9. Annex E: Remediation enforcement considerations in complex scenarios
This annex outlines complex enforcement scenarios that regulators may have to navigate, with advice on how to approach these cases.
This annex outlines complex enforcement scenarios that regulators may have to navigate, with advice on how to approach these cases. These scenarios largely relate to buildings with complex ownership structures but also include buildings stalling in the government’s funding schemes and buildings that have been decanted.
For considerations when enforcing at:
- leaseholder-managed buildings, see 9.1
- leaseholder-owned buildings, see 9.2
- developer remediation contract buildings, see 9.3
- buildings with unsafe cladding that are stalling in the Government’s programmes, see 9.4
- buildings that have entered into insolvency proceedings, see 9.5
- buildings that have been decanted, see 9.5.4
This guidance is intended to support consistent and effective decision-making and is not binding. Regulators should consider the individual circumstances in their area and continue to be guided by their statutory duties and guidance, the principles of the Regulators’ Code and their own enforcement policies.
Multi-occupied residential buildings will have a designated party, usually the landlord, who is responsible for the maintenance, management and repair of the building’s structure and common parts, and the provision of services. The landlord will have the right to recover the costs of providing these services through the service charge.
In certain circumstances, leaseholders can take on the management obligations for the building by setting up a right to manage company (RTM). At some buildings, there may be a resident management company (RMC). The RMC is likely to have all the obligations which would rest on the landlord, for providing services and carrying out repairs and maintenance, and will have the right to recover the costs of carrying out these services through the service charge. Usually, all the leaseholders will be shareholders in the RMC.
Multiple factors may cause remediation to stall at leaseholder-managed buildings, including:
- An RTM or RMC’s lack of knowledge of the remediation process.
- A landlord failing to pay the RTM or RMC the amount they are liable for under the Building Safety Act 2022 (see 9.1.1). Without this funding, the RMC or RTM may not have sufficient funds to carry out the remedial work required.
9.1.1 Financial liabilities at leaseholder-managed buildings
The Building Safety Act 2022 introduced financial protections for the majority of leaseholders in buildings over 11 metres in height or with at least five storeys. These protections mean certain leaseholders do not have to pay for some remediation works through the service charge. The Act does not change RTMs’ or RMCs’ obligations. However, it does change their right to recover most remediation costs from leaseholders through the service charge. This means RTMs and RMCs will need to source the funds for remediation through other means.
To obtain the funds to meet cladding remediation costs, RTMs and RMCs will need to apply for government grant funding they are eligible for (see 6.6).
To obtain the funds for the remediation of non-cladding defects (where the developer is not remediating), RTMs and RMCs will need to:
- Charge leaseholders the limited amount through the service charge, that is allowed under the Building Safety Act 2022’s leaseholder protections (see 6.6).
- Serve a notice of liability on their landlord. Any costs which cannot be recovered through the service charge or government funding must be provided by landlords. The notice of liability sets out the amount the landlord is liable to pay for remediation works. Landlords must then pay the RTM or RMC the specified amount.
See 9.1.2 for more information on how RTMs and RMCs can obtain the funds to cover the cost of remediation works.
9.1.2 Enforcement considerations at leaseholder-managed buildings
When enforcing at leaseholder-managed buildings, regulators may wish to consider who and what is blocking remediation.
Where an RTM or RMC is failing to carry out remedial work despite having access to the necessary programme (i.e., all costs are covered by government funding schemes and/or have been provided by the landlord), regulators may wish to consider:
- Is an RTM or RMC failing to use the programme due to a lack of knowledge about the process?
- Could non-statutory regulatory action to educate RTMs and RMCs about the process and their responsibilities – in line with the regulator’s code – support them to progress remediation works?
or
- Does the RTM or RMC appear to be acting in bad faith? Are they demonstrating avoidance behaviours and unreasonably failing to use the funding provided to carry out remedial works?
- Could enforcement action against the RTMs or RMCs leaseholders be appropriate and proportionate, to compel them to remediate the building (and consequently, use the funding provided to this effect)?
