Building safety fund to be established – Budget 2020

Blake Morgan are pleased to see that there has been an announcement by the Chancellor during his budget speech that a building safety fund of £1bn is to be established. The Government’s statement setting out initial details can be found here.

Whilst the building safety fund announcement will no doubt be welcomed by the thousands of leaseholders who are in apartment buildings affected by such cladding, the devil is in the detail. At the moment, those details are not clear. It appears that the fund will apply to residential and social housing (but not commercial) properties above 18m and that it will include products other than ACM Cladding. It therefore appears to be in addition to or wider than the ACM fund previously established by the Government.

The exact terms of what will or will not be covered remains to be seen. The initial announcement refers to products such as high-pressure laminate, wood and other class C/D cladding. It does not appear to cover internal building issues, such as internal fire stopping or compartmentation issues. It is to be presumed that there will be an obligation to show that the building did not meet Building Regulations at the time it was built or now. This will necessitate the right type of enquiry/report/advice to secure coverage.

It is also not clear if there will be a limit to how far back government is prepared to go in terms of when a building was constructed.

Consistent with the last ACM fund, this new fund will require leaseholders to pursue warranty and other reasonable claims to recover the cost of rectification. What is reasonable and the extent to which claims must be pursued as a condition of funding remains to be seen. However, anyone pushing up towards any of the relevant time limits for such claims would be well advised to take advice and protect themselves from any allegation that they allowed such claims to lapse. There is of course no guarantee that claims on the government fund will succeed, or that they will cover the entire losses or that they will not be subject to pro-rating. The last issue is very real when it is quite unclear how and on when basis Government has determined that this figure for the fund will be sufficient: it may not be. Therefore prudence suggests maintaining and protecting claims against all relevant parties.

Other issues which will no doubt come to the fore include whether leaseholders will be able to recover the myriad of costs such as waking watch and professional fees that may have been incurred investigating the issue. There may also be decant and other costs as well as blight issues, delay on sales etc.

The announcement of the previous ACM only fund was followed by a delay of some months before the details of the scheme and which buildings were eligible was announced. Pending further details of the scheme, leaseholders should exercise caution. Leaseholders will also be acutely aware that pay outs from the initial fund have been slow or non-existent and in the meantime costs are incurred and buildings may pose a very real Health and Safety risk.

We are hopeful that this is the positive news that many have been waiting for and that the details, once fully announced, will confirm that leaseholders do not need to bear the cost of replacing dangerous cladding that they did not install or request in the first place. It is however likely to be an involved process which will need to be followed carefully and efficiently to make proper recoveries whether from the scheme or others.

Contact our construction team for advice regarding the the building safety fund or any other construction law matters.

This article has been co-written by Simon Lewis and James Bessey.