“Planning Powers” A Pawn In Unsafe Cladding Negotiation

It’s a scandal that leaseholders, through no fault of their own, have been exposed to potentially massive liabilities in relation to building defects for which obviously they were in no way responsible.

Isn’t it obvious that where buildings have been constructed unsafely, in breach of legal standards at the time, then those responsible for that work should be liable (with speedy resolution of that issue and gap funding for works in the interim), but that where the work was done to legal standards at the time we as taxpayers should pick up that burden?

In terms of arriving at a solution, has Michael Gove’s 10 January “developers must pay” announcement made things worse or will it prove to be a turning point?

We’re all guilty of swimming along in our separate lanes. I’m a planning lawyer, not a construction lawyer, property litigator or tax lawyer. But I wanted to understand the basics of what exactly is happening here, particularly since the Secretary of State was reported as threatening to use the planning system to make life more difficult for developers if they don’t agree a “fully funded plan of action”.

Since February 2021, we have known that the Residential Property Developer Tax will apply from 1 April 2022 in relation to residential property development recognised in accounting periods ending on or after that date. It will apply to companies or groups of companies undertaking UK residential property development with annual profits in excess of £25 million and is a new 4% tax on profits they make on UK residential property development. As set out in HMRC’s 27 October 2021 policy paper, “the tax forms part of the government’s Building Safety Package aiming to bring an end to unsafe cladding, provide reassurance to homeowners and support confidence in the housing market. Given the significant costs associated with the removal of unsafe cladding, the government believes it is right to seek a fair contribution from the largest developers in the residential property development sector to help fund it.” The Government’s aim is to raise £2bn of revenue over a ten year period.

We have also known that the Building Safety Bill is currently going through the House of Lords. Clause 57 of the Bill would enable the Secretary of State to impose a building safety levy “for the purpose of meeting any building safety expenditure”. As explained in a November 2021 DLUHC building safety levy factsheet:

“This is a new levy on developers. In addition to the new Residential Property Developer Tax (which will tax the profits of larger developers for at least 10 years), the levy will contribute towards fixing historical fire safety defects, including unsafe cladding.

We will establish three regulatory “Gateways” at key stages in design and construction, and introduce new requirements during construction, that will apply to higher-risk buildings:

· Planning Gateway one – at the planning application stage

· Gateway two – before building work starts

· Gateway three – when building work is completed

These are stop/go decision points that must be passed before a development can proceed to the next stage, strengthening regulatory oversight of design and construction. At Gateway two, construction cannot begin until the Building Safety Regulator approves the building control application.

There will be sanctions for failure to pay the levy which will be defined in regulations. This will result in the Gateway two application not being approved by the Building Safety Regulator.”

The levy will apply to developments within scope of the Gateway 2 regulatory process, unless otherwise excluded. That means residential buildings or care homes over 18m or 7 storeys – but subject to exclusions, which we are consulting on.”

Consultation has been carried out as to the design of the levy but we have been waiting for the Government’s response and the quantum of the levy has not yet been determined.

The Secretary of State has been faced with the dilemma of how to relieve leaseholders from their unjustified burden at as little cost to the public purse as possible, presumably recognising that the building safety levy is not going to be able to achieve anything like what is needed .

It was revealed via a 7 January 2022 tweet from the BBC’s Lewis Goodall that Michael Gove had sought clearance from the Treasury “to make a statement resetting the Government’s approach to building safety ahead of Commons Report Stage of the Building Safety Bill”.

The tweet included a screenshot of the response from HM Treasury which authorises DLUHC to seek to secure £4bn funding from developers:

You may use a high-level “threat” of tax or legal solutions in discussions with developers as a means of obtaining voluntary contributions from them.”

“…the taxpayer should not be on the hook for further costs of remediation”.

DLUHC budgets are a backstop for funding these proposals (in full i.e. the £4bn if required) should sufficient funds not be raised from industry. You must prioritise building safety oversupply”.

Lenders and insurers are not included in the “polluter pays” piece – and no contributions should be sought from them”.

Formal announcements were then made by the Secretary of State in the form of:

• a press statement, Government forces developers to fix cladding crisis (DLUHC, 10 January 2022)

Mr Gove has today written to industry giving them a deadline of early March to agree a fully funded plan of action including remediating unsafe cladding on 11-18 metre buildings, currently estimated to be £4 billion.

He warns he will take all steps necessary to make this happen, including restricting access to government funding and future procurements, the use of planning powers and the pursuit of companies through the courts. He adds that if industry fails to take responsibility, the government will if necessary impose a solution in law.