Alternatively, in cases where the RTM or RMC wishes to progress remediation but is being blocked by another party (e.g. the landlord is refusing to allow access or is refusing to provide funding they are liable for), regulators may wish to consider:
- Which party is responsible for raising or providing the funds? For this, regulators may seek to understand:
- Has the RTM or RMC applied for eligible government grant funding? If they haven’t, the RTM or RMC will need to do this.
- Has the RTM or RMC served a notice of liability on their landlord, setting out the amount they must pay for remediation works? If they haven’t, the RTM or RMC will need to do this.
- Has the landlord paid the RTM or RMC the amount set out in the notification of liability?
- Which regulators’ enforcement powers might allow them to effectively target the party delaying remediation (e.g., the party not providing the funding they are liable for)? This could include the lead regulator considering:
- serving a statutory notice under their respective regime, or
- applying for a remediation contribution order under the Building Safety Act 2022. Remediation contribution orders can be used to enforce a landlord’s liability for remediation costs and compel them to provide a specified amount to the relevant RTM or RMC by a set time.
9.1.3 Considerations for local authorities when considering serving an Improvement Notice at leaseholder-managed buildings
If a local authority decides the most appropriate action to unblock a remediation delay at a leaseholder-managed building is serving an improvement notice, they may wish to refer to Schedule 1 to the Housing Act 2004. This schedule sets out whom an improvement notice can be served on in relation to premises type.
Improvement notices issued for the common parts of a flat block must be served on the owner of the premises:
- RMCs and RTMs - as a company - do not typically fall within the Housing Act 2004’s definition of owner (section 262(7) of the Housing Act 2004 and Paragraph 4(3) to Schedule 1).
- Freeholders and an RMC’s or RTM’s individual leaseholders will typically fall within the Act’s definition of owner and could be valid recipients of the notice.
- To determine whether it is more appropriate to serve a notice on the freeholder or an RMC’s or RTM’s leaseholders, local authorities will need to decide who they believe ought to carry out the specified work(s). This may include giving appropriate consideration to which party appears to be delaying or blocking remediation, and to the RMC’s or RTM’s ability to raise the necessary funds (especially in light of the leaseholder protections).
- Local authorities may wish to be clear in any notices served on an RMC’s or RTM’s leaseholders, that they have a collective responsibility to carry out the works.
Leaseholder-owned buildings are buildings where the leaseholders collectively own their property’s freehold. The leaseholders will typically assume the management obligations for the building, and can therefore be subject to enforcement action.
The term leaseholder-owned building refers to a different scenario than leaseholder-managed buildings. At leaseholder-managed buildings (see 9.1), the leaseholders may have the management obligations and right to carry out works at the building but they will not have purchased the freehold. Consequently, at leaseholder-managed buildings, the leaseholders will still be covered by the Building Safety Act 2022’s leaseholder protections.
9.2.1 Financial liabilities at leaseholder-owned buildings
The key consideration for regulators at leaseholder-owned buildings, is that leaseholder-owned buildings are not covered by the financial protections under the Building Safety Act 2022.
At leaseholder-owned buildings, the leaseholders will still be able to access and apply for eligible government funding to cover the cost of cladding remediation (see Annex B for information on the government funding programmes). However, the leaseholders will be liable for non-cladding funding not covered by government grants.
9.2.2 Enforcement considerations
Where regulators are concerned about remediation progress at leaseholder-owned buildings, they may wish to consider:
- How much time has lapsed since the leaseholders bought the freehold? Regulators should also be aware that these leaseholders have taken on complex building safety responsibilities and costs, that it may take them time to meet.
- Do the leaseholders fully understand their building safety responsibility? Would non-statutory regulatory action (see 3.4.1) to educate leaseholders and support them to comply with their building safety responsibilities be appropriate and proportionate – in line with the Regulators’ Code?
- Are the leaseholders aware of and/or have they applied for the eligible government funding? If not, they will need to do so.
- Do the leaseholders have access to the funds they need to cover the costs of remediating identified defects? If not, they will need to take steps to source this funding.
At some leaseholder-owned buildings, it may be appropriate for the regulator to take statutory regulatory action. This may be where:
- remedial work is unacceptably and/or egregiously delayed,
- the regulator has inspected and, due to the non-compliance identified, has a statutory duty to take statutory action (e.g., a local authority has inspected and identified a category 1 hazard).
