Buyer Beware: A Leaseholder’s Overview of the Cladding Scandal

What cost do we put on a human life? It is a question that goes back and forth in my mind every few days. I have never espoused Conservative values before, yet even I have found myself asking how this government could possibly be punishing my partner when he has done everything ‘right’. He has worked hard as a Junior Doctor, he has paid his taxes, he saved for a deposit, and five years later he is staring down the possible barrel of bankruptcy. I catch myself sometimes when I ask this question because it should not matter that he has had a steady job. It should not matter that he pays taxes. Every single life is valuable. Every single person, regardless of their circumstances, deserves to live in a safe environment. And yet, here we are. As I write this, I look out onto a building that is clad in combustible insulation. I write this knowing that thanks to defunct compartmentation, if a fire starts on the other side of the building we will have mere minutes to get out before it could kill us. I write this knowing that we are paying extortionate amounts for a Waking Watch that only has to patrol once every two hours. And I write this knowing that this government, and every one since (and particularly including) Margaret Thatcher’s government, has valued business over human life.

On the morning of the 14th of June 2017, the horror of the fire at Grenfell Tower played out before us on the news. The unimaginable scenes were such that I can almost taste the exact moment when I heard the news, so visceral are the memories. Only one other event has done that in my life- 9/11. On the 29th of June, after an inquiry into the fire was ordered, Theresa May said that the priority would be “to establish the facts of what happened at Grenfell Tower in order to take the necessary action to prevent a similar tragedy from happening again”. Reading that sentence back given what we know now and the glacial speed of progress, it is hard to take. The scale of the crisis that is before us is vast and complicated, and new aspects are added to it all the time. However, I am going to try and lay out the basics here, for my own sake as much as anyone’s. I must stress that I am not an expert and this is a very simplified version of what is happening. I will link to in depth work where I can.

Overview

After the fire at Grenfell Tower it was discovered that hundreds of buildings had profound safety defects that would cost billions of pounds to remediate. The developers are refusing to pay for the costs of the works, the government have set up a Building Safety Fund which falls far short of what is needed, and the freeholders of the buildings are also refusing to pay for the costs. Instead, leaseholders are being charged for the remediation works via service charges, even though they do not own the buildings and were not responsible for the safety defects. The bills run into five or six figures and many leaseholders face bankruptcy.

Pre-Grenfell

The current crisis did not start with Grenfell. It is an accumulation of forty years of deregulation and multiple tragic warnings that were not heeded. In 1973 a fire broke out in the Summerland leisure centre on the Isle of Mann. The fire spread from a kiosk outside of the building to the exterior of the leisure centre which was clad in a material called Galbestos. From there it spread to the transparent acrylic glass sheeting- Oroglass, which covered the rest of the building. Additionally, voids behind the combustible walls acted as chimneys and caused the fire to spread further. Fifty people died. At least four more fires associated with cladding and high-rise buildings were to occur in the UK before the tragedy that befell Grenfell, each with lessons that were not learned.

In 1985 the government under Margaret Thatcher reduced building regulations from 306 pages to just 24. There was just one sentence written about the prevention of fire in relation to external walls. It was as follows:

“The external walls of the buildings shall adequately resist the spread of fire over the walls and from one building to another, having regard to the height, use and position of the building”.

The government released Approved Document B (ADB) alongside the regulations in order to explain how best to meet them. However, there has been and still is much confusion and debate regarding the safety of materials used on external walls. The document uses both ‘Class 0’ and ‘limited combustibility’ as standards by which to meet the regulations. The two standards, however, are very different, with Class 0 much easier to pass. The ongoing debate revolves around whether the document states that cladding must meet Class 0 or limited combustibility, with many people in the industry arguing that regulations permitted Class 0. You can read more about it here.

Therein lies the crux of the problem. The regulations were loose enough that it has allowed for this debate. Meanwhile, buildings with flammable cladding and, it would turn out, many more problems, were built and they now need to be remediated. Someone has to pay to fix them, and while the debate is ongoing between the industry and government, freeholders are refusing to pay and leaseholders are being hit with bills they cannot and should not have to pay. Unfortunately, we have no legal recourse by which to pursue anyone and our only way out is political.

Post- Grenfell

In the days following Grenfell, the government wrote to local authorities, housing associations, and private building owners to ask them to check for Aluminium Composite Material (ACM) cladding.

Over a year later, in October 2018, the government issued an advice note- AN14- which required building owners to check for non-ACM cladding to ensure it was of limited combustibility (material must survive in a 750oC furnace for two hours). This went beyond the building regulations in force when the buildings were constructed. If the buildings did not meet these new requirements, remediation works would need to be carried out. The advice note referred explicitly to buildings over 18m.

In December 2018 the regulations were amended and the use of combustible materials in external walls of buildings over 18m were now banned. In July 2019, Advice Note 22 (AN22) was issued which went further than AN14 by noting that some forms of insulation and High Pressure Laminate (HPL) cladding were unlikely to resist the spread of fire and thus needed to be checked for. It was not until January 2020 that the advice note was amended to include buildings of any height. You can read more about the advice notes here.