• The “Dear Residential Property Developer Industryletter referred to in the announcement:

I am sure you are as committed as I am to fixing a broken system. I want to work with you to deliver the programme I have set out. But I must be clear, I am prepared to take all steps necessary to make this happen, including restricting access to government funding and future procurements, the use of planning powers, the pursuit of companies through the courts and – if the industry fails to take responsibility in the way that I have set out – the imposition of a solution in law if needs be.”

• A statement to the House of Commons “…we will press ahead with the building safety fund, adapting it so that it is consistent with our proportionate approach. We will now set a higher expectation that developers must fix their own buildings, and we will give leaseholders more information at every stage of the process.”

Note the references in the announcement and letter to “the use of planning powers”. Remember that reference in the Treasury letter to high-level threats?

Tory cladding shift leaves relations with UK developers in tatters (FT, 18 January 2022)

On 20 January the Secretary of State met with “senior executives from 20 building firms” but according to the Guardian:

Stuart Baseley, the executive chairman of the Home Builders Federation, said the industry lobby group had made its position clear at the meeting and would continue to engage constructively with the government. “We absolutely agree that leaseholders should not have to pay to remediate buildings. However we firmly believe that any further solutions must be proportionate.”

He said the bill should be shared with “other companies, sectors and organisations”, including “freeholders and the materials providers who designed, tested and sold materials that developers purchased in good faith”.

As we made clear to the government, we do not believe it should fall to responsible UK housebuilders to fund the remediation of buildings built by foreign companies, developers no longer trading, or other parties.”

Another piece, Others must help pay for cladding work, developers tell Gove following talks (Inside Housing, 21 January 2022) quotes Gove:

We have made a start through the residential property developer tax and the building safety levy, both announced last February, but will now go further. I will today write to developers to convene a meeting in the next few weeks, and I will report back to the House before Easter. We will give them the chance to do the right thing. I hope that they will take it. I can confirm to the House today that if they do not, we will impose a solution on them, if necessary, in law.”

In the meantime, the House of Commons Levelling Up, Housing and Communities Committee announced an inquiry into building safety funding on 19 January 2022, with this statement from chair Clive Betts:

The Secretary of State’s announcements on 10 January were a welcome step towards finally addressing the question of meeting the costs of making residential blocks safe rather than dumping the burden on flat-owners. Leaseholders should not be liable for the costs of removing hazardous cladding from their buildings nor the additional work necessary to make their flats safe.

In our new inquiry, we want to examine the effectiveness and impact of the Government’s planned measures to make developers and industry pay. We also wish to scrutinise whether the Secretary of State’s approach goes far enough to finally fix this crisis and examine what the funding arrangement to be agreed with industry should look like. We will also want to examine the risk to the Department’s budget, particularly around social housing, if it is not able to secure sufficient funds from industry.

The public evidence sessions for this inquiry are scheduled take place shortly and will conclude ahead of the Secretary of State’s planned report back to the House of Commons before Easter.”

How is all this going to play out? Who knows. If the development industry (a ridiculously loose term) doesn’t reach agreement with DLUHC, what really could we see in terms of the impacts on planning processes? Of course neither in law nor in practice could the Secretary of State discriminate in planning decision-making against any specific companies holding out from a deal but surely it will influence the priority or not that he gives to measures to increase housing supply by way of planning reform and/or his inclination or not to intervene with authorities where plan making has again stalled and surely it will influence the level at which the building safety levy is set, discriminating hugely against those bringing forward development proposals as against those companies which are responsible for past failings.

No-one should be under any illusion that these issues are easy. Is a “Dear Residential Property Developer Industry” letter accompanied by threats, in order to extract money from companies regardless of culpability, really the answer? We shall find out soon enough.

Meanwhile, this week’s clubhouse Planning Law Unplanned session is entitled “What do we mean by “digitising planning”? Possible futures”. We have five amazing guests: Euan Mills (digital planning lead, DLUHC), Graham Stallwood (director of planning, Planning Inspectorate), Mary Elkington, director, Figura Planning), Stefan Webb (place director, FutureGov) and Shelly Rouse, principal consultant, Planning Advisory Service). Join the app and event here.

Simon Ricketts, 21 January 2022

Personal views, et cetera

MAD World: Mapped Appeal Decisions

We launched Mapped Appeal Decisions today.

It’s a click-through interactive map that seeks to show the location of every planning appeal decision in England made between 1 January 2017 and 12 December 2021 following a public inquiry, with links to the relevant decision letter. Best viewed on a proper screen!

