Sat. Jan 22nd, 2022

Homebuilder shares tumbled on Monday and executives warned of a legal swamp after the government gave the UK industry a two-month deadline to find a £ 4bn solution to the Grenfell upholstery crisis.

Michael Gove, the housing secretary, MPs said that he will ensure that tenants do not have to pay a penny to fix unsafe upholstery on all residential buildings higher than 11 meters. “Innocent tenants should not bear the burden,” he said.

Gove said it would use all the tools at the government’s disposal to force developers, contractors and suppliers of upholstery materials to cover the cost of repairing buildings in England between 11 and 18m high.

But campers have warned that the intervention on upholstery means thousands of tenants are still potentially liable to cover the cost of fixing other fire safety issues affecting their buildings.

Gove’s announcement hit the construction sector, with shares in homebuilders falling as much as 5 percent on Monday.

The government has already earmarked £ 5.1 billion to resolve security issues on some 10,000 high-rise blocks above 18 million and plans to recover £ 2 billion from it through a tax on the construction industry over the next decade. But that left 100,000 tenants in buildings between 11 million and 18 million responsible for £ 4 billion worth of repairs.

Michael Gove announces his plan to get developers paid in the House of Commons on Monday © AFP via Getty Images

“We welcome the fact that there is more funding for midsize buildings and the end of the desperately unfair loan scheme,” said Giles Grover, a tenant and campaigner at End Our Cladding Scandal.

Ministers have struggled to address a building-fire safety crisis in the wake of the 2017 fire at Grenfell Tower in west London in which 72 people died. The tragedy raised questions about thousands of other tower blocks clad in the same combustible material used at Grenfell.

The government exacerbated matters in January 2020 when it advised that all multi-storey, multi-storey residential buildings should be rated for fire risk, which sowed uncertainty among mortgage lenders and left hundreds of thousands of tenants trapped in apartments they could not sell.

Gove said on Monday it would scrap that controversial advice, which he said was “misinterpreted” and called for a more “proportionate” approach to fire risk. “Four and a half years after the Grenfell tragedy, it is long overdue for us to rectify this crisis,” he said.

Although Gove’s intervention addresses the cost of replacing upholstery, many tenants still face large bills to address other fire safety issues identified since the Grenfell tragedy. “There are people with £ 50,000 bills for their flats where none of the work is upholstered,” said Clive Betts, Labor chairman of the House of Commons’ housing committee.

He warned that housing associations and other social housing providers could eventually cut back on investment because of their £ 4bn share.

Gove told the industry that should they refuse to get involved, they could be excluded from government-backed schemes, such as Help to buy, or legally pursued. He said the seven largest homebuilders had made a profit of £ 16 billion over the past three years. He told MPs that builders who “knowingly” endanger lives should be held accountable.

Lisa Nandy, secretary of shadow housing, said she hoped the new measures would work, but was skeptical that the industry would voluntarily cover the cost of remedial work. “The harder I look at this, the less it stands up.”

One CEO said the industry could not complain given its high profits and previous government support, but warned that it would still “end up in the courts”. On buildings under 18m, some developers would probably argue that they complied with safety regulations and therefore did not have to pay, he suggested. Any tall building above 11m is considered by the government to be a greater fire risk than residential buildings below that height.

Sue Ryan, construction partner at law firm Gowling WLG, said she expects a series of lawsuits as developers will be “reluctant” to cover the costs voluntarily. “Many do not do it [on buildings] over 18m and their insurers are fighting everything by hand and tooth. It therefore ends up in the courts. ”

Gove acknowledged that some developers might not “come sweet to the table”, but said that if necessary the government would use the tax threat to bring the industry together.

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