The important thing to note about these advice notes is that they have been applied retrospectively. Consequently, many buildings that met regulations when they were built now no longer do. However, as the warranty has passed for many of these buildings there is no legal way to make the industry pay for the costs. Robert Jenrick, the Secretary of State for Housing, Communities and Local Government has often repeated the words ‘Caveat Emptor’, which means buyer beware. By repeating these words he is insinuating that leaseholders are responsible for the costs because they should have foreseen these problems and, therefore, have known bills of this size would be coming. However, it does not apply in this case as the government retrospectively changed the laws. Many of the buildings met regulations at the time of construction. Furthermore, the intrusive tests that are needed to find out if there are safety defects are not routinely carried out and go far beyond what would be expected of any would-be buyers.

EWS-1 Form

In response to the advice notes, the Royal Institute of Chartered Surveyors developed the EWS-1 form. A particular type of surveyor now had to inspect a building’s external wall and, if it were deemed safe, they would sign it off. This is the point that many leaseholders became aware of the problem- potential buyers were finding themselves unable to obtain a mortgage as the building did not have an EWS-1 form. Without the form properties are valued at £0.

The EWS-1 is a form that shows the external wall system has been assessed as safe. Buildings fall into two categories A and B.

Category A: Buildings have external wall materials that are unlikely to be combustible. Category A falls into three sub-categories. A1 and A2 are sufficient for a mortgage to be granted. A3 shows that remedial works will be needed on attachments to the outside of the building, e.g. balconies.

Category B: Combustible materials are present. B1 shows that the fire risk is low and mortgages can be granted. B2 shows that the buildings do not have an adequate standard of fire safety and remediation works will have to be carried out before the building can be signed off as safe.

There have been many problems with this form. Firstly, the process is slow and expensive as there are only a certain number of adequately qualified surveyors to carry out the inspections. Additionally, the government has stated that low-rise buildings (below 18m) do not need the form. However, in reality, leaseholders have found that lenders have still asked to see the form in order to grant buyers a mortgage.

Building Safety Fund

In order to explain who is liable to pay, it may be first useful to define a few terms that will come up frequently.

Freeholder: the owner of a particular building or piece of land. The landlord of the leaseholder. They often hire a management agency to act on their behalf.

Leaseholder: The holding of property by lease. Leaseholders pay the freeholder for the right to live in or use the property. They have exclusive possession of the land they are leasing for the term of the contract but they do not own the building. They are obliged to pay ground rent and service charges but have no rights to say how the building is run.

Service Charge: a charge made for maintenance on a property which has been leased. The charge will usually cover maintenance and repair work of communal areas.

The government have set up a Building Safety Fund of £5.1 billion. £3.1 billion will be paid by the government, and £2 billion will be collected from a tax on the UK residential property development sector over the next ten years. On the face of it, it sounds good. £5.1 billion is a lot of money. The government knows this and so Robert Jenrick has been repeating it at every available opportunity. However, they have made no attempt to assess how many buildings will need to be remediated and, consequently, they have no idea how much money will actually be needed to fix the problem. It has been estimated that it will cost as much as £15 billion to remediate the buildings (although some people have put it as high as £50 billion).

The Building Safety Fund has other problems too. Firstly, the fund only covers removal of the external cladding system. There are a huge range of other issues that will need remediation too, such as: defunct compartmentation, missing fire breaks, combustible balconies, and inadequate fire doors, among others. However, a clause has been added to the funding agreement whereby leaseholders will need to prove that they have sufficient funding to complete all the works before the government agrees to release the funds for the cladding remediation. The bills for the other issues often run into the tens of thousands per leaseholder.

Secondly, the fund does not cover buildings that are below 18m. For buildings that are between 11m and 18m the government has promised a loan scheme whereby the leaseholder will never have to pay more than £50 a month. However, this scheme will take a long time to set up with details for the loan scheme yet to be announced. Meanwhile, huge bills are arriving now and will need to be paid within 28 days. Additionally, the fund will only cover the cladding system and leaseholders will still have to pay to fix any other remediation works. Furthermore, the loan will be attached to the lease for decades and so it has the potential to reduce the value of the property. The loan also does not cover the costs of Waking Watch and rising insurance. In reality, leaseholders will be paying far more than £50 a month. For buildings below 11m there is no funding and there are no loans. They will have to meet the full costs of remediation works themselves.

The consequence of all of this is that leaseholders are receiving huge bills that need to be paid within 28 days. The bills run into the tens of thousands of pounds, with some as high as £178,000. It is estimated that up to 11 million people are caught up in the cladding scandal. Potentially, hundreds of thousands of people now face bankruptcy and homelessness for something that is not their fault and for something that they never could have foreseen. For those that work in financial services, bankruptcy will also mean the end of their career. If even one leaseholder goes bankrupt in the building the remediation works cannot be carried out as the funding will fall short of what is needed. If the funds are met remediation work will take years. In the meantime, the buildings are not safe, and leaseholders cannot sell. How many more fires will break out in the intervening years?

