations in specified circumstances, including within four weeks of becoming aware of a relevant defect not covered by a previous certificate.

I wanted to make sure your Lordships were aware that the Building Safety Act already includes anti-avoidance and enforcement provisions to ensure that those who are liable to pay do so, and, where it is just and equitable, that costs incurred for historical safety remediation may be recovered. Remediation contribution orders allow interested persons—including local authorities, fire and rescue services and leaseholders—to apply to the First-tier Tribunal, as we heard, for an order requiring a landlord, developer or associated company to make payments in connection with remediation costs. Applications to the First-tier Tribunal for a remediation contribution order cost £100.

The department is clear that any opportunities to avoid the protections needed to be closed off swiftly, and that is what these regulations have done. Although it may be possible to give retrospective provision in law—as the protections in the Building Safety Act do—there is a general presumption not to apply new law retrospectively, and the department does not believe it would be proportionate to do so in this case. The Government therefore have no plans to introduce retrospective provision through primary legislation.

The department has published extensive guidance on the GOV.UK website to explain the leaseholder protections, including information relating to remediation contribution orders. Those affected who write to the department—and I encourage any noble Lord who knows of anyone who is worried about this to tell them to come to the department—will be informed of their options and directed to the guidance to help them to make an informed decision. Of course, each case is different, and leaseholders may wish to consider seeking legal advice before pursuing avenues of recompense.

LEASE—the leasehold advisory service—is providing free support and guidance to leaseholders who face costs for historic safety defects, and officials in my department continue to look at new ways to raise awareness of the leaseholder protection provisions to all leaseholders. These regulations are being issued free of charge to all known recipients of the 2022 regulations, and I put on record my assurance that the department will update GOV.UK guidance to further raise awareness of available redress options, with notifications sent to those who have signed up for them.

The circumstances surrounding the leaseholder protection legislation introduced last summer—particularly the speed of its preparation—were highly unusual, but necessary to ensure that leaseholders were afforded the financial protections under the Building Safety Act without delay. As my honourable friend the Building Safety Minister, Lee Rowley MP, said in his letter to the committee, we are confident that we can rely on the department’s processes that have long been in place, but which were abbreviated last summer, to ensure that, as far as possible, such mistakes will be avoided in the future.

I should like to deal with a couple of further questions. The noble Baroness, Lady Pinnock, referred several times to developers and their related companies. I point out that these regulations refer to landlords; that is, building owners. The mistake has no effect on the liability on developers.

I have answered the right reverend Prelate the Bishop of St Albans, in that we think that this is a very small number. Of course, if anybody knows of any such person, we will give them the support they might need to ensure they get the redress they should have. I hope I have answered all your Lordships’ questions. As ever, I will happily follow up in writing on anything I have not covered, and I am very happy to meet with any noble Lords to discuss this issue further.

I thank the noble Baroness, Lady Pinnock, for bringing forward the debate today. We can all agree that qualifying leaseholders should be protected from the costs of historical safety remediation. This legislation is important in ensuring that landlords’ groups that meet the contribution condition must meet the full costs of both non-cladding remediation and interim measures. On that basis, I ask the noble Baroness to withdraw her Motion.

My Lords, I thank the right reverend Prelate the Bishop of St Albans, and the noble Baroness, Lady Hayman of Ullock, for their support.

The right reverend Prelate has been at the heart of this issue for the six years since the awful Grenfell tragedy; he knows first hand, as he said, the devastating impact it has had on leaseholders. Perhaps I am wrong in saying this, but it was almost the last straw, in that all of us across the House had tried so hard to get the Building Safety Act to provide legislative ways of delivering remedies for leaseholders, and at that moment when everything should have been put right as far as possible—there are omissions that I still intend to pursue—an error crept in. Even then, where things were put right, innocent leaseholders were at the mercy of landlords who wanted to pass on the costs to them. The Minister has said that it is a small number but actually, we have no idea whether it is small or large, and the Government should find out.

I am grateful to the Minister for apologising for the error on behalf of the Government. I accept that it crept in inadvertently, but apologies do not pay bills. Leaseholders have had enormous bills of up to £10,000 from the cascade cap, which they would be required to pay. I am disappointed with the Minister’s response, both to my regret Motion—

The £10,000 would have been over 10 years, and we have stopped it at the end of the first year, so the maximum that would have been required was £1,000. I just wanted to clarify that. I would not want it to be £10,000.

I thank the Minister for pointing that out. I will see what the legislation says.

I am very disappointed with her response and the response to the request by the Secondary Legislation Scrutiny Committee, which also made a very strong statement that the Government ought to find out how many leaseholders were affected and provide them with information and support. This is a government error, albeit one made inadvertently. The Government ought to be leading the way in showing that if errors are made, efforts are made to put them right. Currently, no efforts are being made to put this right. Therefore, I want to underline my considerable concern that the Government are not intending to take any action, and I would like to test the opinion of the House.