The Grenfell Tower fire exposed substantial failings in the construction industry and how it has been regulated. A public inquiry into the disaster is ongoing, but it is apparent there have been serious issues at every level. It is now thought that the "Cladding Scandal" affects some 4 million people nationwide and that only a small fraction of the affected buildings have been completely remediated to date, some four years later. A recent fire at a residential block of flats at New Providence Wharf in London in May 2021, which spread quickly and without warning, served as a stark reminder – if one were needed – that the crisis is far from over.
- Grenfell Tower was built with Aluminium Composite Material ("ACM") panels, as well as other flammable material in its external wall system. The building also had inadequate fire cavity barriers. It was these problems which allowed the fire to spread so quickly.
- Whilst the Government has set up a Building Safety Fund, this only applies to buildings over 18 metres high and, despite being increased to £3.5 billion, it is thought that the fund will be substantially over-subscribed given the scale of the problem. The £30 million Waking Watch Relief Fund, which has also been introduced, is to help finance interim measures whilst buildings are remediated, such as communal fire alarm systems, but it is not going to cure the underlying problem, nor provide any funding for the vast majority affected.
- With the Building Safety Bill set to require flat -owners to fund, by way of additional 'fire safety' service charges, the substantial remediation works to make their buildings safe (where no grant is available or no third party can be held responsible), many flat-owners are living in flats that cannot currently be sold whilst also having to contribute towards increasingly high, and uncertain, maintenance and remedial works costs through their service charge.
- In addition, whilst the necessary remedial works are being delayed due to funding or other issues, flat-owners are often having to meet the substantial costs of waking watch patrols and higher insurance premiums and management charges up front, regardless of whether any funding might be available in the future, because their leases allow building owners to pass these costs through the service charge mechanism of their leases.
- To add to the problem, the extent of remedial works required is often unclear requiring expensive expert investigation. Reliance by purchasers and building owners on External Wall Surveys (and resulting EWS1 form) is also risky, not only because their purpose is to inform usually risk-averse lenders, but because if the EWS1 proves incorrect, as has happened in various recent reported cases where the EWS1 has been downgraded after further investigations, remedial and interim measures costs are likely to be incurred unnecessarily.
What is being done to solve the Cladding Scandal?
- The Government and property industry generally are taking steps to address the cladding crisis and there are signs of progress. Data released by the Building Safety Programme in May 2021 suggested that 92% (433) of all identified high-rise residential and publicly owned buildings in England had either completed or started remediation work to remove and replace unsafe ACM cladding.
- Nevertheless, many leaseholders still need assistance with cladding related issues.
How Forsters can assist
Our Construction and Property Litigation teams have developed expertise and have in-depth knowledge in this area and the broader impact that the Cladding Scandal is having on the Real Estate sector. Our experience allows us to provide tailored, pragmatic and commercially focused advice and solutions to enable our clients to achieve their objectives, including the procurement of any necessary remedial works and the recovery of losses from those responsible for designing and constructing the building. Our clients in this sector include private individuals, corporate occupiers, real estate funds, property developers and investors, family offices and international property companies.
We can assist in providing strategic and legal advice in relation to:
- The coordination of instructions, funding and process for flat owners, including participations agreements.
- Review of the current position and remedial/interim measures proposals, to include assessment of lease terms and the relevant legislation.
- Analysis of the cladding and external wall systems on buildings in the context of the previous Building Regulations and their updated versions, with reference also to the MHCLG Advice Notes and expert reports.
- The engagement of experts (façade consultants, architects, fire consultants) and arrangements in relation to the EWS1 certificate to include review of the same and advice on the procurement of remedial works.
- Ongoing fire safety obligations, before, during and after completion of remedial works (such as waking watches).
- Construction contracts, warranties (including NHBC) and of the leases for the building (including under service charges) to identify who is responsible and how the cost of remediation will be paid, as well as considering the position in tort to determine whether the developer or original construction team is liable in negligence.
- Contracts and appointments for remedial works, to ensure that the client’s position is protected and that the liquidity of the asset is secure.
- The position under statute, such as the Defective Premises Act 1972, to ascertain whether the client has any statutory rights, and the relevant implications of the Fire Safety Act 2021 and the Building Safety Bill.
- Limitation issues for any claims and arrangements, if necessary, for a standstill agreement with potential defendants.
- Review and assistance with applications to the Government funds.
- Pursuing the culpable parties for damages through negotiation/settlement and/or proceedings at Court or the First-tier Tribunal.
- Service charge challenges in the Court and/or First-tier Tribunal.
Well, not enough and not fast enough. Whilst the additional £3.5bn in funding represents a much need injection of cash, it misses the mark in many respects.
Podcast host, Miri Stickland, talks to Construction partner Andrew Parker, associate Dan Cudlipp and Property Litigation associate Sarah Heatley about the findings and recommendations so far from the ongoing Grenfell inquiry, new legislation coming forward in the form of the Building Safety Bill, practical issues being encountered on sales and refinancings of high-rise residential units and what options may be available to cover the costs of any remediation works required..
- The Building Safety Bill
- Ryan Didcock and Sarah Heatley write for the Property Law Journal on the cladding crisis
- Cladding fund papers over residents’ concerns: Andrew Parker writes for The Times
- Leaseholders and cladding: Sarah Heatley writes for Property Reporter
- Defective Cladding - Commercial purchasers/building owners need to beware
- Defective Cladding / Fire Protection - Residential flatowners need to act fast
- The Building Safety Bill and beyond: Emily Holdstock writes for Property Law Journal