Example:
- A local authority identified a category 1 hazard relating to non-cladding defects (e.g., defects not covered by government funding) at a leaseholder-owned building.
- The local authority decides to issue a hazard awareness notice under the Housing Act 2004 to discharge their duty to enforce, and then takes non-statutory action to educate the leaseholders on their building safety responsibilities.
- Following the notice, the leaseholders fail to take reasonable steps to progress remediation, despite the local authorities attempts at engagement.
- The local authority decides to escalate their enforcement action, and considers issuing an improvement notice or use their powers under Part 5 of the Building Safety Act 2022 against the party delaying remediation.
Regulators should note that under the Building Safety Act 2022, remediation orders cannot be applied for in relation to leaseholder-owned buildings. However, remediation contribution orders can be applied for the benefit of leaseholder-owned buildings but not to be paid by the leasehold owners of such a building. This is provided for under Regulations 2 and 4 of The Building Safety (Leaseholder Protections) (England) Regulations 2022.
A number of major developers have entered into the government’s developer remediation contract, and committed to remediate buildings they developed or refurbished between 5 April 1992 and 4 April 2022.
The government expects developers to comply with the contract. However, remediation of buildings covered by the contract may be delayed for various reasons, including but not limited to:
- the developer not complying with their contractual obligations,
- the landlord not providing the developer with access to the building, and/or
- the landlord and developer failing to reach agreement on the works contract.
Regulators’ statutory duties remain unchanged in respect of developer contract buildings under their respective regimes.
Local authorities and fire and rescue authorities should continue to monitor remediation progress at developer contract buildings in their area. Regulators can raise concerns with the department if they are concerned about the pace of remediation at a developer contract building.
9.3.1 Data sharing
To support regulators to monitor remediation progress and identify stalling cases, the department provides local authorities and fire and rescue authorities with a quarterly data release. This includes a list of buildings covered by the developer contract with progress updates.
The department also publishes quarterly data on developers’ progress at aggregate level as part of the wider Building Safety Remediation data release, which regulators can access for intelligence gathering.
9.3.2 concerns about progress at developer remediation buildings
Where regulators have specific concerns about the pace of remediation at a developer contract building, they should raise these concerns with the department.
The department can cross-reference with data centrally held and potentially provide regulators with additional information about the building’s progress. The department can also help regulators assess whether action is required and if so, what action may be the most appropriate approach. This will typically depend on the party that is causing the delay.
Where developers are causing the delay:
- The department will make sure developers comply with the contract and hold them to account when they do not.
- The Responsible Actors’ Scheme (RAS) provides for planning and building control prohibitions that impose commercial consequences on any developer who is eligible for the scheme but chooses not to join, or later has their membership revoked for failing to comply with the scheme’s membership conditions. This includes signing and complying with the developer remediation contract.
Where a landlord is preventing the developer from remediating, regulatory action by a regulator against the landlord may be appropriate. It is recommended that regulators discuss with the department prior to taking such action in non-emergency cases, to make sure parties are confident this will increase the pace of remediation.
If a regulator believes there is imminent threat to life at a developer remediation contract building, they should proceed as they would if the building was not subject to the developer remediation contract and keep the department informed.
9.3.3 concerns about prioritisation
As developers are prioritising their remediation portfolio, regulators may need to manage their expectations around how quickly developers will remediate buildings in their area.
Developers are required to prepare methodology statements at the outset of the contract (and to keep them under review) setting out how they are prioritising their buildings for assessment and remediation.
Developers share quarterly data reports with the department, showing how remediation is progressing across their portfolio. Regulators may wish to contact the department if they have concerns about how developers are prioritising specific buildings in their area for remediation.
As set out in Annex B, the government has made funding available to pay for cladding system repairs and remediation through the ACM Cladding Remediation Fund, the Building Safety Fund and the Cladding Safety Scheme.
However, some landlords may unreasonably stall in these programmes and delay vital remedial work. For example, a landlord may unreasonably delay drawing up remediation plans for funding approval, or refuse to sign the grant funding agreement which allows the funding to be released.
