The Fire Safety Act 2021 - overview and note for Build to Rent Landlords
Intended to address concerns raised in the wake of the Grenfell Tower tragedy, the Bill had a bumpy ride through Parliament. Attempts to introduce a clause prohibiting remediation costs being passed to leaseholders failed. Much of the Act remains controversial, with concerns over the burden of costs on leaseholders enduring.
What the Act does - Reforming the Regulatory Reform (Fire Safety) Order 2005
A significant purpose of the new Act is to update who is accountable for reducing the risk of fires in buildings with two or more domestic dwellings (the ‘Responsible Person’). In most let buildings this will generally be the building owner. The Act also sets out the scope of the risks they must manage. These specifically include:
- The building’s structure
- External walls, including doors, windows and balconies
- Any common parts of the building
- All doors in between private dwelling and the common parts of the building
They must be included in the annual fire risk assessment, which must be shared with the Fire and Rescue Services.
The Act will also allow further legislation, based on the Grenfell Inquiry recommendations, without having to travel through Parliament.
The burden of costs
A focus of the debate surrounding the Act was on ensuring leaseholders were not burdened with the costs of remediating properties in need of recladding. In the end the legislation was pushed through without this, to avoid delays in the new ‘Responsible Person’ rules.
Funding options for building owners
On 21 February 2021 the Government announced an additional £3.5 billion, further to the £1 billion announced in May 2020 for the Building Safety Fund to remediate residential high-rise buildings over 18 meters tall with non-ACM cladding which does not conform to fire safety standards.
For buildings between 11 and 18 metres, the Government is offering a loan to building owners. How is this to be repaid? At the moment nobody knows. The talk is that legislation will cap leaseholder contribution at £50 per month.
The Building Safety Fund contains a range of criteria which the applicant must meet alongside exclusions and limits to obtaining funding. The fund excludes:
- non-residential buildings
- the cost of any interim safety measures such as waking watches put in place
- necessary fire safety work, which may be exposed at the time of remediation, not directly related to unsafe cladding
- Any work which started before 11 March 2020
Building owners should engage with the application process to establish if their building qualifies for funding.
Government statistics show that it is vital for building owners to take care with applications. Many are rejected.
Impact on BTR landlords
With long leases the landlord can generally pass on costs through the service charge but with BTR the rent in this scenario is often “all inclusive”. So due diligence when buying a stabilised asset is key, alongside establishing availability of warranties and identifying relevant construction parties.
What now?
There is talk of a contribution for tall buildings as part of the planning process, and a more general tax on residential developers, to raise cash.
We will have to wait for the Autumn budget.
Podcast: Insights into Build To Rent
On our latest More Than Law podcast, host Miri Stickland is joined by three members of our Build To Rent group who provide their insights into the sector.
