Building safety reforms – What impact on local authority landlords?


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Building safety continues to be of vital importance to the housing sector and, following MHCLG’s recent consultation, the expectation is that a Building Safety Bill will shortly be introduced to implement a new regulatory regime.

Local housing authorities will, of course, be subject to these new building safety reforms but what will this mean in practice? Much of the media attention has been on new residential high-rise buildings, especially those in the private sector. This has meant a focus on leaseholders concerned not just about their personal safety but also their service charge demands, mortgage availability and property values. The fact that the Grenfell tragedy involved a council-owned block undergoing extensive refurbishment reminds us how this is an issue which has direct and deep implications for local housing authorities too.

The current state of play

Local authorities are, of course, very familiar with building safety rules in their role as enforcement authorities under the Housing Act 2004 regime. As landlords, local authorities are also subject to the Fire Safety Order 2005 (which is also currently undergoing review by the Government).

But until very recently, local authorities had not really experienced external scrutiny on fire or other building safety issues. As registered providers, local authorities are regulated by the Regulator for Social Housing in relation to the Consumer Standards which include health and safety. In May 2019, following regulatory action taken against Gateshead Council, the chief executive of the Regulator issued a letter to all local housing authorities, reminding them of their health and safety duties under their Home Standard. Since then there have been breach notices issued to a further seven councils – though four of them, it should be noted, were joint ‘owners’ of an ALMO.

Of course, local authorities have always had their own health and safety systems, irrespective of legal and regulatory requirements.

“Nevertheless, the external ‘environment’ has changed and local authorities are having to demonstrate the effectiveness of their policies and procedures in ways that were not seen until recently.”

In-scope (and out-of-scope) buildings

The main elements of the new regime will apply to new (or substantially refurbished) residential buildings over 18 metres / 6 storeys high, with a gradual roll out of obligations to other in-scope buildings, i.e. those in occupation. Responsibility for in-scope buildings will lie with the “duty holder” (during construction or refurbishment) and the “accountable person” (during occupation). This liability may not be delegated. The new Building Safety Regulator will have tough enforcement powers where there is a failure to comply, ranging from fines to criminal prosecution.

Even those local housing authorities without in-scope buildings should be mindful of the new regime. The Government is still considering how widely the new standards should apply and has confirmed that there is potential for currently out-of-scope buildings to be brought within the regime in due course. Moreover, there are important aspects of the new regime which will apply regardless of whether or not a building is in-scope – for example, in relation to certain aspects of tenant engagement and redress, and also the extension of defects liability periods.

The fact that a building is not (yet) in-scope is unlikely to justify – certainly not as far as tenants are concerned - what could be characterised as an inconsistent, almost literally two tier, application of fire safety standards across a council’s stock. It is for this reason that many local authorities are taking a broader approach when implementing new fire safety measures – that is going beyond the minimum required.

New costs?

The new building safety regime is likely to require considerable investment by landlords across all sectors.

Significant capital costs have been and will continue to be incurred by local authorities in upgrading buildings (and their elements) and installing compliant systems. The proposed building safety regime also contemplates new roles for staff and/or consultants (e.g. a building safety manager) – as well as tenant support - which will require revenue expenditure on an ongoing basis.

MHCLG has provided grant for some capital costs, but otherwise local authorities will need to look to their own resources and, in all likelihood, additional HRA borrowing. The fact that the borrowing cap has been removed is obviously only important where there is surplus revenue to service the debt – and the Section 151 Officer is comfortable with the overall exposure. Revenue Contributions to Capital Outlay (RCCOs) are a helpful exception to usual capital/ revenue rules but again there does, of course, need to be revenue to ‘contribute’ in this way.

Leaseholder contributions towards costs can cause difficulties - there are obvious sensitivities. And the terms of many Right to Buy leases do not permit the recovery of costs for ‘improvements’ – though we have identified scope for enforcing fire compliance covenants which should be explored before concluding that leaseholders should not contribute at all.

Conclusion

The new building safety standards will require important decisions to be made by local authorities about liability, resourcing, but most importantly, how to keep residents safe. Given the complexity of these issues, some local authorities have concluded that tower blocks are no longer a viable option and plan to demolish them. But the blocks are popular with some residents – and in any event, this is obviously no easy or cheap ‘fix’. There is unlikely to be any one solution: various approaches will be needed, but, with the Building Safety Bill pending, all local housing authorities should be reviewing their stock and their HRA and deciding on the right approach for them so they can meet the upcoming challenges head on.

One final thought – the Regulator has made it perfectly clear that registered providers - including local authorities - should not wait for legislation in ensuring their properties are safe.

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