Out-Law News | 26 Jun 2020 | 2:50 pm | 2 min. read
Property expert Andrew Quinlan of Pinsent Masons, the law firm behind Out-Law, said that landlords faced an extremely challenging timetable to both secure the funding and complete the any necessary remediation work.
The UK government announced the creation of the new Building Safety Fund, targeted at non-ACM cladding systems, on 11 March in response to pressure for further action on high-rise buildings. Qualifying buildings must be 18 metres or higher; residential or mixed use residential and commercial in type; and have or potentially have unsafe non-ACM cladding systems as part of the external wall system. Hospitals, hotels and student accommodation are excluded from the fund, which is aimed at supporting residential leaseholders facing substantial bills.
Quinlan said: "Owners of high-rise buildings with affected cladding systems face real challenge in the coming weeks to ensure that they do not miss out on the Building Safety Fund. To miss out might create issues with leaseholders, or shareholders or investors who expect them to access these funds, to reduce the financial burden on them of replacing the cladding".
The challenge of seeking funding, undertaking works as soon as possible and the severe demand on suitably qualified professionals and contractors will require very careful management.
The government published a registration prospectus for the fund at the end of May, in which it set out a three-stage application process. The registration phase opened on 1 June, and will close on 31 July 2020. Buildings which do not register in time will not be eligible to apply for funding.
Once registration closes, the application phase will start. The government will carry out initial checks to confirm which buildings meet the technical criteria, with these buildings then proceeding to the full application process. Applications should be made by the building owner, or management company or other party responsible for repair, by December 2020, and will be processed on a 'first come, first served' basis. The full application must be supported by a tendered contract price.
Once funding has been granted, the works construction phase should start on the site before March 2021.
Building owners must "explore every opportunity" to fund remediation work themselves before seeking government funding, and should not merely seek to pass the costs on to tenants, the government said.
Andrew Quinlan emphasised the need for eligible building owners to submit a full application promptly.
"The need to act swiftly is more critical still in light of doubts projected by the Communities and Local Government select committee as to the sufficiency of the fund," he said.
"In a recent report, the committee said that the £1bn allocated to the fund would not be sufficient to remediate all affected buildings, and would instead only cover around 600 buildings, or one third of the estimated total. This supposed deficit may be partially explained by the government's expectation that developers, investors and building owners who have the means to pay for remediation will take responsibility and cover the costs of remediation themselves, without passing on costs to leaseholders or relying on government funding," he said.
"Moreover, as a condition of funding, building owners must pursue warranty claims and appropriate action against those responsible for putting unsafe cladding on buildings, with any damages recovered paid to the government. Where a warranty claim for remediation has been 'accepted' by a third party, funding will not be available," he said.
"The challenge of seeking funding, undertaking works as soon as possible, the impact that this may have on recovery from third parties - including leaseholders, collateral warranty providers and insurers - and the severe demand on suitably qualified professionals and contractors will require very careful management. Landlords with multiple buildings looking to make an application to the fund will require significant internal resource and external professional support at each stage of the process," he said.
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