Mike Amesbury
Main Page: Mike Amesbury (Labour - Weaver Vale)Building Safety Bill (Fourth sitting)
Mike Amesbury Excerpts(2 years, 7 months ago)
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The Chair
We will now hear from Martin Boyd, chair of the Leasehold Knowledge Partnership, and from Dr Nigel Glen, chief executive of the Association of Residential Managing Agents. I remind colleagues that we have until 2.45 pm for this session. Would the witnesses introduce themselves for the record, starting with Martin?
Martin Boyd: Good afternoon, everyone. My name is Martin Boyd. I am chair of a charity called the Leasehold Knowledge Partnership. We also act as the secretariat for the all-party parliamentary group on leasehold and commonhold reform.
Dr Glen: Thank you very much, Chair, and thank you for the opportunity to present today. My name is Nigel Glen, the chief executive officer of the Association of Residential Managing Agents, a not-for-profit trade body with about 325 members who manage about 1.6 million leaseholds between them.
Mike Amesbury (Weaver Vale) (Lab)
Q
Martin Boyd: No. You have heard two witnesses already tell you that the National Audit Office has reached the view that it will not actually work very often. The problem is that there are limited circumstances in which you can apply the Defective Premises Act. It seems like a welcome idea, and of course it is—six years is not sufficient—but there are very few leaseholders who are going to be able to take action using that facility.
Dr Glen: I would concur with that. If you think about the practicalities of lay leaseholders taking on a plc on a block-by-block basis, just having the financial capability to do that, let alone the expertise and the time, is beyond them. It is one of those things, I hate to say, that sounds good, but in the real world will be very difficult and does not help.
Mike Amesbury
Q
Martin Boyd: No, there is very little. We were aware of one London site that began to go down that route, but the developer agreed to settle before court proceedings were served.
Dr Glen: Likewise, I concur on that.
Siobhan Baillie (Stroud) (Con)
Q
I was interested in your point about grants, Dr Glen, because ultimately we know that quite a lot of businesses have gone bust. Your proposal that we effectively get the taxpayer to foot the bills upfront, knowing that there will be a big gap potentially, is a problem. I am just playing devil’s advocate. On your point about grants, you are suggesting that the taxpayer pays. That is a point of concern for people who are not affected by this and are thinking about the overall financial purse.
Dr Glen: I understand that. The specific example that I was using for grants was that we strip a building down, take the cladding off, look at the building and say, “Oh my gosh. Something has happened to the concrete.” I completely understand why the Government should not be making every building as new. It is the practicality, because the way that service charges work means there is no profit margin in them. If there is any leftover at the end of the year, you give it back. If there is a deficit, you demand it.
This is the problem: let us say that you, Siobhan, are a leaseholder in a particular building, and I say, “Terrible news: we’ve found that there’s a bit of problem with the concrete, so we need to do some work on that. It’s not applicable for the building safety fund because it’s nothing to do with the cladding; it’s just Father Time.” If you then say, “I’d love to—I can understand where you’re coming from—but I just don’t have £2,000,” what do we do? If you do not pay, the others should not pay for you surely, so suddenly I am £2,000 short. That means that I cannot do anything as a managing agent, because I cannot place that contract. I am talking about short-term mechanisms to mean that we can get that building safe. That is why it is a complex situation with no absolute way forward.
On should the taxpayer pay—I am a taxpayer and would like not to pay—it is undeniable that, under successive Governments, there have been changes in regulation where, perhaps, a developer has said, “I would like to put this material up—it’s not cheap— can I?” and the local council has said, “Yeah, it’s fine”. That same local council and, in fact, sometimes the same person, is now saying, “Actually, you shouldn’t have done that”. Is it right that the developer or whoever in good conscience who did what they thought was right at the time should pay, or is that something where we should say, “Sadly, there are some things that taxpayers should front up for”? It is a very complex situation. I come back to it again: there is no single solution. The only one I can see is to let the Government pay now and then figure out how to get the money back later.
I would like to think a bit further than that. This will not be the last issue we have in housing over the next decades. Let us form this fund, so that when whatever it is that next comes up, whether it is something toxic that we did not know about or something else, money is in the bank so that we can start moving on these things straightaway. Let’s think forward as well.
Martin Boyd: I have a letter sitting here from officials in December 2017, after we had written to Ministers saying it is very urgent that Government intervene early on or we will end up with leaseholders going through a rather nasty experience that will drag on for years. I did not think at the time it would be so many years. The assumption was that, well, of course, the law will allow you to take your building owner, as we keep saying, to court and make them pay. It has not happened. The law was never ever going to make that happen.
