Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023.

My Lords, these regulations establish a responsible actors scheme for developers under Sections 126 to 129 of the Building Safety Act 2022, focused on the remediation by developers of historic fire safety defects in residential buildings they have developed in England. Developers that are eligible for the scheme but choose not to join, and developers that join the scheme but then renege on their membership commitments, will be prohibited from carrying out major development or obtaining building control approvals.

Following the Grenfell Tower tragedy, it became evident that thousands of residential buildings over 11 metres had serious fire safety defects. This put resident safety at unacceptable risk while leaving many leaseholders facing potentially life-changing remediation costs. This scheme is one part of the Government’s wider response to the building safety issues that came to light following Grenfell. In addition to the scheme, we are protecting residents by investing £5.1 billion in remediating unsafe cladding on 18 metre-plus buildings; securing industry contributions to remediation through introducing a building safety levy; implementing statutory leaseholder protections against unfair costs of remediation; and creating new legal avenues for affected parties to recover remediation costs from those who caused the problem.

This scheme focuses on major private sector developers, which sit at the top of the supply chain and have overall responsibility for their developments. The Government engaged with major developers through a remediation pledge and then a legally binding developer remediation contract. I welcome the action taken by 48 developers that have signed the developer remediation contract; these include the top 10 private sector UK housebuilders. The scheme will create a level playing field whereby eligible developers that commit to remediate are not placed at a competitive disadvantage compared with those that do not.

The regulations set out three descriptions of persons who are eligible to join the scheme. Developers based anywhere may be eligible for the scheme, if they developed relevant buildings in England. First, major housebuilders are eligible where their principal business has been residential property development; they were responsible for the development or refurbishment of one or more 11 metre-plus residential buildings in England in the 30 years ending 4 April 2022; and they meet the profits condition set out in the regulations. Secondly, developers are eligible where they meet the profits condition and they were responsible for the development or refurbishment of at least two buildings that we know are defective because the buildings have been assessed as eligible for a relevant government remediation fund. Thirdly, there is a voluntary eligibility provision. This allows other persons to join, where they were responsible for the development or refurbishment of a building that would require remediation under the developer remediation contract.

My Lords, I very much welcome the way my noble friend has introduced these important regulations. My dear late father was an architect so I was brought up in that climate, and I do not think anybody in the industry disputes the fact that those responsible for developing unsafe buildings should remedy the defects at their own cost as quickly as possible. That bit seems to be agreed all round.

However, there are some aspects of the scheme that I hope my noble friend will take on board and that should probably result in some changes. The first is the presumption that anyone who has developed a building above 11 metres has to bear the burden of proof that their buildings are not unsafe. That is a pretty costly execution to be done, plus I wonder whether this self-examination is actually the right way forward. What ought to happen is that a regulator should be employed and report accordingly to the Secretary of State.

Secondly—and this is an important dimension—the regulations impose qualifying criteria for membership that appear to bear no rational relationship with the harm identified. Rather than specifying membership criteria by reference to the number of buildings above 11 metres developed, instead the criteria relate to profitability. The result is that a cowboy developer that has built countless buildings of 11 metres and over unprofitably appears to escape the criteria, but for the responsible developer that has built virtually no buildings above 11 metres, profitability is required to join the scheme, with all the obligations that entails.

My third overall observation is that membership, as I understand it, involves the requirement to sign up to a binding contract negotiated by the department’s lawyers, apparently with some select representatives from the industry. I am not aware, in the time I have been in Parliament—nearly 50 years now—of where we have had a statutory liability subordinated to a contractual document in terms that give some cause for concern.

I will list three key features that came to my mind as I worked my way through these papers. First, there is eligibility. Inclusion is understandably determined with reference to profitability in financial years 2017, 2018 and 2019, together with having developed any residential building over 11 metres in any year since 1992. So you are automatically included, even if you have only one or two buildings a few centimetres over 11 metres and they do not, in the view of the developer, need remediation. They are automatically excluded if they are unprofitable, no matter how many buildings the developer builds of 11 metres and over. Logically, one would have thought that the more buildings that have been developed, the greater the statistical risk to the public. In other words, rather than leaving the burden of proof where it normally lies—on the regulator to show that there had been a breach—in this scheme, instead, it amounts to the Secretary of State saying, “I have decided, in broad terms, that because you all meet these criteria”, seemingly selected without consultation, I am told by the industry, “you must prove that you are not in breach”.

Secondly, there is obligation. The obligation is to sign a developer remediation contract. As my noble friend rightly says, this contract has already been signed—voluntarily, we are told, but it seems from talking to some of the contractors in the business that it was not entirely voluntary, bearing in mind the sanctions if they do not sign—by 48 companies, thankfully. That is good in itself. It seems to me that it was not, initially at least, intended that those companies with buildings that were not in need of repair should be included. Nor, as I understand it, was it anticipated that people, particularly small and medium-sized contractors, with buildings that were 11.2 or 11.3 metres —and others right at the bottom of the scale—would be included.

Thirdly, and importantly, I come to the sanctions. They are pretty tough. In fact, I am not aware of any such scheme in all the time I have been working in and commenting on this market. Failure to join the RAS means exclusion from the planning and building control systems, hence exclusion from—

My Lords, there is a Division in the Chamber. The Committee will adjourn for 10 minutes.

My Lords, as there is another Division immediately, we will not restart the Committee. We will start it again at 4.25 pm, by which time the second Division will have taken place.

Sitting suspended for a Division in the House.

My Lords, I had finished two of the three key features I wanted to address, which were eligibility and obligations. I now turn to probably the most important of the lot: sanctions. As I understand it, failure to join the RAS means exclusion from the planning and building control systems. In effect, that means exclusion from most commercial and residential development in England for all companies, including non-developer companies—for example, an engineering subsidiary wanting to expand.

These sanctions are automatic. The regulations remove discretion in their use from the Secretary of State. The underlying Act originally contemplated the availability of discretion, but somehow it does not appear to have been carried through to the regulations. There are no mechanisms to determine whether the sanctions are proportionate to the risk or the harm. These coercive penalties would also apply to any further membership conditions applied in future, including compulsory financial contributions for works to buildings to which the scheme member had no connection at all.

I conclude with my reading of the situation. The severity of the penalties and the sanctions, the lack of discretion in their application, the arbitrary nature of inclusion in the scheme and the effect on employees, subcontractors, other stakeholders and shareholders seem to me, and to others outside who I have talked to, to be disproportionate and suggest that—I hope—His Majesty’s Government will think again. This industry is absolutely vital to this country; we see that daily in the newspapers.

My noble friend mentioned the material suppliers. In many ways, to any of us who take a real interest in this, they are equally liable. After all, without rotten materials that were highly inflammable, we probably would not have had Grenfell. I am surprised that, if I understand what my noble friend said, so far no single firm in that field has contributed anything or is proposing to join the scheme and contribute.