The Chancellor of the Exchequer has announced in the 2020 Budget that the government "will invest an additional £1 billion to remove unsafe cladding from residential buildings above 18 metres to ensure people feel safe in their homes". This is on top of the £600 million already offered by the previous ACM fund. The Chancellor also said the "new fund will go beyond dealing with ACM to make sure that all unsafe, combustible cladding will be removed from every private and social residential building above 18 metres". As to what is meant by "all unsafe, combustible cladding", the Ministry of Housing, Communities and Local Government also published guidance on 11 March 2020. This confirmed that "high-pressure laminate, wood and other class C/D cladding" would be covered by the new fund.
On the face of it, this appears to be very good news for building owners who are faced with the unenviable task of replacing unsafe cladding. Having said that, we note the following less palatable points which we believe building owners should be aware of.
- The fund will become available in "2020 to 2021". Whilst building owners are having to wait for this fund, the government is continuing to stress that those building owners remain responsible for ensuring the safety of their residents and "have no excuse for not ensuring their safety". We believe building owners are therefore going to be expected to remove unsafe cladding now and worry about cost recovery later.
- The government has requested that "building owners who have already committed to pay for the removal and replacement of unsafe non-ACM cladding systems on buildings above 18 metres" honour these commitments. This suggests bona fide building owners who decided to remove non-ACM cladding from their buildings (presumably in light of government pressure) will not be able to apply for the new fund to recover their costs.
- The government has placed pre-conditions on being able to apply to the fund. It has said "as a condition of funding, building owners must pursue warranty claims and appropriate action against those responsible for putting unsafe cladding on these buildings, which will be repaid to government once recouped".
- Not only is the fund not immediately available, has pre-conditions attached to it and excludes certain building owners from applying, the government has also said "if building owners continue to fail in their responsibility to remediate unsafe cladding systems, despite this additional funding, the government will not hesitate to encourage and support enforcement action through local authorities and fire and rescue services using their powers under the Housing Act 2004 and the Regulatory Reform (Fire Safety) Order 2005. These enforcement powers, including the changes we are making through the Fire Safety Bill, and additional funding announced for the fire and rescue services in the Budget, will help ensure owners remediate their buildings at pace".
- To top this all off, the total sum of £1.6 billion is "the limit to the government’s funding for remediation". Not only have multiple news outlets reported today that unsafe cladding in the social sector could exceed £10 billion, the G15 group of London's biggest housing associations, which owns about 10 per cent of tall buildings in England, has previously said that the total cost of upgrading its 1,145 tall buildings would alone be about £4.3 billion. This £10 billion figure does not even take into account the cost of private sector removal works.
When the small print is examined, the impressive tag line from the 2020 Budget is clearly anything but. The yet to be available funds are clearly going to be inadequate to cover the estimated costs. Despite this, the government has taken the opportunity to re-emphasise to building owners that they must replace a wide variety of cladding (in addition to ACM cladding) as quickly as possible and, if this is not done, enforcement action will be taken.
Unfortunately we therefore believe building owners will still have to make the decisions in 2020 which we identified in our other article. Whilst this currently only relates to residential buildings over 18 metres in height, we strongly suspect this will soon apply to any residential building (irrespective of height).
Dentons has extensive experience in assisting landowners in the area of cladding, including current regulatory rules, cladding removal, remediation works and cost recovery from residents.
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