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Cladding scandal small print could leave landlords with big bills

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Written by: Anna Sagar
22/02/2022
Landlords with multiple properties who are caught up in the cladding scandal could be left footing the bill for repair works, despite previous government assurances that developers will cover the cost.

Small print in the Building Safety Bill legislation which should have finally ended the cladding scandal has actually revealed that some leaseholders may need to pay to fix the problem.

Last week, the government announced a tough new rule for housebuilders and developers to protect leaseholders from being billed for historical fire safety and cladding issues affecting blocks of flats. They were told to pay for the remediation works or face being blocked from the housing market.

The move was hailed by campaigners as “the most positive step forward” in the building safety crisis as the government promised that no leaseholder living in medium or high-rise buildings will have to pay a penny for the removal of dangerous cladding.

However, comments from Secretary of State for Levelling Up, Housing and Communities, Michael Gove, suggest that landlords with multiple properties may not be eligible for cladding remediation under the Building Safety Bill.

Essentially, portfolio landlords are considered as having the financial means to cover the cost themselves, whereas the Bill’s priority is to protect leaseholder homeowners who have received eye-watering sums for cladding removal, remediation work and waking watches.

Speaking at the Levelling Up, Housing and Communities Select Committee yesterday, Gove said that if a landlord has a “string of properties” then Building Safety Bill legislation would not apply to them.

He explained: “We are seeking to make sure that every leaseholder who, including those who made themselves be a landlord by default, are protected.

“If it is the case that a landlord has a string of properties then that won’t be, but it will be the case that the overwhelming majority of those who have been affected and concerned will be protected by the legislation we will be bringing forward.”

Gove defined a landlord by default as someone who has moved out of their leasehold property and is letting it out, but it is the only property they own.

He added that this was the “plan at the moment” but said that as the Bill made its way through the House of Lords and if “specific cases” or “systemic problems” emerged, then it would “look sympathetically” at amendments.

However, he said: “But the aim is to ensure we are not in a position where we have a runaway commitment to people themselves who are of significant means.”

‘This is about fairness’

Ben Beadle, chief executive of the National Residential Landlords Association, said: “Michael Gove’s previous comments about ending the scandal of leaseholders paying to remove dangerous cladding now ring hollow.

“This is not about who does and does not have the means to pay. It is about fairness. No leaseholder, irrespective of how many properties they own, should be expected to foot the bill for dangerous and illegal cladding installed by someone else.”

He added: “The Government needs to wake up to an injustice of its own making and make amends now.”

More on the amendments to the Bill

Last week, during the Bill’s second reading, Lord Naseby tabled an amendment, amendment 65, which stated that all leaseholders should be treated equally, regardless of how many properties they own.

This compares to the prior amendment 64, which stated leaseholders should not have to pay for cladding remediation if the dwelling is the leaseholders’ principal home, the leaseholder doesn’t own any another dwelling in the UK or leaseholders only owned one other property in the UK.

There has also been a parliamentary motion tabled by Conservative MP Sir Peter Bottomley who said buy-to-let landlords and owner-occupier leaseholder should also be treated equally.

Earlier this year, Gove said that the government was putting developers “on notice” for cladding remediation and other costs and gave developers a March deadline for cladding remediation plans.

He added that if developers failed to take responsibility, then the government would “impose a solution into law”.

Challenges around getting foreign developers to pay

Gove said that some of the most “egregious transgressors” of developers looking to dodge cladding remediation payments were companies domiciled outside of the UK and there were “practical difficulties” to pursuing them.

However, he said it was currently pursuing certain companies to show that they could not evade these responsibilities.

He said that the government did have “levers” that it could use to identify who was “ultimately responsible” for the buildings in question.

He added that he “didn’t want to show their hand” too much when it came to getting some foreign companies to pay.

Gove continued that if it can’t necessarily allocate “precisely and with total authority all of the burden to some players who are hiding behind offshore and other vehicles” it was important to have a “collective approach”.

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