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A look ahead to the impact of the Building Safety Bill

13 October 2021

This article considers the scope of the new Building Safety Bill ("the Bill"), which is currently passing through Parliament. Here, we look ahead to the proposals and the ramifications for the wider house-building and housing provider industries. It is a high level, "at a glance" overview of the key provisions of the draft legislation and the likely impact upon stakeholders in the construction and housing industries.

The wording of the proposed legislation was debated at second reading on Wednesday 21 July 2021 and has now been sent to the Public Bill Committee. The Public Bill Committee will scrutinise the Bill line by line and it is expected to report to the Commons by Tuesday 26 October 2021. It is important to note therefore that the below is a "look ahead" rather than a definitive summary as to content and impact of the legislation.

The Government describes the Building Safety Bill as follows:

"The next step in ground-breaking reforms to give residents and homeowners more rights, powers and protections – making homes across the country safer. This will overhaul regulations, creating lasting generational change, setting out a clear pathway on how residential buildings should be constructed,  maintained and made safe. It also sets out the framework to improve compliance, with tougher penalties for those who break the rules and mandates developers to belong to a New Homes Ombudsman scheme."

The Bill predominantly applies to buildings that are at least 18 metres in height or have at least 7 storeys and have at least two residential units, known as "higher risk buildings". Government envisage that the Bill will be ‘living legislation’, the scope of which will be adapted should, for instance, other categories of higher risk buildings be identified.

Key provisions

The Bill contains the following headline provisions:

  • Claims for defective work - The Bill proposes changes to the Defective Premises Act 1972 ("DPA") and Limitation Act 1980 such that the period within which legal action may be brought for sub-standard construction work on residential buildings which renders a building "unfit for habitation" is extended from 6 years to 15, to apply retrospectively.
  • Competence - Prescribed competence requirements for Principal Designers and Principal Contractors under the Construction (Design and Management) Regulations 2015 who are engaged to work on all buildings. Competence levels will be maintained on a centralised register. As part of the procurement process for appointing the Principal Designer and Principal Contractor on a project, the Client must sign a declaration confirming they have assessed and are content with their competence. It is envisaged that there will be additional competence requirements for those working on higher risk buildings.
  • Regulator - The creation of a new Building Safety Regulator ("the Regulator") within the Health and Safety Executive ("HSE"). First recommended by Dame Judith Hackitt during her independent review of the Building Regulations and Fire Safety, the Regulator would have three core functions:
    • implementation and enforcement of the new regulatory regime for "higher-risk buildings";
    • overseeing the safety and performance of all buildings; and
    • assisting and encouraging competence in the building industry and among registered building inspectors.

The Regulator will have powers to enforce compliance with registration and competency requirements through criminal sanctions including fines and imprisonment. The Regulator will advise on extending the definition of “higher risk buildings”, implying that the scope of this measure could be widened over time.

  • "Gateway" – the Bill proposes three "Gateway" points at the design, construction and completion phases for development work on high rise residential buildings.
    • Planning permission – the planning application must demonstrate that fire safety requirements have been considered and incorporated into the construction proposals. This provision, known as "Gateway 1", has been in force since 1 August 2021. Local authorities will need to have protocols in place to ensure that fire safety compliance has been considered by the developer during the approval process;
    • Pre-construction - the Regulator must approve the design as compliant with the Building Regulations;
    • Completion – a completion certificate will only be issued by the Regulator once they are satisfied that the work is compliant with the Building Regulations.

A project can be halted at any of these three stages unless compliance with the Building Regulations is demonstrated. 

  • Accountability – The Bill will create new statutory roles and responsibilities for an "Accountable Person" and a "Building Safety Manager", each of whom will have legal accountability for the operation and management of higher risk buildings. This should address some of the ambiguities around the identity of the "Responsible Person"
  • Responsible Persons – Despite the above, the Bill does not seek to replace the concept of Responsible Persons under the Regulatory Reform (Fire Safety) Order 2005 but rather imposes additional obligations. Responsible Persons must make themselves known to others who may also be Responsible Persons, informing them of the parts of a building for which they are responsible. This is particularly relevant for mixed use premises. The Responsible Person must also ensure the fire risk assessor is competent to assess the building in question.
  • Golden Thread - Government intend to create a "Golden Thread" in which all data about higher risk premises, including how the building is designed, built and operated as well as the fire safety measures in place, will be stored in a single digital document. The concept of the Golden Thread is therefore designed to provide accountability, should any issues with the build or management of the building be identified.
  • Building Control - The Building Safety Regulator will be required to establish and maintain a register of building inspectors (individuals) and building control approvers (either organisations or individuals). Those involved in carrying on building control activities must therefore prepare to demonstrate their competence in carrying out their role.

