Regulation of “higher-risk buildings” in the Building Safety Bill

Understandably, most attention on the Building Safety Bill has been focused on the proposal to extend the limitation period for claims under the Defective Premises Act. Less eye-catching, but perhaps just as significant for developers, landlords and leaseholders in residential developments are the Bill’s measures relating to the regulation of “higher-risk buildings”.

There are two elements to the new regime:

• Provisions in Part 3 of the Bill which amend the Building Act 1984 to create a new role for the Health and Safety Executive as the regulator of higher-risk buildings.
• Provisions in Part 4 of the Bill which create new responsibilities for landlords (and others) in relation to managing “building safety risks”.

The provisions of the Bill are lengthy and complex and it is not possible to cover every detail in this article. What follows is a broad summary of the main provisions of the Bill and how they are likely to work in practice if the Bill becomes law.

What is a “higher-risk building”?

“Higher-risk building” is defined differently for the purposes of Parts 3 and 4 of the Bill.

Clause 30 of the Bill would create a new section 120D of the Building Act 1984 which will define a higher-risk building in England as follows:

“(2) Higher-risk building” means a building in England that –

(a) is at least 18 metres in height or has at least 7 storeys, and
(b) is of a description specified in regulations made by the Secretary of State.

(3) The Secretary of State may by regulations make provision supplementing this section.”

 In Part 4 of the Bill, higher-risk building is defined differently:

“(1) In this Part, “higher-risk building” means a building in England that

(a) is at least 18 metres in height or has at least 7 storeys, and
(b) contains at least 2 residential units.

“(2) The Secretary of State may by regulations make provision supplementing this section.”

Both definitions adopt the threshold requirement that the building must be at least 18 metres in height, or have at least seven storeys. Anyone familiar with cladding disputes will recognise the 18m threshold as a distinction adopted from Approved Document B: in theory at least[1], buildings under 18m in height should be capable of evacuation by the fire service using ladders, meaning less stringent safety standards are appropriate.

The definitions then diverge:

• For the purposes of Part 4, a building must have at least two residential units in order to meet the definition. As set out below, this makes sense in the context of Part 4, which is aimed at governing the relationships between tenants, landlords and others in relation to fire safety risks. Part 3 has no such requirement in the body of the Bill: any building over 18m / seven storeys in height is potentially within the definition.
• Both definitions are subject to elaboration by regulations issued by the Secretary of State, with the regulator empowered to make recommendations as to what should be included.
• For the purposes of Part 3, a building must meet the threshold requirements and fall within a description set down in regulations, whereas for the purposes of Part 4, a building which meets the threshold requirements falls within the definition of higher-risk building unless regulations have been made which exclude buildings of that particular description.

Draft regulations have been issued which shed some light on the intended scope of the two parts:

• The definition for the purposes of Part 3 includes any building containing two residential units, as well as care homes and hospitals. The regulations then exclude certain types of building from the definition, including military premises and secure residential institutions.
• The definition of Part 4 excludes care homes and hospitals, as well as other categories excluded from the Part 3 definition.

Part 3 of the Bill: a new role for the regulator

At present responsibility for enforcing the Building Regulations generally sits with local authorities[2]. Part 3 of the Bill will amend the 1984 Act so that responsibility for enforcing the Building Regulations in relation to higher-risk buildings will fall on the “regulator”, i.e. the Health and Safety Executive. The regulator takes on the newly defined role of “building control authority” for higher-risk buildings, as well as for work with a “prescribed connection” to higher-risk building work. Local authorities remain the “building control authority” for other work.

The Bill also expands the potential scope of the Building Regulations. If the Bill passes, the Building Regulations can include:

• a new system for requiring notices and the submission of information to the building control authority prior to obtaining Building Regulations approval. Without seeing the proposed new Building Regulations, it is difficult to know exactly what is planned, but the emphasis appears to be on having the building control authority more closely involved at an early stage, with increased powers to request information.
• new requirements for “appointed persons” who may be required to be appointed in relation to any work, and who may also be required to have certain prescribed competencies. The objective, presumably, is to ensure that for certain kinds of risky work, someone is involved in the design and / or construction who is competent to ensure the safety of that work.
• a new system of “compliance notices” and “stop notices”to be issued by building control authorities in the event that Building Regulations are not followed.
• new requirements as to inspection and testing of work and buildings.

There is nothing in the Bill which limits the new scope of the Building Regulations to higher-risk buildings, but it is to be assumed that the new Regulations, if and when published, will draw a distinction.

Part 4: managing “building safety risks”

One of the difficulties faced by occupiers of buildings affected by building safety issues is that it is not always obvious who bears responsibility for fixing issues with the fabric of the building. When an issue with (say) defective cladding is identified, leaseholders in residential blocks are often faced with a scenario whereby the landlord, developer and contractor all point fingers at each other, leaving the tenants with a choice between living with the potentially unsafe building, taking potentially expensive measures to remedy the situation themselves, or commencing a risky and expensive legal action.