The statements that we made have been made in Parliament too, and said that building owners should do the right thing. It is not what the law says they should do. They are under a fiduciary duty to represent the interests of their company. If you happen to own ground rent investment and therefore are deemed to be the building owner, which will only represent possibly 1% of the property value, or even less, how on earth are you expected to pay to remediate the cladding? It was never, ever going to happen. Grants have been the only way the system would work from the very beginning. I think it is still the only way that we have left.
Mike Amesbury
Q
“to protect leaseholders from historical remediation costs”,
and then it was “unaffordable costs”. Does this Bill do that? What key things are missing from the Bill?
Dr Glen: No, I do not think it does, because the Bill says that historical costs can be levied on the leaseholders at 28 days’ notice et cetera. I heard in an earlier session about whether that would really help. It could increase costs, because we will have two separate charges now. We might want to touch on that later. No, it does not. There are some amendments around. As we said, the polluter pays is part of the amendments, because we need to try to figure out where the money is coming from. I go back to my earlier statement: the only way I can see it happening, unless we are going to be here in four years’ time still discussing this, is something big like Government—I think the Government are the only size that can do this—to make sure that we front-fund pay. Then, absolutely, Government should figure out how to get the money back to protect the taxpayer. So I do not think it does it, in short.
Martin Boyd: I agree. I have nothing to add to that, it is just not going to do it.
Ms Marie Rimmer (St Helens South and Whiston) (Lab)
Q
Martin Boyd: No. Judith Hackitt said the problem is that we need a fundamental culture change in the industry, but I have to defend the industry. If you are providing into a market that says, “You have liability for a product for two years. After that two years, the liability moves over to a warranty scheme for another eight years, and then after that you walk away scot-free,” how does that encourage developers to produce high-quality products? The Bill reinforces that because, again, we have a new homes ombudsman. For two years, we are not proposing to change in any way the idea that somebody builds a building, keeps quiet for two years that they have problems with it, and then says, “I’m sorry, Mr Customer, you are not protected by the normal Consumer Protection Act rules because this is a property, not a toaster.”
Ian Byrne
Q
Dr Colwell: As part of the development work, we were part of the working group 8 looking at competency development. We are actively working with the regulator coming in on that and also within the Department as to where we would like that to go forward to.
Mike Amesbury
Q
James Dalton: Sure. There are two different types of insurance in play in your question. On the cost of buildings insurance, it is important to note—I think I heard this in the previous sitting—that the Bill is prospective. It is not retrospective except for the provisions that I will come to in a second. Will safer buildings be built as a result of the Bill and all the accreditation and certification, in terms of the golden thread? Buildings should be safer as a result. As I said to your colleague, safer buildings should be cheaper to insure, and that insurance should be more available.
On your question about the Defective Premises Act 1972, that issue is about liability insurance, not buildings insurance. The challenge in that space is that, without there having been consultation, the Bill retrospectively extends the period of liability from six to 15 years; some insurance policies will have excluded liability over and above six years. I do not know who is going to pay for the period between six and 15 years, when there is found to have been negligence. There may not be an insurer that is on risk to cover that liability. That is the big concern from an insurance industry perspective. Other insurance policies potentially would come on risk. Then we have a question about whether it is fair and reasonable to amend the Act retrospectively without consultation.
Kate Osborne (Jarrow) (Lab)
Q
Dr Colwell: An initial reading of the Bill in its current form suggests that the answer is no. Work will be required to ensure that we are clear on the standards being applied and how those are being used in the framework. We also need provision for going from testing to third-party certification, to ensure that we have the provenance following through on the products being used and the context in which they are being used.
The Bill lacks a little clarity. As mentioned earlier, the detail will probably have to sit in a secondary framework if we are to ensure that we get to the level of implementation that gives us a clear playing field.
Ian Byrne
Q
Mr Wrack: I was previously a firefighter in the London Fire Brigade—I have been in this position since 2005—and I think there is a problem with culture. I have lived through a decade in which the endless mantra from senior civil servants and Government Ministers of both parties has been that fire is a declining risk, and we can therefore afford to reduce our emphasis on fire safety. That was very clearly a theme that we heard for more than a decade. I think it fed through into the fire service itself, and senior managers and chief officers accepted that mantra. As I say, we were often a lone voice opposing that approach. That has allowed corners to be cut, and for deregulatory approaches to be taken. It has allowed standards to be cut. Over two decades, we lost something like 40% of fire safety inspecting teams. Then, of course, along comes Grenfell Tower, and people wake up to the fact that we have not been properly addressing risk.
To pick up a point made earlier by a representative from the insurance industry, one of the big problems in relation to fire safety and building safety in the UK is a complete lack of horizon-scanning. A question was asked about fires in the UK and elsewhere. The truth is that there have been warning signs from fires elsewhere. Clearly, you cannot necessarily draw an immediate analogy between a building in Europe or the middle east and one in Britain because the regulations may be completely different, but there were warning signs about external cladding systems, including in the UK. Regrettably, we have not had structures in place that allowed various professional voices, whether of construction specialists, building control specialists or fire safety officers, to discuss emerging risks and identify how we address them. I think a deep complacency about fire safety has emerged, particularly over the past two decades. Grenfell, hopefully, is a major turning point on that.
