Cladding help might not apply to landlords
Cladding help may not apply to landlords
Years after Grenfell and with the big housebuilders regularly topping the stock market sector table for total returns, the government finally says, “You know what, it ought to be you that pays for fixing the cladding and other unsafe building materials that were used in the building of lots of blocks of flats over 11 metres tall”.
Alleluia! Some common sense at last.
The only question being, “What took you so long?”
After all, it is hardly the flat owners fault, never was, so why should they pay? And it is not as if the big housebuilders are short of cash, nor have they exactly been at the butt end of treatment by this and previous governments. Indeed, the “Help to Buy” scheme is often dubbed, “Help to Buy Housebuilder’s Yachts” by a lot of industry and stock market observers.
But OK, the government has finally done the right thing at last.
Michael Gove has given developers until early March to work out a funded plan to: 1) fix unsafe cladding on buildings that are 11-18 metres tall, thought to be worth about £4bn; 2) fix all necessary work to remediate buildings over 11 metres high that they have played a role in developing and 3) give information on all buildings over 11 metres high which have historic safety defects and which they played a part in building in the last 30 years.
If they don’t, Gove has warned of consequences for the housebuilding industry including reduced access to government funding and procurements, the use of planning powers and even chasing companies through the courts.
Property builders are already expected to pay four percent Residential Property Developer Tax (RPDT) from 2023 onwards, which aims to raise £2bn over the next decade to cover the cost of recladding buildings that are over 18 metres. So, this new policy is really aimed at fixing problems in the buildings that are between 11 and 18 metres high.
This could be done by an increase in the RPDT or it could be in the form of a one off hit.
But, as ever, things are not so straightforward.
It seems that it is pretty common for house builders to fold the company that built a block of flats once the blocks have been built. This is in fact the normal way for developers to sell on with no future liabilities. And many smaller builders seem to file for bankruptcy and then the same directors reappear as directors of another building company – this is often known as “phoenixing”.
Gove will get traction and successfully lean on the publicly quoted housebuilders such as Barratts and Persimmon as well as bigger private housebuilders too, but smaller private companies might be harder work.
So, where do the flat owners go to get their cladding removed when the company responsible does not exist any more?
Well, there is no simple answer. So, it is my view that the government has to step in where these cases exist and get the thing sorted themselves. Sounds like the slow road to nowhere given the glacial speed that government moves? Yes, you would be right.
I do think that this is where the government has to work with the big, reputable house builders. If the original builder really cannot be found and /or has no assets at all, then there has to be a levy on the whole housebuilding industry that pays for the fix or agrees to pay for the fix, so that flat owners trapped in limbo can move on with their lives, so that properties can be bought and sold – and things can get moving again. Mortgage companies have to play ball too. A system that is workable and is transparent and clear to them too, must be in place. The limbo must end. And this MUST happen soon.
It is the bigger public housebuilders and a few of the big private ones who have mad most of the big cash in recent years with the small builders feeding on crumbs. It is the big boys who should be paying up.
Another way the government has messed up is that there remains confusion about whether the help is available for people who let out their flats.
In the initial announcement it said the £4 billion ‘fund’ would be for ‘leaseholders living in their own flat’s, apparently. So, it appeared landlords would be left out in the cold again.
This then led to lots of discussions. Why is that fair anyway? And how would that even work?
It seems discussions are ongoing about this.
Perhaps there will be a wave of landlords evicting good tenants and moving back in to their flats so they count as full time residents? Is that what the government really wants?
You can also see this as a potential poison pill to break up the unity in blocks of flats – as landlords are left out in the cold, whilst owner occupiers are protected. What if landlords cannot afford it? Many will not be able to.
This is still being looked at and I will try to update this story as we get more news in.
But you would really have thought (well hoped) that after all this time, the government would have had a proper, clear plan in place, taking account of what to do with builders who have apparently “ceased to exist” and which presented a solution to all flat owners, not just owner occupiers.
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