Residents’ committees are convened, resolutions are made and letters are written, but in the meantime the building remains unsafe, because no one wants to be the party to put their hand in their pocket, pay for the necessary remedial works and then face the unpleasant task of trying to recoup that expenditure from others.

Part 4 of the Bill looks to overcome this problem by ensuring that for all higher risk buildings there is at least one “accountable person” who is under ongoing duties to assess the safety of the building and take such steps as are necessary to ensure the building is safe, including works to the fabric of the building. However, as set out below, the Bill as currently drafted does little to avoid the problem of leaseholders bearing the costs of such measures.

Who is an accountable person?

An accountable person is anyone who holds a legal estate in possession in the “common parts” of a higher-risk building, or anyone who is subject to a repairing obligation in respect of any of the common parts. “Common parts” are defined to include the undemised structure and exterior of a building, as well as any part provided for the enjoyment “of residents of more than one residential unit”.

This seems fairly straightforward: if there is a party with a repairing obligation in respect of the common parts, that party is the accountable person. If there is no-one with a repairing obligation, the accountable person is the party who has a legal estate in possession of those parts. Each of the following could be an accountable person:

• A landlord, if the common parts have not been demised to the leaseholders;
• A management company, if that management company has a repairing obligation;
• The occupiers of a building, where they share ownership of the freehold.

The Bill therefore does not prescribe who will be the accountable person or even how many accountable people there will be: that all depends on the private arrangements between the parties with an interest in the building. What the Bill ensures is that at least one person will be the accountable person, and that person will be identifiable by reference to a straightforward test.

The Bill also introduces the concept of a “principal accountable person”. Where there is only one “accountable person” they will also be the principal. Where there is more than one accountable person, the principal accountable person will be the person who holds a legal estate in possession in the undemised parts of the structure and exterior of the building.

To hammer home the idea that someone identifiable must take on these new responsibilities, the Bill makes provision for an application to the First-tier Tribunal in the event of any dispute as to who occupies the role of accountable person or principal accountable person.

What must accountable persons do?

The Bill proposes that accountable persons and principal accountable persons will be subject to ongoing legal duties backed by enforcement on the part of the regulator and by criminal sanction in the event of non-compliance.

The Bill imposes different duties on accountable persons and principal accountable persons. These duties are built around the concept of a “building safety risk” which is a risk to the safety of persons caused by fire, structural failure or other matters specified in regulations.

Accountable persons would be made responsible for taking substantive steps to ensure the safety of the parts of the building for which they are accountable:

• All accountable persons for occupied higher-risk buildings must make an assessment of the building safety risks regarding the part of the building for which they are responsible. This is an ongoing duty: assessments must be made as soon as the building is occupied, or when the accountable person becomes an accountable person (if later), and then thereafter at regular intervals.
• Pursuant to clause 86 of the Bill accountable persons also have a duty to “take all reasonable steps” to prevent a building safety risk materialising in relation to the part of the building for which they are responsible, and to reduce the severity of incidents in the event that such risks do materialise. These steps must be taken “promptly” and expressly can include carrying out works to the building.
• The Bill also requires accountable persons to make arrangements for engaging with residents regarding building safety risks and how they will be dealt with. The principal accountable person must prepare a residents’ engagement strategy, and residents have a right to request information of the principal accountable person as well as to make complaints to the regulator.

In addition to whatever obligations they may have as an accountable person, the principal accountable person is also required to perform duties aimed at coordinating, monitoring and reporting on the duties required to be undertaken by accountable persons:

• The first duty is to ensure that any occupied higher-risk building is registered with the regulator. The Bill anticipates regulations specifying what information must be supplied along with an application for registration, but draft regulations have not been issued.
• The second duty is to appoint a “building safety manager” who has the necessary expertise to plan, manage and monitor the functions of accountable persons created by Part 4 of the Bill. In the case of a new building, the building safety manager must be appointed before the building is occupied. If the principal accountable person has the necessary skills, they can perform this role themselves, but it seems to be envisaged that in most cases this will be a professional appointment. The Bill anticipates regulations as to what expertise will be required.
• The third duty is to apply for a “building assessment certificate” if required by the regulator. Although the precise requirements will be set by regulations, the principal purpose of this assessment appears to be to ensure that all accountable persons are complying with the duties imposed by Part 4 of the Bill. The regulator grants the certificate if it is satisfied that the duties are being complied with.
• The fourth duty is to undertake a safety case report detailing the risk assessments undertaken by accountable persons, together with any steps taken in relation to building safety risks.

Of all of the duties imposed by the Bill, the most significant seems to be that created by clause 86: the duty on accountable persons to take all reasonable steps to prevent a building safety risk materialising. Given that the Bill expressly anticipates carrying out remedial works as a “reasonable step”, this duty seems to be expansive, and potentially expensive for accountable persons. If an accountable person discovered that cladding on a higher-risk building was unsafe for example, it seems difficult to argue that they would not be under a duty to replace that cladding, “promptly”, as a reasonable step in order to prevent the building safety risk arising.

