Leaseholders and cladding: Everything you need to know

Sarah Heatley - Forsters LLP
23rd February 2021
Cladding 218

It feels as though cladding is constantly in the news at present and, given that fire safety-related issues are currently adversely affecting approximately four million leaseholders, this is hardly surprising.

Last week the Housing Secretary, Rt Hon Robert Jenrick MP, pledged a further £3.5 billion in order to fully fund the remediation of unsafe cladding on residential buildings over 18 metres or six storeys high. Leaseholders in low-rise blocks between 11-18m in height will be eligible for a new government loan scheme under which repayments for cladding removal are to be capped at £50 per month. A developer levy to help fund these measures will be imposed on certain high-rise developments and a new tax on the residential property sector is to be introduced in 2022.

This latest announcement brought into sharp focus once again just how many people in the country are being impacted by cladding and associated issues, to date only about 200 out of approximately 12,000 affected buildings have been completely remediated. As a result, we anticipate seeing an increased number of claims being made but, additional financial assistance aside, it is clear that questions remain about exactly how to access the funding or how to make other types of claims if your building is ineligible for any reason.

Put simply, the key is to get organised and act quickly so that your range of options to recoup or claim the costs of remediation is not diminished.

So what options do I have?

Faced with the potentially exorbitant costs of cladding remediation property owners may have viable claims against a number of third parties in addition to funding. If and when a funding application is made, do not forget that you will need to demonstrate that all reasonable steps to recover the costs of replacing unsafe material have been taken from any party who might be responsible for its installation, or which might provide insurance cover.

It is therefore important to consider and explore the gamut of available options from the outset if dangerous cladding material is found.

The original developer or vendor and their building contractors may be liable for breaches of contract, in negligence and/or pursuant to the Defective Premises Act 1972 if a building has been built defectively or in breach of Building Regulations. Claims may also be viable against the architects, engineers, surveyors, material suppliers and cladding consultants and sub-contractors involved in the building project.

Most owners of new-build or converted residential buildings have new home warranties from NHBC, LABC or Premier Guarantee which may cover claims in relation to the structure and Building Regulation compliance.

How long do I have to bring claims against these entities?

Any claims need to be considered and brought in a timely manner, and there are strict deadlines for doing so.

The usual time period to bring a building defect claim is six years from the breach of contract or negligence causing the damage, which would ordinarily be the date of the first sale, but this requires court or arbitration proceedings to actually be commenced within this period. It may be possible to agree what is known as a 'Standstill Agreement' with a prospective defendant to extend this time limit but this may take time to negotiate and arrange.

In relation to new home warranties, like the NHBC, claims need to be made within eight to ten years of the completion of the building.

How much will court or arbitration proceedings cost?

It depends very much on the defences, if any, run by a defendant and whether the case proceeds to trial however, as, with any litigation, costs can be substantial. Whether you are a building owner, individual leaseholder or residents group, it will therefore be important to consider third party funding and costs insurance (which is available for sizeable meritorious cladding related claims) and groups should consider participation agreements when formal action is contemplated so that they can act together to defray the costs, seek insurance cover and/or instruct their advisors on a contingency basis.

So what do I do first and is there anything else to consider?

If you have not already done so collate details of the defects and then take urgent advice from a lawyer and building surveyor who has experience in fire safety-related issues. Building owners and leaseholders alike should consider from an early stage how the costs of invasive testing and remedial works will be met and transparency and collaboration in this connection will be key.

As a leaseholder it might be a good time to get more involved, or start, a Residents Association or Leaseholders Group and building owners should not forget to consider whether they need to carry out a formal consultation with the leaseholders about any steps they intend to take.

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