Waking Watch, Insurance, and Shared Ownership

Waking Watch was set up in the wake of the Grenfell Tower for buildings that had the same cladding. However, in 2020 it was revealed by Inside Housing that there are as many as 420 buildings that require a Waking Watch. It was defined in the National Fire Chiefs Council Guidance for Simultaneous Evacuation as follows:

“A system whereby suitably trained persons continually patrol all floors and the exterior perimeter of the building in order to detect a fire, raise the alarm, and carry out the role of evacuation management”.

In the event of a fire, the suitably trained persons sound an airhorn or knock on doors in order to raise the alarm. It has been designed as a temporary measure in order to bridge the gap before a common alarm system is fitted. The alarm itself is designed to be a temporary measure and will remain in place until the remediation works are completed, after which it will be removed and the building will go back to a stay-put policy. The costs of these waking watches and alarm systems once again fall on leaseholders. The average cost of Waking Watch per leaseholder in England is £331 per month. The government has set up a fund of £30 million to cover the costs of the common alarm systems but it falls far short of what is needed.

Alongside the costs of the remediation works and Waking Watch, many leaseholders have found that their building’s insurance has risen substantially, with one building seeing their insurance rise by 1148% in two years. Once again the costs fall on leaseholders.

Shared Ownership is a scheme which makes it easier for first-time buyers to get on the property ladder. The buyers purchase a share of the property and pay rent on the remaining share. However, Which has discovered that many shared ownership buyers, despite not owning 100% of the property, are being charged 100% of the costs of remediation works.

Fire Safety Act

In February, March, and April of this year, the House of Lords, Labour, and some Conservative backbenchers sought to amend the Fire Safety Bill with clauses to protect leaseholders from the cost of remediation works. The McPartland-Smith amendment (named after the two Conservative MPs who created it) was voted down by the Conservatives on at least three occasions, their reasoning being that it would delay the implementation of the bill. After several rounds of Parliamentary ‘ping-pong’, whereby the bill was passed between the House of Commons and House of Lords, the bill was eventually made law on 29th of April- without the amendments. It is now called the Fire Safety Act 2021. A further amendment which was voted down by Conservative MPs was a proposal to force the government to implement the recommendations from Phase One of the Grenfell inquiry. This included: forcing building owners to communicate what materials are used in external wall systems to fire brigades, monthly inspections of lifts and annual inspections of fire doors.

Now

So where do we stand now? Legally we have no way of fighting against the inevitable bills. The government has stated that they expect freeholders to cover the costs of the remediation works but the majority of them are refusing to. Instead, the costs are being passed onto leaseholders via service charges. We are relying solely on the government to change its mind. We know another option is possible, however, as two states in Australia have shown us. We have already seen bankruptcies happen, and the mental health of leaseholders is worsening as the reality hits home. We have also seen fires break out in multiple buildings in the four years since Grenfell. However, the End Our Cladding Scandal campaign are fighting back with a National Day of Developer Protests on the 5th of June and a Leaseholders Together rally in Central London on the 15th of July. It can feel like we are facing an insurmountable battle and it can take its toll. The End Our Cladding Scandal campaign has set up a support page with information about mental health support, leasehold advice, and financial advice and support. You can find it here.

My View

My partner and I are among thousands of couples that wish to sell our flat and move on up the housing ladder in order to find somewhere with a garden and space to start a family. We do not yet know if we will be able to rent this property out and rent another property elsewhere. If we cannot, we will be stuck in an apartment that no longer feels like home, that is unsafe and is valued at £0. We are awaiting our bill.

It comes in waves, the anger. It has to. It is not sustainable to be this angry all of the time. It is there though, bubbling under the surface until the exhaustion lessens or the sheer magnitude of the situation takes precedence again. The fear can be all-consuming too. Time seems to stop when a fire alarm sounds in your building as you wait to see if you need to run. Your heart races every time you hear fire engines on the streets surrounding the building. Some days you pack a bag to have at the front door in case you need to leave in a hurry, other days you empty it again because you feel like you are over-reacting.

Sometimes you have to take a step back to protect your mental health, and that’s ok. It’s ok because you know someone else will step forward. We are a community, after all. There are other scandals that come to light from time to time. Most recently we heard about the Post Office scandal. What they went through was heart-breaking and should never have been allowed to happen, and it seems absurd that something of that magnitude went under-reported for so long. They did not know, however, that there were other people affected by the scandal for a long time. This is our one silver living. We know there are millions of us affected by this and we know we will all keep fighting for as long as it takes. We have to.

If you were looking at the Cladding Scandal from the outside, it would be easy to think it was all about numbers; the numbers of people affected, the numbers of buildings that need remediation works, or the five or six figure bills leaseholders are receiving every day. Indeed, there are some days when all I can think about are the numbers. How many figures does the bill have to hit before the inevitable happens? On these days I need to remind myself that there is so much more that we are fighting for. It is something the government underestimates, I think. We are not just fighting for ourselves. We are fighting for each other and we are fighting to ensure another tragedy like Grenfell is not allowed to happen. It is that conviction that lies at the centre of the community and it is that conviction that will keep us going.

To all other leaseholders: please remember that you are not in this alone. We must hold on and we must keep fighting.

To everyone else: Beware this government. They could come after you next.