New Budget, New Cladding?

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Article

14 April, 2020

A new budget has brought new funding for landowners of high-rise buildings containing ACM and other unsafe cladding. This represents acknowledgment by the Government that in addition to ACM (cladding similar to that present at Grenfell Tower) there are other types of cladding which may be life-threatening (such as that present at the Bolton student flats which lit ablaze in November 2019). The £1billion Building Safety Fund extends Government help to remove dangerous cladding present in both social and private sector buildings. On the face of it, this appears to be good news for those faced with the task of replacing unsafe cladding, but it is important to note the caveats which come with this:

  • The fund will become available in 2020 to 2021. Whilst building owners must wait for the fund, the Government is continuing to stress that safety is key and should not be delayed. As such, we assume that building owners may be expected to remove dangerous cladding now and worry about cost recovery later. Although, Housing Associations who have already committed to pay for replacement cladding have been requested to honour their commitments meaning they will be unable to recover their costs from the fund.
  • The fund has pre-conditions attached. For instance, it may only apply to residential buildings over 18 meters. This mark establishes what has been the high-rise threshold for quite some time now and so is understandable. A further pre-condition is that the Government expects building owners to explore whether they have any avenue of recourse against the parties who installed and designed the unsafe cladding system. We can expect the Government may require building owners to pursue any potential claims as a condition of funding.

Does the £1billion go far enough?

This £1billion is on top of the £600million already offered by the previous ACM fund and shows the Government's commitment to take some direct action in speeding up the process to end the cladding scandal. It is a good start, but it does not go far enough. The National Housing Federation conducted an analysis as to the cost of removing dangerous cladding for all Housing Association owned buildings and revealed that fire safety costs could be well over £10billion. This shows that although the £1billion tagline is a huge figure, it is but a drop in the ocean. Even more so, when you consider the G15 group of London's biggest housing associations, who own 10% of tall buildings in England, and predict that the cost of upgrading all their tall buildings alone would be over £4billion. As the scale is so vast, the £1billion will help, but not solve the cladding issue.

What does this mean for mortgages?

Where a property does not have a satisfactory and acceptable fire risk report, surveyors often value the property at zero. As after all, why would anyone want to be party to a potentially life-threatening transaction. Most management companies do not have large sinking funds to replace cladding and so they approach leaseholders for the money leading to personal loans. Although the £1bn may help fix buildings, those who do not qualify for these funds, i.e. those living in buildings below 18m high, where materials are unsafe or not tested, this will still be an issue which will not be solved until landlords inspect buildings and inform lenders that the cladding is safe. Funding may be needed for this and there is no acknowledgment of this in the current budget. This may be an issue the Government may wish to consider in their next budget as this is a problem which may not go away.

When the caveats are noted, the impressive £1billion tag line is anything but. Although, it is a step in the right direction and has allowed the Government to re-emphasise the importance of building safety.

For more information contact Aisha Bhailok in our Housing & Regeneration department via email or phone on 01772 220240. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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