Clarity on cladding

Following the Grenfell tower tragedy, many leaseholders have been stuck in a nightmare situation where it has been discovered that their building is covered with unsafe cladding, but little has been done to help them. This has resulted in many thousands of people being unable to move because no one wants to buy an affected property and lenders are not prepared to lend money against them.

Some leaseholders have already been asked to pay out thousands of pounds for remediation work, or 'walking watch' services. The government has set up a fund to which applications can be made to pay for remedial work and it had been suggested that leaseholders could borrow money at reduced interest rates to assist with the costs of remediation. However, the loan scheme has been shelved and in January 2022, the government set out a new plan designed to protect leaseholders. It was announced that no leaseholder living in their own flat will have to pay to fix unsafe cladding. The government revealed a four-point plan:

  • Opening up the next phase of the Building Safety Fund to drive forward taking dangerous cladding off high-rise buildings, prioritising the government's £5.1 billion funding on the highest risk
  • Those at fault will be held properly to account: a new team is being established to pursue and expose companies at fault, making them fix the buildings they built and face commercial consequences if they refuse
  • Restoring common sense to building assessments; indemnifying building assessors from being sued; and withdrawing the old, misinterpreted government advice that prompted too many buildings being declared as unsafe; and
  • New protections for leaseholders living in their own flats: with no bills for fixing unsafe cladding and new statutory protections for leaseholders within the Building Safety Bill.

Inevitably, the devil will be in the detail and the government must find the millions of pounds that are required to fix the cladding problem. Clauses in the Building Safety Bill will allow the government to introduce a levy on developers of high-rise buildings. This will build on the 4% tax on the largest most profitable developers, which was announced in this year's Budget and expected to raise at least £2 billion over the next ten years to help pay for building safety remediation.

However, it has already been reported that some larger developers intend to resist the suggestion of the levy. The government has also stated that 'there must be fewer unnecessary surveys, an assumption that there is no risk to life in medium and low-rise buildings unless clear evidence of the contrary' is produced. Whilst the government can make bold statements, it remains to be seen what attitude the lenders and surveyors take. If the latter are cautious and the lenders are unwilling to lend money on flats contained in buildings with suspect cladding, this will not assist leaseholders in the short term.

Whilst any positive move is to be welcomed, many leaseholders are still going to find it difficult to move or remortgage their properties for some time to come. A leasehold conveyancing transaction can be long-winded and expensive. Anyone who might be affected should consider taking legal advice at the beginning of a proposed sale transaction to establish whether the uncertainties relating to cladding are likely to derail a sale. Whilst a conveyancing lawyer might tell a leaseholder something that they do not want to hear, this could still be a better alternative than the leaseholder finding out much further into the transaction after considerable costs have been incurred.

So, perhaps not clarity, but a step in the right direction for leaseholders stuck in affected properties that they cannot sell or mortgage.

To discuss this or any other property related issue, contact us.