Mike Amesbury
Q
Mr Wrack: A single system of regulation would be better than what is proposed. I understand that there may be a need for a phased approach, but I am not sure that is what is in front of us. I think that the 18-metre cut-off point is incorrect, too. There should be a move towards an elimination of private-sector interests in building control. The idea that people can choose their own building control system is wrong, and appears wrong to many people. Finally—this relates more to the background to the Bill—resourcing is a huge issue for us in the fire service, for local authority building control, and for the HSE.
Ms Rimmer
Q
Mr Wrack: We welcome the commitment in the Bill to driving up standards. Regrettably, we in the union attend inquests, sometimes on the deaths of members of the public and sometimes on deaths of our members. There have been incidents in which our members have died and it has emerged that the fire risk assessor in the building had no qualifications. That is quite shocking. It is a sign of a deregulated sector.
We welcome the drive to improve and professionalise standards operating in a whole number of areas; if you listen to the shocking evidence to the Grenfell Tower inquiry, you find it relates to fire safety awareness among architects, to fire risk assessors, and to building control. We have from day one opposed the privatisation of local authority building control. If you listen to the evidence from Grenfell, there have been unprecedented cuts in local authority building control teams. That was reflected in the harrowing evidence given to the inquiry by an individual who reported that his team had been slashed completely. He kept a notebook by his bed because he could not keep up with the scale of work.
If we are to take building safety seriously, we need to provide adequate resources to those organisations tasked with delivering it, and that needs to improve standards. In the fire and rescue services, cost-cutting has reduced fire safety specialist teams and the provision of training. In the fire and rescue service, over the past 15 or 16 years, there have been reductions in training across the board—from the initial training that firefighters receive on joining the service to the training they receive when they enter specialist teams, such as fire safety departments—and, in our view, reductions in standards. If we are talking about driving up standards, we need to invest in the provision of adequate training and support for people to adopt those standards.
Shaun Bailey
Q
Eric Leenders: I think our primary interest, like the rationale for drafting the Bill, is to ensure adequate safety and protection for homeowners, so we all buy into that. To the extent that the Building Safety Bill gives voice to homeowners and perhaps particularly to leaseholders, we think it is very important. There are some details of the Bill we are likely to come on to discuss where other experts can support homeowners and leaseholders, particularly regarding safety standards. Our primary interest as lenders, of course, is to ensure that homeowners, particularly those who require mortgage finance, are able to afford the borrowing they take on, and that includes potential remediation costs if they are necessary for particular properties. Work in the Bill and work undertaken by the Ministry of Housing, Communities and Local Government outside the auspices of the Bill are helpful in that regard.
Mike Amesbury
Q
Eric Leenders: Experts are probably better placed to consider the dimensions of the Bill, but I did mention the work that the MHCLG has done, which looks to support those who have been classified as cladding prisoners. I understand that in working through the detail of the support for those in properties of 11 to 18 metres, it was found that there could be some complexities in the security arrangements for any lending and the allocating of responsibility for any lending to a property or an individual or leaseholder and so on. The Bill could provide a platform for some of those technicalities to be worked through so that there is a sound legislative footing.
Rachel Hopkins
Q
Eric Leenders: Yes, and I think there are also some protections for leaseholders where the amount of remediation exceeds £250. That is welcome. The 28 days is potentially challenging—I am thinking of the staff in our organisation paid on a monthly 31-day cycle—so there could be a little more time for individuals to pay. Salaried individuals in particular are predominantly likely to look in the Bill for support. Increasing that timeline might be helpful.
Daisy Cooper
Q
Steve Day: Yes. I live in south-east London, in a development called Royal Artillery Quays. We had a £30 million cladding bill, have £1.7 million of internal firestopping issues, and a builder that says that we are timed out with the Defective Premises Act 1972 and the Latent Damage Act 1986 because we are 17 years old, and our 15-year hard stop in latent defects times us out. We are very angry.
My brother is here today. We are doing a start-up and do not have enough money for one salary. It is devastating to have to fight a developer that claims it has no legal liability, even though we found multiple breaches of the BBA certificate on the external wall system. I went around with a fire engineer with an endoscopic camera to see all the holes in the firestopping above every single flat. I am sickened.
I have had to help people in the development with depression. One of my neighbours had to talk someone out of suicide. I am sure my brother will not mind me saying that it has been challenging—running a small business start-up, and trying to fight a developer and come up with a statutory scheme to stop everyone else from doing this.