Although onerous, such a duty is precisely the policy that the Bill is aiming to create: if there is a risk to occupiers due to fire or structural failure, the Bill identifies a specific person responsible for dealing with that risk, and imposes a duty backed by criminal sanction to deal with that risk promptly.

Who pays?

That leads to the question of who pays for steps that have to be undertaken by accountable persons and / or the principal accountable person. The Bill proposes amendments to the Landlord and Tenant Act 1985 which will imply into relevant leases pursuant to which the tenant covenants with the Landlord to pay the “building safety charges” listed in a new Schedule to the 1985 Act. It is not possible to contract out of this implied covenant.

In outline, the landlord is entitled to pass on almost all of the costs of complying with the duties set out in the Bill, except for the cost of carrying out any works to the building, including works taken as a step under clause 86 of the Bill. “Relevant leases” are any leases for a term of seven years or more under which the tenant is liable to pay a service charge. Social housing is excluded.

On first sight, this appears to be a significant boon to leaseholders, and to achieve the government’s stated policy objective of relieving leaseholders of the costs of remedial works to the fabric of the building. In fact though, for most leaseholders the Bill will effectively preserve the status quo. Schedule 7 to the Bill (which creates a new Schedule 2 to the Landlord and Tenant Act 1985) makes it clear that “building safety charges”, which are passed on to tenants via service charges, do not include the cost of carrying out remedial works, whether pursuant to clause 86 or otherwise.

However, although such costs are not “building safety charges” for the purposes of the new Schedule, there is nothing in the Bill which prevents those charges being passed to tenants pursuant to the express terms of their leases (so that they fall outside the scope of the Bill completely). For many tenants, little will change, as was acknowledged by Mr Eddie Hughes MP in committee. He said that the purpose of the building safety charge being separate from the usual service charges under a lease was merely to ensure that residents are given “further information about what they are paying for to keep the building safe and assurance that the manager of the building is charging reasonably“. He also confirmed that it was not the policy of the Bill to interfere with the allocation of costs as determined by the terms of a particular lease:

” We wish to make it clear that remedial costs are not included in the building safety charge. This clause does not make leaseholders liable for the costs of remedial works. Whether or not leaseholders are liable for works is governed by the terms of their existing leases.“

Even if the express terms of the lease are not such as to allow the landlord to pass on costs of remedial works via a service charge, many landlords will simply not be in a position to pay for necessary works. Ownership of residential developments is often structured in such a way that the immediate landlord is little more than a shell company with no real assets.

The problem of shell landlords is not unique to this context, but the courts have taken the view that it is for Parliament to solve the problem by providing routes for tenants to sue up the landlord chain (see Rakusen v Jepsen [2021] EWCA Civ 1150). As currently drafted, the Bill does not appear to do very much to improve the lot of tenants faced with the prospect of expensive safety-critical remedial works to the fabric of their building.

How are the duties enforced?

The first line of enforcement of the substantive duties created by Part 4 consists of the duties imposed on the principal accountable person. The obligation to register a building with a regulator, report on demand (via an application for a building assessment certificate) as to how the duties are being complied with, and to appoint a building safety manager will all put pressure on accountable persons to comply with the substantive duties imposed by Part 4 of the Bill.

In the event of a failure to discharge the new duties, the regulator is empowered to issue contravention notices requiring an accountable person to remedy any failure. In extremis the regulator can apply for a “special measures order”, in which case the regulator effectively takes charge and appoints a special measures manager to implement the steps required by the regulator.

Sitting behind all of that is the risk of criminal sanction. Failing to meet a requirement of Part 4 of the Bill in such a way as to create a significant risk of death or serious injury is an offence punishable by a fine and / or imprisonment. Corporate officers can be held directly liable for offences of corporate landlords, although it is unclear whether this would be of any assistance in the “shell landlord” scenario identified above. The offence created by clause 101 of the Bill requires that the accused contravened one of the relevant requirements “without reasonable excuse”: a lack of available funds seems likely to be a “reasonable excuse” for these purposes.

Conclusion

Once one penetrates the dense regulatory drafting, it becomes apparent that the Building Safety Bill proposes a radical realignment of responsibility for ensuring the safety of higher-risk buildings. Landlords and developers in particular will want to carefully study the implications of the Bill, and no doubt if enacted the Bill will result in many taking on duties they would much rather be without.

Overall though a legal framework which ensures that someone is directly responsible for the safety of the common higher-risk buildings ought to be welcomed. The new regime ought to ensure that risks are identified and dealt with before they materialise. Where things nevertheless go wrong, it ought to be more straightforward to identify the responsible party.

Author: Daniel Churcher

[1] The National Fire Chiefs Council has questioned whether this distinction is realistic, given that many fire services only have ladders capable of reaching 11m heights. The adequacy of the threshold has also been raised as an issue by the Public Bill Committee for the Building Safety Bill: see James Leabeater QC’s article on the Committee hearings.

[2] Per section 91(2) of the Building Act 1984.

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Daniel Churcher

Call 2012

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Construction & Engineering