Impact

Impact upon Local Authorities, Housing Providers and other landlords:

  • The Building Safety Regulator will be responsible for holding local authorities and registered building inspectors (i.e., building control officers) to account, with the power to suspend or remove inspectors from the register and prosecute where necessary. The Regulator will effectively become the building control authority for higher risk buildings, so it is anticipated that high rise residential buildings will follow outside local authority building control remit. All local authority building control teams will need to understand the changes and how their roles, responsibilities and level of accountability are affected, once further details are provided by Government.
  • Local authorities or their managing agents may become the "Accountable Person" for the management of a building once construction is complete. The Accountable Person is to:
    • apply to register the building as a high-risk building;
    • appoint a Building Safety Manager who is responsible for managing building safety risks on a day-to-day basis; and
    • assess the building safety risks and prepare a Safety Case Report (further details as to what this entails set out below) to be submitted to the Regulator.
  • Under Section 124 of the Bill, landlords must take “reasonable steps” to obtain monies from either Government grants or from pursuing third parties, before pushing remediation costs onto leaseholders. Landlords must therefore prepare themselves to explore legal action in recovering costs associated with remedial fire safety work on affected properties, which they may until now have simply passed down to leaseholders. They will also need to re-visit cases which they may not have pursued initially because of limitation periods.
  • Whilst Government have therefore provided leaseholders and landlords with another avenue of recovering costs for remediation works, this should not be seen as a panacea. The usual risks of litigation are still present and there is no guarantee of a favourable outcome even after incurring heavy legal costs. In addition, neither Section 124 nor the extension of limitation resolves the issue if the developer/constructor responsible has ceased to trade or is insolvent. In particular, any legal test for the extent to which cladding or other fire safety risks fall within the definition of "unfit for habitation" under the DPA is likely to take some years to be established by the Courts by way of test case.

Impact upon Developers and constructors

  • Conversely, developers must now brace themselves for a wave of new legal action from landlords which might otherwise have not been brought owing to the limitation period and by the new obligation on landlords under Section 124. Prudent developers should already be beginning to assess any potential liabilities which may arise from historic defective building work.
  • As part of this process, developers will need to ensure that they retain documentation from projects within the last 15 years. If such documentation is not available, they may find claims become harder to defend.
  • Developers should also be aware that should they be successfully sued, they may be unable to claim contribution from parties with which they have previously contracted. This is because the limitation extension under the DPA is not mirrored under contract legislation whereby the limitation period for a simple contract is 6 years (12 years if executed by deed). Developers should therefore be seeking to protect their position as to the 15 year claim period in future contracts.
  • Design team appointments and boilerplate construction contracts will also now need to take into account delays or issues flagged by the Regulator during the project's progress through the Gateway stages. Developers should also be aware that projects, even where compliant, may be delayed in obtaining the relevant consent from the Regulator during the Gateway stages. The HSE have previously voiced concerns at how they will be able to resource the new powers they have been given and it is reasonable to assume there will be a backlog of projects awaiting Regulator approval. Contracts will also need to provide for damages apportionment for defective work identified during the Gateway stages.
  • Developers and contractors need to assure they are able to evidence the relevant competence levels and that they are duly registered on the centralised competence register.
  • Developers should also familiarise themselves with the New Home Ombudsman scheme which specified developers will be required to join. Owners of new build homes can seek redress in respect of defective work to the New Homes Ombudsman.

Impact upon Lenders

  • The provisions of the Bill will no doubt cause Lenders to be more cautious in the financing of higher risk building projects. Lenders should undertake due diligence on the parties involved on the project to satisfy themselves to mitigate the risk of the building work being found to be non-compliant by the Regulator under the Gateway scheme. Any delays caused by the Gateway scheme could impact upon the timescales for repayment owed to the Lender.
  • In addition, the extension of the limitation period may mean certain developers become insolvent as a result of historic claims made it against it on previous projects, potentially leaving the Lender exposed.

If you would like to find more on the topic, please do not hesitate to get in touch with Simon Naylor.

Further Reading