Leasehold high-rise flats: Who pays for fire safety work?

After the Grenfell Tower fire in June 2017, the Government established a Building Safety Programme with the aim of “ensuring that residents of high-rise residential buildings are safe, and feel safe from the risk of fire, now and in the future.”

Remediation work is complex, with significant associated costs. The full cost of remediation work on all affected blocks is estimated at around £15 billion (PDF).

The question of who should pay for the work has been at the forefront of debate about how quickly it can be done and the financial implications for long leaseholders living in affected blocks.

Funding to remove ACM cladding

In the aftermath of Grenfell, the Government said building owners should take responsibility for funding fire safety measures, including the replacement of dangerous cladding.

Almost one year later, on 16 May 2018 the Government said it would meet the “reasonable cost” of the removal and replacement of unsafe cladding by councils and housing associations.

Not all developers and freeholders responded positively to calls to protect leaseholders in private blocks from the cost of remediation work. Almost two years after Grenfell, on 9 May 2019 James Brokenshire, then-Secretary of State at the Ministry of Housing, Communities and Local Government (now the Department for Levelling Up, Housing and Communities, DLUHC), said the Government would fully fund replacements of “unsafe aluminium composite material (ACM) cladding on high-rise private residential properties where building owners have failed to do so.”

Funding to remove non-ACM combustible cladding

In the March 2020 Budget, the Government said it would provide £1 billion in 2020 to 2021 “to support the remediation of unsafe non-ACM cladding systems on residential buildings 18 metres and over in both the private and social housing sectors.”

The registration process for the Building Safety Fund opened on 1 June and closed on 31 July 2020. The deadline for submitting funding applications was extended 30 June 2021. Further flexibilities were considered on a case-by-case basis.

On 10 February 2021, Robert Jenrick, then-Secretary of State for Housing, Communities and Local Government announced additional funding of £3.5 billion for the removal of combustible cladding on high rise blocks of
18 metres and over.

On 10 January 2022, Michael Gove, Secretary of State at DLUHC, said the next phase of the Building Safety Fund would open later in the year. The Fund opened for new applications on 28 July 2022 for eligible buildings without a funding solution in place.

Industry to pay

On 13 April 2022, the Government announced agreement with developers to contribute a minimum of £2 billion towards cladding remediation on their buildings of 11 to 18 metres. By 15 September 2023, 50 developers had signed the developer remediation contract. Eligible developers who refuse to sign or fail to comply with the contract terms face significant consequences.

A further £3 billion will be raised for this purpose through a Building Safety Levy over ten years. The press release said this would “ensure no leaseholder in medium-rise buildings faces crippling bills, even when their developer cannot be traced.”

Building Safety Act 2022

Amendments were made to the Building Safety Bill to “protect leaseholders from having costs passed on unfairly by the owners of the freeholds of these buildings.” The leaseholder protections came into force on 28 June 2022.

Leaseholders in blocks above 11 metres are protected from the cost of cladding remediation work, with some exceptions.

The Building Safety Act 2022 provides for what’s been referred to as a ‘cascade’ of responsibility for assessing who is responsible for meeting the cost of non-cladding remediation work on blocks of 11 metres and above. At the end of the cascade, leaseholders may, in some cases, be required to contribute. Contributions are capped for most leaseholders at £15,000 within Greater London and £10,000 elsewhere.

Contributions already paid towards remediation of historical defects in the previous five years count towards the caps.

Ongoing issues

Despite the announcement of additional funding and measures in the 2022 Act, there are ongoing concerns, including:

• Exclusions from assistance for those who have already paid towards remediation work; some buy-to-let landlords; and those in affected blocks under 11 metres in height.
• The imposition of contributions towards non-cladding remediation work, albeit capped.
• The potential impact on the social rented sector’s ability to develop new affordable homes and invest in existing stock.
• The pace of remediation work and how long it is taking for the funding to come through. The Government has said the Building Safety Regulator will start taking enforcement action in spring 2024.

Affected long leaseholders should seek professional legal advice and assistance. The Leasehold Advisory Service and the Leasehold Knowledge Partnership (which also acts as the secretariat for the All-Party Parliamentary Group (APPG) on leasehold reform) are potential sources of advice. The LKP has a dedicated email address: cladding@leaseholdknowledge.com.