It is a basic requirement of a modern society that people should feel safe in their own homes. Since the Grenfell Tower tragedy the government has worked to make buildings safe, protect leaseholders and to comprehensively reform the system so that such a tragedy never happens again.
The laws passed by this Parliament and the actions taken by this government have unblocked what seemed at times to be a hopeless impasse. I commend the efforts of colleagues across both Houses who campaigned so passionately and to good effect on this subject. Your contribution has been essential to the progress we have been able to make to date.
Today we announced measures that will make sure that developers contribute to fixing buildings, that building owners fix their buildings, that wrong-doers are held to account, and that at this difficult time leaseholders get some relief from high buildings insurance premiums.
The developer remediation contract
In April, we announced that the largest housebuilders had signed a pledge to fix all life-critical fire-safety issues in buildings over 11 metres in England which they had developed or refurbished.
Today we published the contract that will legally commit developers to delivering on this pledge: a commitment worth more than £2 billion that will protect and give peace of mind to leaseholders in hundreds of buildings. Developers will be required to inform residents in affected buildings how they will meet their commitments. And they will be required to reimburse the taxpayer where public money has been used to make their buildings safe.
While there is much left to do, the publication of the contract is a major step towards putting leaseholders’ minds at rest. Once developers have signed the contract, leaseholders and owners in affected buildings will benefit from a common framework of rights and responsibilities that will get buildings fixed without cost to leaseholders.
We expect developers to sign the contract within the next six weeks, by 13 March. This includes every company that signed the pledge, as well as several companies that were invited to sign but regrettably failed to do so. In signing this contract, developers will be taking a big step towards providing much needed certainty to all affected parties. Accepting their responsibilities will allow developers, too, to plan for the future in the knowledge that they understand the full extent of their legal obligations.
Responsible Actors Scheme
Using Building Safety Act powers, we will in the Spring bring into law a Responsible Actors Scheme in England. Developers will only be allowed to join and remain in the Scheme if they enter into and comply with the terms of the developer remediation contract published today. Any eligible developer that is not a member of the Scheme will suffer significant consequences: they will not be permitted to commence developments for which they have planning permission, and they will not be able to secure building control sign-off for buildings already under construction. Ultimately, we want the Scheme to capture all those who built unsafe buildings over 11 metres and should be paying to fix them.
Holding wrongdoers to account
The Recovery Strategy Unit in my department is dedicated to pursuing firms that have failed to do the right thing and pay to fix problems they have created. It has spearheaded legal action against recalcitrant freeholders and is actively investigating the concerning conduct of various entities and individuals across the built environment, including contractors and construction product manufacturers. We will use every power at my disposal to hold them to account.
Too many freeholders are holding back work to make buildings safe, even where the government has made sufficient money directly available. We have set our expectations that they must get on with fixing their buildings. Legal action has already started, and leaseholders have already secured the first successful Remediation Contribution Order. We would encourage others to use these new powers to challenge bad behaviour and we are considering what further action is necessary to ensure homes are not held hostage by irresponsible asset managers.
We are also backing councils to boost their enforcement action against freeholders unacceptably delaying works to make their buildings safe with more than £8 million committed to support local authorities in the areas most affected by building safety issues.
Building insurance
At my request, the Financial Conduct Authority (FCA) reviewed the buildings insurance market for multi-occupancy residential buildings. Their report highlighted serious issues relating to commissions and other payments being shared with property managing agents, landlords and freeholders by insurance firms, with such payments making up at least 30% of leaseholders’ insurance premiums on average and as high as 60%. The FCA also identified concerning obstacles faced by some leaseholders in trying to understand or challenge their insurance bills. This is not acceptable, and we must act.
We will take action to ban managing agents, landlords and freeholders from taking commissions and other payments when they take out buildings insurance, replacing these payments with more transparent fees. Over the coming year we will press insurance brokers, managing agents and freeholders to change these practices. We will arm leaseholders with more information, enabling them to better scrutinise costs, and also ensure they are not subject to unjustified legal costs and can claim their legal costs back from their landlord. These steps will ensure that leaseholder insurance costs are fairer and more transparent and will rebalance the legal costs regime to give leaseholders greater confidence to challenge their costs.
The FCA have committed to investigating broker practices and consulting on regulatory changes to further protect and empower leaseholders. While this is a positive first step, leaseholders require meaningful change to ensure that they are better protected in the future. Leaseholders also need insurance premiums to reduce significantly and urgently, but it is clear that the quality of data in the insurance sector must improve to make this possible. We expect the FCA to ensure that industry implements its new data collection code for fire safety, to report on what actions it will take to ensure a fairer and more competitive market by the summer and to continue monitoring this sector.
We welcome continuing work by the insurance industry on launching a UK-wide scheme to reduce the most severe premiums for leaseholders in buildings with significant fire safety issues and we have stressed the urgency: leaseholders need this support now.
Transforming the built environment
Finally, we are creating a culture of high standards that will transform the sector and ultimately the built environment. The Government will be taking forward an ambitious programme of secondary legislation over the next year to set the Building Safety Regulator on firm foundations. We will be working closely with the Regulator to ensure that we have the world-leading regime that residents and leaseholders deserve, and I look forward to approving their first Strategic Plan in the coming months.
I also welcome the statement from the six major mortgage lenders that confirmed that, from earlier this month, they will once again consider mortgage applications in England on properties that are covered by the leaseholder protections in the Building Safety Act, or where the building is eligible for a government or developer remediation scheme.
The measures in this announcement strengthen our commitment to delivering a much-needed overhaul of the building safety system, making sure that residents are safer in their homes now, and in the future.
I recognise that whilst this is a significant step forward there is more to be done, and I would like to thank colleagues for their ongoing engagement on this vitally important matter.
With every good wish,
Rt Hon Michael Gove MP
Secretary of State for Levelling Up, Housing and Communities
and Minister for Intergovernmental Relations