When do the ends justify the means?
I wrote about Michael Gove’s strong arm tactic to secure contributions from developers towards cladding and other building defect issues, in my 18 February 2022 blog post Developers As Proscribed Organisations: The Government’s Amendments to the Building Safety Bill. The Bill was enacted, including section 128 (prohibition on development for prescribed persons) and section 129 (building control provisions).
By way of the responsible actors scheme (the subject of this DLUHC guide), the Secretary of State can decide to exclude particular businesses (developers) from operating (developing). The background, as to the Grenfell tragedy (albeit with multiple points of culpability) and failings across many other developments, is understood but this is quite a market intervention for a Conservative Government and more of a v-turn than u-turn from the days of “red tape challenges” and similar (literally) dangerous nonsense.
How the process is going to work is now clearer, the draft Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023 having been laid before Parliament on 25 April 2023, together with a helpful explanatory memorandum.
I’m going to quote a large chunk of that memorandum:
“7.2 Since the Grenfell Tower Fire, it has become evident that a very significant number of residential buildings of 11 metres and above in height were clad with unsafe materials which posed a fire safety risk to residents.
7.3 In January 2022, the Government set out its position that industry actors that had profited from the events leading up to the crisis must pay to fix the problems they created, and that the wider industry must also contribute to resolving these issues. Our objective with this instrument is to ensure that developers pay an appropriate share of remediation costs.
7.4 The Government initially secured (by Summer 2022) a public pledge from 49 larger developers, committing to fix life-critical fire safety defects in residential buildings 11 metres or more in height which they developed or refurbished in England between 1992 and 2022. In July 2022, the Government published an initial draft developer remediation contract, followed by a period of sustained and intensive engagement with around fifty major developers, coordinated by the Home Builders Federation, until January 2023 on how the Pledge commitments should be codified into a binding contract. The contract terms also include requirements that signatory developers keep residents in buildings which are undergoing remediation informed of progress, and to reimburse taxpayers for money that has already been spent to fix buildings through government funds.
7.5 The developer remediation contract is at the heart of the RAS. The Government has been consistent in its public position that developers who are eligible for the scheme but who elect not to make the important commitments set out in the developer remediation contract, or who fail to comply with its terms, should expect to face significant consequences given the significance and urgency of this problem. In such circumstances, they will be prohibited from carrying out major development and gaining building control sign-off in England, subject to certain exceptions set out in the instrument. The RAS is intended to support a level playing field for major developers in the industry, so that those developers who do make commitments to remediate are not disadvantaged. As of 21 April 2023, and subject to change, 46 of the 50 developers who have been invited to sign the contract have done so. In signing the contract, they have committed to remediation works estimated by the industry to be worth over £2 billion.
7.6 The description of who is eligible for the scheme captures, in both cases by reference to meeting a profits threshold [“average adjusted operating profits of over £10m per year over three years from 2017-2019”], (i) major housebuilders who have developed 11m+ residential buildings, and (ii) other large developers who have developed or refurbished two or more residential buildings that are known to have fire safety defects by virtue of having been assessed as eligible for a relevant government cladding remediation scheme. There is also a route for other developers who developed a defective building to volunteer to join the scheme. The developer selfremediation approach, and the RAS, is to be expanded over time to cover other 4 CO/EM/2022.3 developers who developed or refurbished defective 11m+ residential buildings and should pay to fix them.
7.7 As with the developer remediation contract, the RAS aims to improve the safety of buildings by requiring that any member of the RAS must identify and remediate, or pay for the remediation of, life-critical fire safety defects in residential buildings of over 11m in height which they developed or refurbished between 1992 and 2022. To join the scheme, members of the RAS will be required to enter into the developer remediation contract with DLUHC as published by DLUHC on 16 March 2023 and available at: https://www.gov.uk/government/publications/developer-remediationcontract, and comply with its terms.
7.8 The prohibitions in this instrument relate to persons who are eligible under the instrument for the new RAS scheme and do not join, or who join but who subsequently fail to comply with the scheme conditions and have their membership revoked, and persons controlled by them. It is necessary for the effectiveness of the scheme and prohibitions to include persons under the control of the prohibited developer so that a prohibited developer cannot continue their development business through other entities which they control.
7.9 The regulations enable Secretary of State to make exceptions from the prohibitions covering five main circumstances: businesses under the control of an eligible person who are not in the building industry; exceptions for projects necessary for critical national infrastructure; allowing building control sign-off for residential buildings where people have exchanged contracts on their new home before the prohibition on their developer went into effect; permitting purchasers and owners to obtain a regularisation certificate for unauthorised building work under the Building Regulations 2010; permitting emergency repair works; and permitting building works in occupied buildings to ensure resident safety.”
“11.1 We plan to issue guidance on the operation of the scheme and to local authorities on the operation of the statutory prohibitions. The guidance will be made publicly available by Summer 2023. Because of the time limits provided for in the instrument, this guidance will be available well in advance of the prohibitions being applied to any developer.”
According to the latest DLUHC update, 48 developers have so far signed the developer remediation contract. Three developers are named as being yet to sign the contract.
It may be a brutally effective measure. But imagine if a similar approach was taken to another industry, for example the media or (hmm) water utilities or (hmm hmm) some arms of state activity?
Simon Ricketts, 3 June 2023
Personal views, et cetera
Pic courtesy of Wesley Pibaldi via Unsplash
SIMONICITY 