Govt mulls cladding proposal to ‘unlock’ mortgage prisoners

Govt mulls cladding proposal to ‘unlock’ mortgage prisoners

The UK government is looking at an amendment to its recent Building Safety Bill which campaigners say could “unlock” leaseholders in buildings with unsafe cladding, FTAdviser has learnt.

Campaigners led by Woolwich leaseholder Steve Day have created what they believe to be a solution to the cladding remediation costs currently threatening many of them with bankruptcy.

The issue has also created an estimated 2m mortgage prisoners who are unable to sell their homes because lenders refuse to lend to those interested in buying their flats because of concerns about cladding.

The amendment was dubbed a “matter of such importance” by the Earl of Lytton in the House of Lords last month, and has since been signed off by Daniel Greenberg - a parliamentary counsel acting in a private capacity on the bill.

It would place the responsibility of remediation costs on those who failed to make the grade in construction standards - rather than on leaseholders.

Called the ‘Polluter Pays Bill’, the scheme would work alongside the government’s grant schemes which are backed by £5.1bn in public funding remediation.

This money would be used to foot the initial bill. But over time, building companies would pay the government back based on the Building Safety Fund - a document which sets out how to calculate which parties are responsible for unsafe cladding and to what degree.

Day told FTAdviser this would provide lenders with a remediation plan and route to redress - something they have been lacking until now, hence leading to market-wide “log jams”

“This would see the insurance and lending industries utterly unlocked”, said Day.

Addressing the issue in the House of Lords, government minister Lord Greenhalgh said: "we are very aware of the polluter pays bill and the work that is being led by Steve Day.

"We are looking at it very carefully to see whether it could further enhance the proposed Building Safety Bill.

"This could provide further support to ensure that it is the polluter who pays. We are looking at that very carefully, as I said."

Scrapping 18m rule

The amendment intends to take away the rule which restricts the government’s £5.1bn funding to buildings over 18 meters only - hence alleviating pressure on all, rather than just some, leaseholders.

Financing in the amendment applies to two main scenarios. One is buildings which were defective upon construction, and the other is buildings which did keep to regulations in place at the time but which have since changed following the Grenfell Tower fire in 2017.

Parties which feature in the proposed repayment plan include developers, contractors, and parent companies where the original developer no longer exists, as well as material suppliers, and insurers.

If no-one is responsible, two levies of funding can be drawn on according to the bill. One from the industry - such as building companies - and one from ancillaries, such as cladding manufacturers.