On 21st October 2020, Justin Bates warned delegates at the online Institute of Residential Property Management conference to brace themselves for 15 – 20 years of Building Safety remediation and said about the property managers listening: “I don’t envy them at all.”
To put it in context, this was his observation that the Government’s chosen policy was for leaseholders to pay for remediation. That would place property managers in the difficult position of having to demand money from leaseholders that can’t or won’t pay. He predicted the only stakeholders to make money over the next 5-10 years would be lawyers!
Whatever is finally decided, in terms of Government Building Safety policy, we can all agree that resolving this situation and making buildings safe will take years, if not decades.
Even if the money problem was taken off the table, there is still a finite supply of Surveyors, Designers, Planners, Scaffolders and Facade Contractors to complete the critical works.
Most residents must continue to live in unsafe homes for a period of time and the property market will have to adjust to this ‘new normal’.
Impacts of the Building Safety crisis
Block Managers
Significant extra work for block managers over a prolonged period of time. In many cases, much bad feeling has been created as a result of this crisis and the perception of a slow response. EWS1 is a good example. So is the belief from leaseholders that their block managers’ interests are not aligned with theirs over remediation funding.
The most relevant risk for block managers, in our view, is their role and liabilities as a result of the Building Safety Bill implementation.
Assuming the role of Accountable Person or Building Safety Manager for a block that you cannot properly manage risk, could lead to special measures or fines by the regulator. Block managers may choose to resign the contract. Difficult decisions will need to be made by block managers. These decisions could even be forced by the regulator or insurers.
Leaseholders
Many leaseholders are facing, or currently enduring, ruinous costs from interim measures and building safety remediation. But the real sting is from £0 lender valuations and the prospect of the new Building Safety Charge (payable within 28 days).
There is already talk of leaseholder groups organising rent strikes, as well as not paying service charge and ground rent fees. Facing the prospect of financial and emotional ruin is forcing leaseholders into more desperate actions, including exercising their lawful rights.
Local Authority
Each local council has a duty to allocate social housing. There is a real risk that they will have to face increased applications from leaseholders who are ‘forced out’ of their homes by the Building Safety crisis.
We would hope that Local Authority housing teams are reviewing their risk registers and taking proactive steps at a local level to manage this risk effectively.
Insurers
An increasing number of blocks affected by the Building Safety crisis are seeing a rapid increase in premiums of 300 to 1,000%. Some blocks have failed to secure insurance renewals due to withdrawal of insurers or unaffordability.
Impacted leaseholders are likely to be classified as ‘vulnerable’ by the Financial Conduct Authority. This will increase the likelihood of regulatory investigation into the distributors of insurance products to the leasehold community (including Block Managers).
Lenders
Following EWS1 issues, lenders have lost trust in Building Regulations compliance as an assurance that the assets they lend against meet minimum safety standards.
Further doubt has been cast on the EWS1 Form recently due to fraud issues, incompetence and conflicts of interest in the EWS1 survey market. Any client commissioning an EWS1 inspection needs to conduct extensive due diligence before appointing a surveyor.
Shared responsibility for Building Safety
All stakeholders in high-risk buildings need to accept that for them Building Safety is a ‘condition that will need to be managed’ for a prolonged period of time before it is cured.
Working together in a transparent way, to a common goal, is key to navigating this crisis.
This is what Dame Judith Hackitt said on the subject in 2018:
“…residents need to understand the safety systems in place in their building, and to do this they require access to a wide range of information relating to safety…”
Dame Judith Hackitt
3 steps to navigate the Building Safety Crisis
The only logical way to tackle this crisis is to go back to basics: identify the risks; manage those risks; provide evidence of your risk controls; and keep all key parties informed.
Risk Assessment
Conduct a thorough risk assessment in each block. As a minimum, a Type 4 (intrusive) Fire Risk Assessment should be completed. This will establish a baseline for the block. In addition, a thorough review of the external wall system is essential for all higher risk buildings.
In addition to the physical aspects of the block, consider the vulnerability of residents, neighbouring properties, location, maintenance and other relevant factors in the risk assessment.
Risk assessments must be shared with residents, in line with Hackitt recommendations and the proposed Building Safety Bill, unless there is a clear security reason not to.
Risk Management
Ensure that identified risks are being effectively managed and that the strategy is kept under regular review. Responsible persons must ensure that auditable record-keeping of all actions is kept at all times.
Details of the risk management programme must be shared with residents as a part of the Resident Engagement strategy. This helps to ensure that their role in managing building safety is clearly understood.
The combination of thorough Risk Assessment and Risk Management form the main components of the Building Safety Case. All higher risk buildings will require a Building Safety Case over the coming years to satisfy the new Building Safety Regulator.
Communication
As with any prolonged and stressful crisis, the ability of all parties to build trust and keep talking will pay dividends. In terms of trust, block managers need to make sure that all decisions and communications are factual and fair.
Whether the news is good or bad, open communication and transparency of information between all key stakeholders is key to successful risk management.
Getting help with Property Risk Management
Our team has years of experience in creating risk management frameworks across a wide range of heavily regulated industries.
Once you have the framework in place we can also help you with Property Compliance Software that is Building Safety Regulator ready and can power your Resident Engagement Strategy.