You may recall that, in July, the Government announced how ESW1 forms would not be required for buildings under 18m, however leaseholders needed to apply for a Government loan to carry out remedial works.
These low-interest loans were able to be paid back at no more than £50 per month, however in an environment where the cost of living is soaring, it’s certainly a very unwelcome additional outgoing each month. Particularly given that the average cost per leaseholder could easily reach as much as £75k each with the average expected to be around £9k!
You will undoubtedly be aware that the Government has recently announced that costs for remedial works to buildings 11m – 18m will now need to be covered by developers as opposed to being passed onto leaseholders.
So, how will this work? Will developers now have to stump up large sums of cash to carry out additional remedial works?
Well, current proposals indicate that the 11-18m finance scheme will be replaced with a ‘limited grant scheme’ totaling £4bn. This will be made up of existing funds from within the Government’s housing budget. So, will developers have to pay or not?
Well, Housing Secretary Michael Gove has warned he would take “all steps necessary” to make developers pay including:
- Restricting access to government funding and future procurements
- Using planning powers or changing the tax system
- Or, if the industry fails to take responsibility, imposing “a solution in law”.
The time limit for leaseholders to sue builders over defective flats will also be extended from six to 30 years.
Discussions are due to be held with major developers over the next few months in the form of a roundtable discussion with the aim of encouraging them to find a solution. As far as I understand, if a satisfactory conclusion has not been reached by Easter the above points may begin to come into force.
Here’s a simplified description of how I see this having played out so far:
“Leaseholders of buildings 11m – 18m will no longer need to pay for remedial works and funds will come from an additional £4bn of existing funds within the housing department.
These funds will be initially provided as some form of grant and may be claimed back from developers in an undecided legal manner… property developers be warned!”
It’s yet to be seen exactly how this will play out and, for people living in buildings under 11m, it’s very concerning that they seem to have been overlooked! Personally, I think this is great news for leaseholders and would hope that the debts already incurred are repaid/wiped.
I do, however, question why developers, whose buildings were signed off as safe and meeting requirements at the time of building are being made a scapegoat to a dramatic change in standards!
It’s also disappointing to have heard Housing Secretary Michael Gove say on the news today how ‘developers caused the problem, so they must pay for the solution’. Yet again, property developers have been made to be the bad guy in the situation, further tarring the reputation of the sector and leaving a bad taste in every property investor’s mouth.
In my view, this should be a shared responsibility in terms of paying for remedial works and the Government should also make their failings clear. I feel very strongly about this particular point!
Yes, profits may be up, but it does make me concerned that developers are just easy targets (after all, things such as ground rents will probably need to be adjusted to recoup the funds meaning leaseholders will eventually end up paying).
I’ll leave you with this fact… the current £5bn pot has funded completed works on just 12 (out of 3,191) sites with 90 having works in progress!
There is, however, a big twist to this announcement as leaseholders could yet be left with large bills for other fire safety remedial works to make their homes mortgageable as the announcement excluded things such as:
- Defective fire compartmentation
- Fire doors
- Other non-cladding faults still face bills
I’ll be very interested to hear your thoughts on this as we wait with bated breath to hear the next move… I think we have a long way to go!