Building safety fund for the remediation of non-ACM cladding systems
Due to the delays in undertaking remedial works to unsafe ACM cladding following the Grenfell tragedy, the government had previously opened funds, initially for the public and later the private sector, to access monies for the removal and replacement of such systems on residential buildings of 18 meters or over. Applications for the private sector ACM remediation fund closed at the end of last year.
On 11 March 2020, the government announced in the Budget that it would provide £1 billion in 2020/21 to fund the removal and replacement of unsafe non-ACM cladding systems (including high-pressure laminate systems) https://www.gov.uk/guidance/remediation-of-non-acm-buildings.
Last week the government published the registration prospectus for the new non-ACM fund (the Prospectus) https://www.gov.uk/guidance/remediation-of-non-acm-buildings and stated that registrations of interest could be made from 1 June until 31 July 2020. Full guidance and an application process is said to then be available from the end of July 2020 for those that have registered. We have set out some of the key points below to assist you in checking whether you are eligible to apply to the fund and the next steps you should consider.
Who can register?
Private sector residential building owners/ freeholders/ responsible entities where the cost would otherwise be passed to leaseholders through the service charge.
In the social sector, owners of residential buildings regulated as social housing, if that provider's viability or the Housing Revenue Account is threatened by the cost of the works. There will be a separate claims process in July for a contribution from government for registered providers with in-scope" buildings where this is not the case. This will be the equivalent to the service charge increase which would otherwise be passed to leaseholders, including those in shared ownership properties, and it is stated that registrations should not be made to this fund in such instances. This separate claims process will be a welcome development for the sector as it was initially thought that there would only be funds available if the works threatened viability.
In both sectors funding will be available for mixed use residential and commercial developments but not for remediation works which had already been committed to, or had started, prior to 11 March 2020.
Residents cannot register but the Prospectus sets out guidance on what residents should do if they are concerned the building owner is not taking appropriate action, including using a form to notify MHCLG of the same. This would therefore include commercial entities and social housing providers who are not also the owners of buildings. However, the Prospectus makes it clear that social housing units held in blocks owned in the private sector will be eligible as part of the relevant application for that building. Registered providers owning such units should therefore liaise with the building owner to ensure they are registering and applying to the fund.
In–scope buildings and cladding systems
Buildings over 18m (with a 30cm tolerance) when measured in accordance with diagram D6 of Approved Document B with systems containing the following materials (with classifications under BS EN 13501-1):
- any cladding of class C,s1-d0 or worse;
- insulation of class B-s1sd0 or worse and the cladding is of class B-s1,d-0 to class B-s3,d2, unless the system has achieved a BR135 certificate via a BS8414 test and is installed in line with this, or has been assessed to be in line with this by a suitably qualified professional in line with Expert Panel advice; and
- insulation, or filler, of class B-s1,d0 or worse where the system installed has not achieved a BR135 certificate via a BS8414 test.
What costs will be covered?
The fund will cover the 'reasonable' capital cost of removing and replacing the unsafe non-ACM cladding and associated professional team and managing agent fees. The costs of remediating other fire safety issues and the costs of waking watches or other interim safety measures will not be covered.
The fund will not cover buildings where a warranty claim for the full costs of remediation has been accepted. However, if a claim is on-going applications will be considered.
What should you do if you think you are eligible for the main fund?
- For registered providers considering a full application on the basis of viability or challenge to the Housing Revenue Account (rather than to cover the leaseholder recharge element) consider the business case for this and the wider ramifications including notification to the regulator and any related funding issues.
- Assess what materials you have on your building (if you haven’t done so already) so that you can answer the questions set out in Annex B. Guidance on assessing the materials is contained in Annex A.
- Ensure you register your interest between 1 June 2018 and 31 July 2020, otherwise you may not be able to apply to the fund. One registration is required per building (including those in a single development). NB registered providers looking to recover the leaseholder recharge element only should not register under this process but the separate process that is to follow.
- Look to appoint a competent design team for the remediation works (to the required standard set out in Annex A) and contact local authorities and building control departments to facilitate the completion of the design work. Annex A contains guidance on appointing the design team.
- Consider whether you may have cover under a warranty product (such as NHBC) and/ or any potential claims against third parties and obtain advice on the same. The Prospectus makes it clear that owners should have explored every opportunity to fund the works from elsewhere and we note that the questions to be answered include whether any legal or warranty claims are on-going. Furthermore such claims may cover costs which are not covered by the fund, such as waking watch costs, so it would be prudent to explore such recoverability in any event. You should also make sure that you take appropriate steps to protect your position in respect of such claims at least before any remediation works are carried out.
- If determined to be eligible by MCHLG, Issue a full application based on tender review price as soon as possible thereafter but no later than December 2020. It is stated that applications will be managed on a first come first served basis up to the £1billion limit so time is likely to be of the essence!