Rebecca Penney is one of potentially thousands of private leaseholders who have been told that their properties are covered in combustible cladding. Understandably, she asks how did everyone get in this position and who really is responsible in the end for the necessary remedial works.
Aside from Covid-19, this year has been particularly tough for leaseholders of new build properties up and down the country whose properties have been affected by the latest cladding scandal to hit the Government. I am one of an estimated 3,000,000 private leaseholders who have been told that their properties are covered in combustible cladding and are effectively worthless until further notice. Our housing association, the "building owner" for the purposes of the relevant legislation, has known about the issues with cladding at our development since June 2018. The building is deemed to be so dangerous that we have had a waking watch in place 24 hours a day for the past two years and yet nothing has been done to rectify the situation. It has become increasingly apparent that litigation is on the horizon and there is no doubt an ongoing battle behind the scenes as to who should pick up the tab for the remedial works. So how did we get to this position, and who is ultimately responsible for the remedial works?
Following the Grenfell tragedy in 2017, the Government announced a number of reforms designed to improve fire safety in high rise multi-occupied buildings, including the Building (Amendment) Regulations 2018 which prohibit the use of combustible cladding in buildings over 18m and the now infamous Advice Note 14, which extended building owners' obligations to checking that the materials contained within external wall systems are of limited combustibility and safe. This in turn led to surveyors valuing "unsafe" buildings that could not demonstrate compliance with Advice Note 14 at £0 and mortgage lenders became unwilling to lend against such properties.
On 16 December 2019, in a bid to give confidence to lenders, RICS introduced a new requirement to facilitate the process of evaluating and selling properties, the EWS1 (External Wall fire Review) form. The EWS1 form is intended to record "in a consistent manner what assessment has been carried out for the external wall construction of residential apartment buildings where the highest floor is 18m or more above ground level or where specific concerns exist".
EWS1 contains two options for recording the findings of the fire engineer undertaking the assessment for the building owner. Option A applies where the 'primary materials' (i.e. the cladding and the form of insulation) used in the external wall system are known to be of limited combustibility1. Option B applies where the 'primary materials' includes materials that are combustible. Under this option a fire engineer is required to confirm through an appropriate risk assessment that the fire risk is sufficiently low or (more often than not) that remedial works are required.
Whilst the EWS1 process was introduced to give mortgage lenders confidence that high rise blocks over 18m were safe, unfortunately it has had the opposite effect on the market. The situation was exacerbated on 20 January 2020 when the Government suddenly published a consolidated advice for owners of multi-storey, multi occupied buildings. The consolidated advice draws together the advice in the previous advice notes 1 to 22 and makes clear that owners of buildings under 18m have equal responsibility to make sure those buildings are safe. This in turn means that the vast majority of multi-storey, multi-occupied blocks in the country must now go through the process for obtaining the EWS1 form, regardless of whether the block has been constructed using cladding. There are a very limited number of inspectors in the UK that are qualified to carry out the necessary investigations with the result that some leaseholders have been told that they will have to wait up to 10 years to obtain an EWS1 form for their building. The situation is further complicated by the fact that many consultants are unwilling or unable to sign the EWS1 form due to concerns about their liability and whether or not they will be covered by professional indemnity insurance.
Whilst the latest Government advice does not state that the EWS1 is a compulsory requirement, it is now abundantly clear that mortgage lenders are insisting on EWS1 forms as a pre-requisite to lending to prove that building owners have discharged their fire safety obligations, with the result that a huge number of people are now effectively trapped in their flats and unable to sell.
Liability for remedial works
Whilst the Government has set up various funds for remedial works, including most recently a £1bn Building Safety Fund for the removal of non-ACM cladding, it is becoming increasingly clear that this will not be sufficient. It was reported in September that one property manager alone has applied for cladding remediation funding for 450 buildings, enough work to take up 90% of the total fund2 and by the Government's own admission, the fund is expected to cover only a third of affected buildings. Whilst priority will be given to building owners who can demonstrate that contractors can start work on cladding remediation by 31 March next year, it seems very likely that a large proportion of building owners will be unable to meet that requirement that given the current backlog of work and the length of time that takes to have a fire consultant carry out the necessary investigations.
In a new report issued in June this year, the Housing, Communities and Local Government select committee expressed the following concerns:
"Given the urgency of these remediation works, it is necessary for the government to provide the funding up front. However it cannot be fair for the financial burden of remediating buildings to rest solely with taxpayers. Those who are responsible for this crisis should be made to contribute. For each affected building, the government should actively seek to recover funds from the construction companies, architects, suppliers of faulty products, approved inspectors and any others who are found to be responsible for fire safety defects."3
This is evidenced by the fact that the availability of Government funding is contingent on building owners being able to show that they are actively seeking to recover those sums from their contractors and other suppliers.
So where does this leave architects and design and build contractors?
Typically, a building owner will have a direct contractual link with the relevant architect and/or design and build contractor. It may also have the benefit of collateral warranties or have had rights assigned to it. Where a defect has been cause by negligent design or advice, the question of whether the designer or contractor has complied with its duty of care will be subject to the test of reasonable skill and care. In many cases, the duty to exercise reasonably skill and care will be an express obligation within the contract or collateral warranty itself. This raises the question of whether a claim can successfully be brought in circumstances where the relevant professional executed its design in accordance with industry standards and the Building Regulations that were applicable at the relevant time.
Historically, architects and design and build contactors have been able to successfully defend such claims made by building owners on the basis that compliance with Approved Document B (the relevant Building Regulation regarding fire safety) is sufficient to discharge any allegations of breach. However, by issuing the various advice notes on fire safety, it appears as though the Government is retrospectively seeking to rewrite the regulatory regime on the basis that compliance with Approved Document B is no longer adequate to demonstrate compliance with the requirements of the amended Regulations.
It is not yet clear how this will pan out in the courts. Towards the end of last year, Camden Council commenced a £130m claim in the Technology and Construction Court against Partners for Improvement in Camden and its principal contractors, Rydon Construction, Rydon Maintenance, Faithful + Gould and United Living South who were involved in the refurbishment of the Chalcots estate in London. The council is seeking to recover the costs incurred in addressing multiple fire safety failings at the estate which includes the removal of ACM cladding from the outer façade, the rectification of serious internal defects (including inadequate internal fire stopping and fire doors) as well as the costs of fire marshals and additional security. If successful, this could pave the way for many other similar claims.
It is likely that the Grenfell Inquiry, now in its second phase, will also have a significant impact on future legal proceedings. It may be that building owners will await the outcome of this and other claims before seeking to recover the costs of remedial works, however this will do little to allay the concerns of the millions of leaseholders stuck in unsafe buildings with no way out for the foreseeable future.
- 1. As defined in BS9991:2015
- 2. https://www.insidehousing.co.uk/news/news/one-property-manager-registers...
- 3. https://publications.parliament.uk/pa/cm5801/cmselect/cmcomloc/172/17202...
This article is taken from Fenwick Elliott's 2020/2021 Annual Review. To read further articles go to Fenwick Elliott Annual Review 2020/2021
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