9.4.1 Timescales and delays
The timeframe for a building to reasonably move through the government funding process will vary. Timeframes will typically depend on the complexity of the remediation works as more complex projects are likely to take longer. Industry capacity may also affect the pace of remediation.
The department has published Building Safety Fund process guidance which includes indicative timelines for each stage in the application process. The indicative timelines are provided to help regulators and leaseholders determine whether a building is progressing at a reasonable pace.
The indicative timelines are:
| Application stage | Indicative timescale |
|---|---|
| 1. Making an application | Applications are encouraged as early as possible once fund applications have opened |
| 2. Eligibility checks | 3 months |
| 3. Pre-tender support | 2 months |
| 4. Full funding application | 12 months |
| 5. Checking building costs and agreeing funds | 3 months |
| Building control applications – where applicable | |
| 6. Work on site | 12 months |
| 7. Work completion | 6 months |
9.4.2 Monitoring progress and taking action
Where regulators believe a delay is unreasonable and are considering regulatory action, they may wish to consider:
- Can the issue causing the delay be resolved through non-statutory regulatory action? (see 3.4.1) For example, by educating the landlord on their responsibilities for building safety.
- How egregious is the delay? Do the reasons provided for the delay reasonably explain why the building’s progress exceeds the Building Safety Fund’s indicative timescales?
- Is the landlord demonstrating unacceptable avoidance behaviours (see 3.3.3), which are causing and/or contributing to the delay?
- Would regulatory action – such as serving a statutory notice or applying for a remediation order – be appropriate or proportionate to compel timely remediation? Regulatory action to require the landlord to remediate by a set date, may – by extension – encourage the landlord to move through the fund’s application process at pace to release the funding needed for remediation. Regulators may wish to consider the principles in Annex D to determine the most effective and appropriate action.
9.5.1 Background on insolvency proceedings
There are specific sensitivities, pressures and challenges for regulators to consider where buildings have entered into insolvency proceedings.
Insolvency in this context is where a landlord (which might be a company) cannot pay its debts. This could mean that the company cannot pay its bills when they become due, or that it has more liabilities than assets on its balance sheet. The insolvent company will normally enter into insolvency proceedings under insolvency law or be placed into administration.
In either case, control of the company (outside of ‘voluntary arrangements’) normally passes to a licensed insolvency practitioner, whose responsibility is to reach an agreement with creditors about the companies’ debts and either take steps to restore the company’s viability or begin the process of winding up its operations.
Insolvent companies who lack the resources to pay their existing creditors may (depending on the scale of any remediation required and funds available to the Insolvency Practitioner) be unable to meet the costs of remediation. Under Insolvency Law, it will not always be possible (depending on a number of factors including the type of proceedings and the amount of funding available to any administration) for remediation works to be carried out in insolvency. Alternatively, in some cases (such as in a well-funded administration) the administrator may seek to remediate the building to sell it on (with residents normally having a right to first refusal), so the proceeds can be returned to creditors.
9.5.2 enforcement considerations
In an insolvency scenario, the administrator or insolvency practitioner will likely be balancing multiple interests and priorities. For example, an administrator may be seeking to keep a Managing Agent employed so that people can stay safely in their homes – i.e. they will want to make funds last in the administration whilst they keep the building running and/or apply for funds to facilitate a sale before liquidation. This may directly impact the speed at which remedial works can be carried out before a sale.
In this scenario, regulators should be aware that an enforcement notice may crystalise liabilities for insolvency practitioners and may lead to buildings moving from insolvency to enforced liquidation. This will normally include the freehold of the building being ‘disclaimed’ and escheating to the Crown under residual law – a situation which may leave residents and leaseholders in a very difficult position.
Senior-level contact with the building’s representatives (e.g., the administrator(s), insolvency practitioner) is recommended in an insolvency scenario. Regulators may wish to establish a dialogue with the administrator and/or insolvency practitioners and work out suitable deadlines on remediation action plans with them.
In deciding deadlines in the way outlined above, regulators will wish to satisfy themselves that the administrator/insolvency practitioner has introduced and/or maintained any necessary temporary or interim measures.