The data is drawn from our weekly Town Library planning appeal decisions updates over the period (free subscription still available via the link) and for all this work we at Town Legal are very grateful both to the Planning Inspectorate for the information publicly available on its website, which makes these sorts of applications possible, to OpenStreetMap for the base mapping and of course to our friends Simmons Wavelength for the legal engineering (in particular Joy Bradley for pitching the initial idea to me last year).

Any feedback would be very helpful. So far the extent of Green Belt across the country is shown on the map base but of course the possibilities are almost limitless.

Health warning: there are some decision letters where a postcode is not shown for the relevant site – they are not currently shown on the map. If you spot any other glitches do let me know.

Feel free to share the link or indeed this post with colleagues.

The only other thing I am going to mention in this week’s very short blog post is, as always, clubhouse Planning Law Unplanned. This Tuesday, 18 January at 6pm, the subject is SECRET WORLD OF BARRISTERS’ CHAMBERS, with as our guests, Paul Coveney (senior clerk, Francis Taylor Building), Marie Sparkes (head of business development and marketing, Keating Chambers), Gary Smith (chief clerk, Kings Chambers) and Mike Gooch (senior practice manager, Landmark Chambers). Everything you ever wanted to know but never dared to ask…

A link to the clubhouse app and event is here.

Simon Ricketts, 14 January 2022

Personal views, et cetera

Just What Is It That Makes First Homes So Different, So Appealing?

First Homes have been stuck onto the “affordable housing policy” collage, not as net additional affordable housing but as a replacement, mandated by policy, for other forms of affordable housing which would have been secured by local planning authorities in any event.

I summarised the 24 May 2021 government announcement and how the first homes mechanism is meant to operate in my 28 May 2021 blog post Moving Into First Homes: 3 Key Deadlines (TL;DR: at least 25% of all affordable housing secured on a development should be first homes; must be for first time buyers; must carry at least 30% discount in perpetuity; household income cap of £80,000, or £90,000 in London).

The House of Commons Library first homes information page (3 November 2021) is also useful for its links to the relevant announcements and documents.

As I summarised in the blog post, there were three key dates to implementation of the new regime:

28 June 2021

From the guidance: “ Local plans and neighbourhood plans submitted for examination before 28 June 2021, or that have reached publication stage by 28 June 2021 and subsequently submitted for examination by 28 December 2021, will not be required to reflect the First Homes policy requirement”

(However: “Planning Inspectors should consider through the examination whether a requirement for an early update of the local plan might be appropriate.”)

28 December 2021

From the guidance: “The new First Homes policy requirement does not apply for the following:

sites with full or outline planning permissions already in place or determined (or where a right to appeal against non-determination has arisen) before 28 December 2021”

28 March 2022

It also does not apply to “applications for full or outline planning permission where there has been significant pre-application engagement which are determined before 28 March 2022”.

So if you wish to avoid the new requirement and you are not in an area where a plan has been adopted under the transitional arrangements, you need to have submitted your application so that it will be determined (or so that that the statutory right to appeal on the basis of non-determination has arisen) by 28 December 2021 and if there is any doubt as to whether you will meet that deadline it would be prudent to have engaged in “significant pre-application engagement” such that the deadline for achieving permission is 28 March 2022.”

The first two dates have now passed. I have not yet seen examples of first homes being secured as part of a section 106 agreement. What experience is there out there?

As originally promised in the May 2021 announcement, on 23 December 2021 DLUHC published model section 106 clauses for first homes. At the same time it updated its planning practice guidance. It is really good to see the model clauses, which will be a useful starting point.

Stuart Tym from Shoosmiths wins the “working over Christmas” prize with his excellent 5 January 2022 Local Government Lawyer article First Homes: model Section 106 agreement (although I’m going to deduct a point for his conclusion that “the devil remains in the detail” – when is the devil not in the detail?!).

The first clubhouse Planning Law Unplanned session for 2022 is at 6pm on Tuesday 11 January and will be another really key event, particularly if you have any interest in the survival of theatre and live arts in the face of this pandemic: “MAKING DRAMA OUT OF A CRISIS: theatre vs covid”, featuring Broadway theatre producer (and ex US environmental lawyer) David Siesko; chair of Shakespeare’s Globe (and former planning lawyer) Margaret Casely-Hayford CBE, and theatre manager/Theatres Trust cultural policy manager Tom Stickland. Link to app here.

Simon Ricketts, 7 January 2022

Personal views, et cetera

Just What Is It That Makes Today’s Homes So Different, So Appealing? by Richard Hamilton (1956)