I urge you to recognise that full redress is not just something that we want—a “nice to have”. You will hear more evidence on it, but think about it this way: if you, as Parliament, do not intervene now, this will happen in decades to come. There is a race to the bottom in construction. I was on holiday, and after The Times article that came out last weekend backing the polluter pays Bill, I did not really want to be next to a senior member of the construction industry for my holidays. However, he was very understanding and said to me, “Well, yes, there is a race to the bottom. Yes, the cheapest contract always wins. Yes, the building control that looks the least at the defects is the one that gets the contracts.” We have to stop this. Levies and taxes is letting them get away with it. We have to step in. That is what I am asking you to do today.
Mike Amesbury
Q
Steve Day: I am glad that you have asked about SPVs, as that is obviously a point of contention for our scheme. First, we are creating a statutory scheme—we are writing the law and Parliament is intervening. We would go after the parent companies when there is a relationship there. In the case of an SPV, we would try to establish that relationship. Remember that there are two parts to polluter pays—I do not know if you have seen the diagram. One part is to get the responsible parties to pay in full if we can. If we cannot find anyone—this is your first answer—we go to the levies that we have on the construction industry and the ancillary bodies such as cladding manufacturers and so on, who have all been part of the problem, as we heard in the Grenfell inquiry.
We can do a better answer than that, though: parent company liability. You might say, “Is that possible?” The UK Competition and Markets Authority can hold parent companies liable for the anticompetitive conduct of their subsidiaries, and can hold both the parent and subsidiary company jointly and severally liable for the payment of fines resulting from the anticompetitive conduct of the subsidiary. It has been done. If you want to look further afield, in German law, Konzernrecht holds parent companies liable for obligations of controlled subsidiaries; that has been done in Germany. Some say that British companies will not be attractive for investors if we do this parent liability, but it seems to be working in Germany. Hopefully, that gives you a little more colour on why we want to do this.
Ultimately though, take a step back from the legality. I am very grateful for Daniel Greenberg’s help and his 20 years of experience as parliamentary counsel; he is operating in a private capacity pro bono, because that is how much he believes in the Bill. He is not at all worried about this liability; he thinks it can and should be done. We have a simple, cost-effective and fast mechanism; a statutory scheme that will make those responsible pay, and their parents. Is that okay, Mike?
Mike Amesbury
Q
Steve Day: Do you mean just extending the limitations in the Defective Premises Act?
Mike Amesbury
Yes.
Steve Day: First, you cannot take a parent company to court if they do not exist or you do not have the relationship. That is where we need the Government to step in with a statutory scheme, because we need to establish the ability to make that connection. Ultimately, we need the Government to step in with a statutory scheme, which they did for asbestos, so that when people do not come to the table, we fall to a statutory scheme. This is a unique situation. We need the Govt to step in because the law is failing us. Extending limitations is a problem, because people may not have the standing to take their developer to court. They might not be in the contract; they may not have the money or the time; they may have mental illness as a result of suffering we have had already.
Alison Hills: May I come in here? I am a litigation lawyer; housing is not my area of speciality but I have some insight into the litigation process. The Government seem to think that they have solved this crisis by extending the limitation periods under the Defective Premises Act. I respectfully suggest that is far from true. First, as leaseholders, we do not own the property and we have no leg to stand on to pursue any legal action. Secondly, as we heard from two very prominent lawyers last week, there are a number of problems under clause 124, which could result in extensive litigation before we even get to remediation.
Thirdly, the Bill as drafted does not help when buildings are over 15 years old, it does not help in situations where developers have become insolvent, and it does not help in my own situation, where the developers and the freeholders are part and parcel of the same legal entity, so in essence they would have to sue themselves, which is not going to happen. That is why the polluter pays Bill is the most cost-effective way forward. It is simple and clear and provides an effective solution that avoids years of litigation that leaseholders simply cannot afford.
There was a case recently of Aviva Investors and Shepherd Construction, where Aviva Investors tried to pursue action for £4.5 million relating to a block of student flats. The litigation was unsuccessful, and the judge stated in that case that
“There is no pleaded case that a duty of care was owed by Shepherd to future owners of the property”.
If huge rich companies like Aviva cannot have a successful litigation against these developers, what chance to the little leaseholders have, who have no leg to stand on and no funds to do so?
Steve Day: One final point, if that is okay?
The Chair
Fire away.
Steve Day: There is another complication of the limitations extension, and that is basically the risk of a two-tier system. We have been discussing this with the polluter pays Bill team. There are bilateral investment treaties that have settlement provisions. We are concerned that if a foreign national were to use one of those provisions for international arbitration, especially in the case of a developer not existing in the UK—and these foreign investors are investors, leaseholders in UK property—they may be able to use that international arbitration and get compensation from the UK Government, where UK nationals will not be afforded such a privilege. That would be a shame if the developers do not exist and foreign nationals can use these international arbitration treaties when UK nationals cannot.