The plan for remedial work will likely need to account for the specific situation and challenges at the building. If administrators fail to engage and work productively with regulators, regulators may wish to consider what regulatory action might be proportionate to make sure all parties are taking appropriate action to remediate the building without unreasonable delay. Regulators may wish to take into account the guidance at 3.3.4 in coming to a decision on enforcement.
Where the building (and/or the systems in place to ensure safety) are in a condition that would normally lead to regulators considering immediate enforcement action (see 3.4.4) they should not defer, delay or pause that action because a building owner is in administration (or the duty holders threaten to place the building into administration if action is taken).
9.5.3 insolvency notification
Under section 125A of Part 5 of the Building Safety Act 2022, insolvency practitioners are required to notify regulators, and provide them with certain information, if they are appointed in relation to a Responsible Person for a relevant building or a higher-risk building.
The term Responsible Person is used in both the Fire Safety Order and section 125A of the Building Safety Act 2022, but has different meanings under the different legislation. Responsible Person is defined in section 125A of the Building Safety Act 2022 as:
- In the case of a building in scope of the ‘higher-risk building’ regime (see 4.3), the Responsible Person is the person that is the Accountable Person for the building under section 72 of the Building Safety Act 2022.
- In the case of a relevant building (section 117 of the Building Safety Act 2022) that is not a higher-risk building, the Responsible Person is the person that would have been the Accountable Person for the building if section 72 of the Act applied to that building.
The insolvency notification duty makes sure that local authorities and fire and rescue authorities are made aware if a Responsible Person at a building over 11 metres in height or with at least 5 storeys in their area goes insolvent. Where the building is a higher-risk building (i.e., it is over 18 metres or at least 7 storeys in height) the duty makes sure that the Building Safety Regulator will also be made aware of the insolvency.
The duty on insolvency practitioners to notify relevant regulators should support regulators to exercise their building safety functions at their discretion and from an informed perspective. This may include the regulator putting plans in place to work with other regulators in their area or with central government should this be needed. It will also allow the Building Safety Regulator to intervene promptly and in an informed way in relation to 18m+ buildings if the Accountable Person has become insolvent and is not complying with its duties under the Building Safety Act 2022.
This duty does not introduce any additional mechanism for regulators to enforce this notification. There are existing provisions within their regulatory framework that hold insolvency practitioners accountable. Insolvency practitioners are regulated by one of four recognised professional bodies and are also subject to a code of ethics, which includes the fundamental principle of ‘professional behaviour’ and complying with relevant laws and regulations. Legal notice requirements are expected to be adhered to by insolvency practitioners.
9.5.4 Regulatory action following a decant
A decant is the full or partial evacuation of a property. Decants can occur for a number of reasons, such as identification of serious fire safety or structural defects through inspections. During a decant, the government expects landlords to provide and pay for suitable alternative accommodation until residents can return home. Decants can be triggered by landlords, which in this guidance is referred to as a voluntary decant.
Local authorities and fire and rescue authorities also have powers to trigger a decant if a building is not safe for occupation. Local authorities and fire and rescue authorities can issue a prohibition order (see 5.1.2) or prohibition notice (see 5.2.2) respectively, to require the full or partial evacuation of a property, or restrictions in its use.
Once a building has been decanted and is no longer occupied, the building needs to be made safe so residents can return to their homes.
Regulators should take action to make sure the building is fixed without delay and can be re-occupied. Prohibiting full or partial access to a building is not an acceptable end point to regulatory action, due to the impact on residents’ livelihood.
Regulators have legal powers to take appropriate action to make sure the building is made safe and can be reoccupied. This could involve engagement with the landlord to make sure take they take remedial action to make the building sustainably safe for occupation. If a landlord fails to do so, further statutory action to compel permanent remediation may be necessary.
In some cases, it may be appropriate for the relevant regulator to apply to the First-tier Tribunal for a remediation order under the Building Safety Act 2022, as this power applies to unoccupied relevant buildings. Local authorities also have powers under the Housing Act 2004 to compel action to make a building safe for re-occupation.