The UK cladding crisis - What it means for building owners, purchasers and investors

What is happening?

Since the tragic Grenfell Tower fire on 14 June 2017, it has become clear that many recently constructed or refurbished residential buildings, particularly taller buildings, are unsafe and require urgent and substantial remedial action.

Grenfell Tower had combustible Aluminium Composite Material (“ACM”) panels which allowed the fire to spread. But it was also the entire external wall system, including the insulation and other materials within the external wall, that was combustible and unsafe. It has now become apparent that many buildings have been built with external wall systems that contain combustible materials and, often, non-existent cavity barriers to stop the spread of fire.

There has been substantial publicity as to the plight of leaseholders facing serious safety issues and hefty service charge bills and a call for Government action to meet all the rectification costs.

But the issue is not limited to residential buildings. It can equally apply to commercial buildings with cladding and there have been particular issues with student accommodation and hotels. And the issue is not limited to cladding or fire safety as it is clear that there has been a far more general failing in relation to defective workmanship, design, and materials.

Response from the UK government

The Government has tried to address the problems being faced by leaseholders and owners of buildings by making available a Building Safety Fund (“BSF”) which includes £3.5 billion to help pay for the cost of remedial works. However, the BSF has been met with substantial criticism as it is considered by many to be insufficient to deal with the large number of affected buildings, the application process is complicated and time consuming and the availability of funds is uncertain and slow in coming.

In addition to the BSF, as part of a longer term strategy, the Government is making changes to the legislation which governs how new buildings are procured, designed and built and then occupied and managed. The Building Safety Act is before parliament at the moment, having undergone a substantial consultation process throughout the property and construction industry. The legislation is expected to come into force by the end of 2021.

What steps should be taken by building owners, purchasers and investors of UK buildings?

It is even more imperative that prospective purchasers and tenants of properties where major works have been undertaken carry out full due diligence on their purchase or letting, especially with older buildings where no warranties may be available and any claim against those responsible is likely to be statute-barred. A claim will ordinarily be statute-barred once six years have elapsed from the breach of contract or when damage first occurred, but it might be 12 years or longer depending on the contract in question and all the circumstances.

Some practical steps that could/should be taken are as follows:

• Obtain a full survey and, where there is cladding consider retaining a specialist façade engineer.
• Make detailed enquiries and obtain all relevant construction documentation and details of available insurance in relation to the works undertaken and materials used. It is particularly important to obtain as-built plans and compare them to the original plans for the building. In some cases it may be appropriate to carry out intrusive surveys of the external wall system to establish what has actually been built and what materials have actually been used.
• Obtain an assignment of all warranties available.
• Establish what certificates, guarantees or reports have been issued and can be relied upon.
• Query/check what tests were undertaken as to products used at the time of construction (such as BS8414 fire safety tests which under the Building Regulations 2010 were required in order for an external wall system which contains combustible materials to be considered compliant with the Regulations).

Andrew is a Partner in our Construction team.

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