Thu. Jan 27th, 2022

Plans by the UK government to ensure that property developers pay the cost of replacing unsafe upholstery on apartment blocks have long been in arrears. Michael Gove, the Secretary of State for Communities, Housing and Local Government, said that responsible for the construction of apartments would be forced to pay most of the £ 4 billion bill for the removal of unsafe upholstery. This is the right approach and a welcome intervention from Gove, even if it took too long to get to this point.

Following a public inquiry into the safety of cladding material in the wake of the 2017 Grenfell Tower fire in which 72 people died, thousands of tenants were trapped in unsold apartments. They cannot prove the properties comply with building regulations, and so often they do not qualify for mortgages. Many tenants had to pay for the removal of the material from homes that were sold as safe or for other expensive fire safety measures, including watches that last all day. The Bank of England is concerned that the scale of the problem could affect financial stability through its impact on lenders.

The solution to the problem, which is estimated to cost around £ 15 billion and affect more than 800,000 homes, has so far proved unsolvable. Developers argued that the building materials were approved at the time and therefore builders followed the applicable regulations impeccably. The treasury, in turn, is equally reluctant to pay the entire bill, arguing that tenants should take partial responsibility for their own properties. While it has provided £ 5bn in housing allowances for more than £ 18m, the finance ministry has said it will not make additional funds available for buildings between £ 11m and £ 18m.

Gove grabbed the nettle. Following a leaked letter from the Treasury, he promised that tenants – a form of property ownership common in England and Wales dating back to feudal times – would not have to pay out of their own pockets. Instead, the government will institute legal action against developers or freeholders, the ultimate legal owners of rental property. Rebellious builders who have refused to pay the bill to make their properties safe can be excluded from public building contracts in the future. One involved in the renovation of Grenfell Tower has already been excluded from the help-to-buy scheme.

The government has weapons in its armory to get its way, but it will probably have to fight through the courts. This will face challenges from developers, arguing that the attempt to force them to solve the problem on now-sold properties amounts to a retroactive change in the law. Many developers may also have disappeared over the past half decade.

While tenants seek restitution, meanwhile, the government should try to ensure that homeowners are not trapped in unsold homes. Gove has indicated that the government has, rightly, withdrawn its previous advice that properties must have a certificate guaranteeing their safety before they can be sold or re-mortgaged.

Finally, the government will also address the broader challenge of leasehold reform. Along with the cladding crisis, high-profile cases of unfair terms, such as land rents doubling every decade and unexplained high service costs, mean that the change to the contract system is also in arrears. Proposals that will reduce the exorbitant cost of extending leases and land rents are pushing through parliament. Change is urgently needed. Tenants have been paying for developers’ mistakes for too long.

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