The UK government is under increasing pressure to address a looming building safety crisis that could impact up to 1.7 million homeowners. Concerns have arisen due to a legislative gap in the government’s leaseholder protection regulations, which were introduced in response to the Grenfell fire tragedy in 2017. These regulations fail to cover three specific groups: those living in low-rise flats, those who have enfranchised, and those who own more than three flats.
The result is a situation where homeowners in these categories face uncertainty until their buildings are assessed for fire safety issues. The lack of clarity affects the entire flat market, as the status of buildings is unknown. Homeowners in unsafe buildings may find themselves unable to sell their properties or burdened with significant costs for remediation, including the removal of Grenfell-type cladding from low-rise blocks. In some cases, residents may be living in potentially hazardous flats that require urgent safety improvements.
The government implemented partial leaseholder protections last year, but this created a three-tier flat market, causing challenges for conveyancers and creating a risk of stalling a significant part of the UK housing market. The situation could worsen next year when new banking rules take effect, potentially forcing lenders to revalue loans for properties with reduced values. This could lead to financial difficulties for homeowners who are partially or wholly unprotected by current regulations and pose risks to banks that have lent them money.
To address this crisis, an amendment to the government’s bill has been proposed by the Earl of Lytton, a crossbench peer. This amendment seeks to hold developers or lead contractors permanently liable for building defects at the time of construction or establish a building industry levy to fund remediation efforts if the builder is no longer in existence. The goal is to ensure the remediation of all unsafe flats, protecting the 1.7 million homeowners currently excluded and eliminating the three-tier flat market.
The amendment has garnered widespread support from 48,000 people, the National Residential Landlords Association, Property Mark, and former Australian state premier Ted Baillieu. These organisations and individuals believe that the amendment offers comprehensive and equitable solutions to the building safety crisis.
The fate of this critical amendment will be decided in the House of Lords, and its acceptance or rejection will have significant implications for homeowners, the banking system, and the UK housing market.
For more information about the Earl of Lytton’s amendment, please visit www.buildingsafetyscheme.org.