12 January 2021

Defective Cladding / Fire Protection - Residential flatowners need to act fast

Since the tragic Grenfell Tower fire on 14 June 2017, it has become clear that many residential buildings are unsafe and require urgent and substantial remedial action. Grenfell Tower had Aluminium Composite Material ("ACM") cladding but many other cladding systems, as well as insulation and other materials making up the external walls, have now been found to also be combustible and unsafe. Moreover, many buildings have been built without adequate cavity barriers to stop the spread of fire.

Flatowners in such buildings not only face great concern as to the safety of the occupiers of their flats, and the costs of remedial works, but also in relation to the amount of money they may have to contribute in relation to protective measures required pending their buildings being made safe. Until their buildings have passed an External Wall Fire Review (i.e. obtained an EWS1 sign off by an accredited engineer), their flats will be extremely difficult to sell or mortgage. It is understood that EWS inspections so far carried out have identified in many cases the need for fire safety related works before the building can be duly certified.

There have been various unsuccessful challenges by flatowners to being held liable to pay by way of the service charge for protective measures and remediation works. It is claimed that flatowners are paying £2.2 billion a year in total for interim safety measures (such as waking watch patrols and the installation of communal fire alarms) whilst remedial works are delayed or arranged, as well as for additional building insurance.

The draft Building Safety Bill published in July 2020, and currently going through the consultation process, proposes that further liability be put on flatowners to meet remediation costs by way of the 'building safety charge', a new type of service charge specifically for fire safety works that will be implied into the existing and new long leases of higher-risk buildings.

It is estimated that some 4 million flatowners are affected by fire safety related issues in one way or another. The Government has set up a number of funds, particularly for residential buildings over 18 metres high with dangerous cladding, but the amount of funding that has been promised is limited and will only cover a small fraction of buildings affected. Moreover, flatowners are expected in the first instance to seek reimbursement from third parties, such as developers and contractors and warranty providers, who are responsible for the design, installation or inspection of defective cladding systems or materials.

To date, only about 200 out of approximately 12,000 affected buildings have been completely remediated.

The most important questions and answers in relation to leaseholders being able to hold the relevant parties responsible are:

Who may be responsible and why?

The original developer/vendor and their building contractors, architects, engineers, surveyors, suppliers of materials, and cladding consultants/sub-contractors. If a building has been built defectively and/or in breach of Building Regulations, a Claim may be brought in contract (preferably), in negligence, and/or pursuant to the Defective Premises Act 1972.

In addition, most owners of newly built or converted residential buildings have new home warranties from the likes of NHBC, LABC, or Premier Guarantee which may well cover claims in relation to the structure and/or building regulation compliance of such buildings.

Is there a time limit for making a claim?

Yes, and a very strict one. The usual time period is six years from the breach of contract or negligence causing the damage (which will ordinarily be the date of the first sale) but this requires court or arbitration proceedings to actually be commenced within this period. It is, however, possible to agree Standstill Agreements with the Defendants to extend this time period and avoid the costs of issuing Proceedings.

In relation to new home warranties, claims need to be made within eight to ten years of the completion of the building.

Will court/arbitration proceedings be necessary?

Hopefully not if you are clearly within time to pursue a Claim. For reputational and commercial reasons, substantial developers may well be willing to undertake remedial action whether or not they accept liability. Some have already pledged to do so and/or made financial provision for this. If there is no substantial developer to pursue, then there may be a substantial contractor who is insured and any professional who is liable for defective design or supervision will also be insured.

Companies like NHBC who provide new home warranties, and who often also acted as the Building Inspector, may also well accept liability if the Claim is made in time. They may also pressurise the developer/contractor to remedy the defects.

Much will depend on when the building was designed and built, however, and what the actual failings are with it. Many Defendants will claim they were not at fault as the buildings were built in accordance with Building Regulations at that time. The ongoing Grenfell Inquiry, and invasive investigations undertaken into the construction of many high-rise blocks, have, however, shown that corners were often cut and works and materials were often sub-standard or non-compliant.

How much will court/arbitration proceedings cost?

It depends very much on what Defences are run and whether the case proceeds to Trial but costs can be very substantial. And the losing party is likely to be liable to pay the successful party or parties' costs as well. Accordingly, it is important that leaseholders of buildings enter into Participation Agreements so that they can act together to defray the costs and/or to seek to secure third party funding and costs insurance (which is available for sizeable meritorious claims) and/or instruct their legal advisors on a contingency basis.

What should I do next if my building has cladding issues?

If you have not already done so, you do need to collate details of the defects and then take urgent advice from a lawyer and/or building surveyor/engineer who have experience in cladding claims/issues. It is sensible to join with any Residents Association or Leaseholders Group in doing so. As stated above, time is of the essence.

You should also check whether you have any legal expenses insurance (such as part of your contents cover) and research what surveying advice, if any, you received on your purchase.

In relation to relevant documentation, you need to collate your purchase contract and any new home warranty, or any other warranty, and any information received from your Landlord/Managing Agents as to the action they are taking or proposing to take and the likely costs.

A PDF copy of the article above is also available to download here.

Natasha Rees is Head of Forsters' Property Litigation team. Jonathan Ross is a Partner and Sarah Heatley is an Associate in the Property Litigation team. Andrew Parker is a Partner in the Construction team.

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