This article was co-authored by Bushra Jalil, Trainee Solicitor, London.
Last month, the Department for Levelling Up, Housing and Communities (DLUHC) laid the Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023 (the regulations) before Parliament.
The regulations, to be adopted under sections 126-129 of the Building Safety Act 2022, will mainly target those developers that failed to sign the developer remediation contract but will have far reaching implications for the construction industry as a whole. Before we delve into those impacts, we outline the background to this ongoing saga.
In 2022, 49 developers pledged to perform and fund mitigation works to address life critical fire safety risks identified in high rise buildings (the pledge). The DLUHC then wrote to developers in January this year, asking them to sign a developer remediation contract (the contract) that would effectively make the pledge legally binding.
Those who have signed the contract will be required to:
- Undertake necessary works to address life critical fire safety defects arising from the design and construction of buildings 11 metres and over in height, developed or refurbished in England in the past 30 years (prior to 5 April 2022).
- Inform residents about the progress of the works.
- Reimburse taxpayers for funding spent on remediating their buildings.
The deadline for signing the contract passed on 13 March 2023. Subsequently, the Government made clear that eligible developers who had refused to enter the contract or failed to comply with its terms will face significant consequences.
The Government saw through its threat by laying the regulations before Parliament in April. If approved, those that did not sign the contract will not be able to join the Responsible Actors scheme.
This means that they will be prohibited from carrying out major development work and obtaining building control sign-off. The same limitations will apply to developers that did sign the contract but do not comply with it. The scheme is designed to create incentives for developers to remediate and/or mitigate defects in unsafe buildings, ensuring that those who do take on the cost of this are not disadvantaged in comparison to other eligible developers who fail or refuse to do so.
As flagged in our Kennedys article, published last year, concerns remain within the construction sector, including insurers, that those developers barred from the Responsible Actors Scheme (and those in breach of the contract) will look to the original project teams and/or their supply chains (as well as their insurers) for recovery of their liabilities.
It is possible that there will be a growing number of claims against project parties and their respective insurers.
As the scheme rolls out later this year, Insurers will be wanting to keep a close eye on how membership criteria/eligibility for it works in practice as inclusion in the scheme will likely be a key consideration for Insurers.
Developers have since queried the legality of the regulations and this may encourage challenges to the Responsible Actors Scheme, consequently resulting in the revision of the regulations.
However, such challenges will not be enough to help establish a framework for remedying fire safety issues in multiple occupancy buildings. To do so, all issues (some of which are mentioned above) have to be addressed. To make developers responsible for remedial works is merely one strand of this process.
Nevertheless, Insurers will welcome the encouragement and focus on accountability and responsible behaviour in the industry that the Responsible Actors Scheme will bring. This it is hoped will help to drive the standards of their Insured which in turn could lead to a reduction in claims to insurers.
The Government is hoping to obtain Parliament’s approval and bring the regulations into law by the summer of 2023. We will provide a further update on impacts after the regulations come into force.
Related item: Developers to bear the brunt of ‘building safety crisis’