The Building Safety Act 2022 (“the Act”), the biggest reform of building safety regulation in UK history, received Royal Assent on 28 April 2022.
The Act is a response to the tragic events at Grenfell Tower in 2017 as recommended by Dame Hackitt in her review of building safety, Building a Safer Future: Final Report, which was highly critical of the construction industry.
We have followed the Act through its passage in previous editions of QIA:
- In December we outlined where the Bill had got to and predicted it would become law in 2022.
- We also explained a late amendment to increase the limitation period for claims under the Defective Premises Act 1972 from 15 to 30 years.
Since the last edition of QIA, while the role of the Building Safety Manager was scrapped, further radical amendments were introduced in the House of Lords which have been largely retained in the final version of the Act. These amendments will have a significant impact on developers and commercial and residential property owners.
Certain provisions to come into force on 28 June 2022.
The Government has published an Outline Transition Plan detailing when the provisions are expected to come into force. The majority of provisions will come into force in 12-18 months time. However, the extension to the period for bringing claims under the Defective Premise Act 1972 will now come into force as of 28 June 2022 according to the Government website. From this date, Section 38 of the Building Act 1984 will also take effect after 28 years of sitting on the statute books allowing for claims for compensation to be brought for physical damage (e.g. injury or damage to property) caused by a breach of building regulations.
New remediation orders and orders against associated bodies corporate
Various new orders in the final text will apply to “relevant defects” (i.e. defects which cause a building safety risk) but also anything done or not done or anything used or not used in connection with relevant works in “relevant buildings” (which are self-contained buildings (also defined in the Act) or parts of buildings which consist of two or more dwellings).
Some of the new available orders can apply not only to landlords/developers but also to their “associated persons” and to “associated bodies corporate”. This is particularly noteworthy as these orders will effectively allow the corporate veil to be pierced which is rare in English law and illustrates the seriousness of the situation. This piercing of the veil is only permitted rarely such as in case of fraud or serious breach of directors duties (such as fraudulent or wrongful trading).
The following will be capable of being granted by a “First Tier Tribunal”:
- Remediation Orders – An order requiring a relevant landlord to remedy defects in a relevant building. This order can be applied for by the Building Safety Regulator, a local authority, a fire and rescue authority, any person with a legal or equitable interest in the relevant building or “any other person prescribed by the regulations”.
- Remediation Contribution Orders – An order requiring a landlord (or entity who was the landlord at the time), developer or an entity associated with a landlord to make a payment for the purpose of meeting costs of remedying relevant defects. This can be applied for by the Secretary of State, Building Safety Regulator, a local authority, a fire and rescue authority or a legal or equitable interest in a relevant building or any other person prescribed in regulations.
These provisions will likely be used by the Building Safety Regulator to hold relevant landlords and developers (and their associated entities) to account in the event they do not deal with relevant defects in the manner expected.
Further new orders are included which are again designed to stop companies with liabilities for relevant defects escaping by winding up the relevant entity with the liability:
- Remediation costs of insolvent landlord – Where there are relevant defects in a relevant building and the landlord is being wound up, the liquidator can apply for an order requiring an associated entity to contribute such assets as the court considers to be just and equitable to go towards remediation costs.
- Building liability orders – If an entity has a liability under the Defective Premises Act 1972, Section 38 of the Building Act 1984 or “as a result of a building safety risk” (a “relevant liability”) and has been dissolved, if just and equitable to do so a “building liability order” can be applied for to make other associated corporate bodies liable for the same liability.
Those parties will find it more difficult to hide behind shell companies or special purpose vehicles (known in the industry as SPVs).
Prohibitions
The amendments to the final text also include two wide reaching new powers:
- The power to prohibit prescribed persons from carrying out development – The Secretary of State can “prohibit a person of a prescribed description from carrying out development of land in England”. If a prohibition order is made, it will override any planning permission that may have been granted.
- Building control prohibitions – This essentially allows a person to be stopped from applying for building control approval or from obtaining a final certificate in relation to works carried out by the person.
How these powers are to be used in practice is yet to be seen but the message is clear from Government that it expects the industry to take responsibility and it intends to use these powers to punish those who do not – by effectively banning them from the industry.
Building industry schemes
The Act provides for “building industry schemes” for entities to contribute to the Government’s building safety fund. The Government has been in discussions with industry in order to secure pledges from industry parties in relation to contributions which industry companies will make.
Takeaway points
- Majority of provisions of Building Safety Act will come into force in 12-18 months.
- The Act will increase regulation for development of “higher risk buildings”. Existing “higher risk buildings” will also have more regulation and will need to be registered.
- Amendments to the Defective Premises Act and Section 38 of the Building Act will be in force from 28 June 2022 – widening the scope for claims against the real estate and construction industry.
- The new Building Safety Regulator will also have significant powers at its disposal to address historic building safety defects.
- Significant shift from the position a year ago where it was initially proposed that leaseholders would have to take out loans to meet the cost of remediation themselves.
- 35 developers have committed to pledge funds towards building industry schemes. No such deal had been reached with construction products manufacturers.
If you are interested in finding out more about the Building Safety Act 2022, Wedlake Bell are holding a seminar on 12 October.
Please click here to register your interest.