Combustible Cladding Removal - Who will pay the cost?

Following the Grenfell disaster, the Government announced in May that it will fully fund unsafe cladding removal in social housing at an estimated cost of £400 million.

It said local authorities and housing associations, that are non-profit making, will be given access to the money to help with “reasonable costs of removing and replacing unsafe cladding from buildings over which they own to ensure people are safe in their homes”.

But the overall costs of making buildings safe are likely to be much higher.

The Government says building owners in the private sector must also ensure private sector homes are also made safe.

A Government consultation is underway on banning the use of combustible cladding on the external walls of high-rise residential buildings. But there are questions over whether or not the scope of the overall consultation is sufficient, by not fully examining the implications of using combustible cladding in non-residential buildings above 18 metres in height.

Therefore, all organisations that own tall buildings – including housing associations, public bodies, commercial landlords and institutional investors – could be affected, and may now be facing substantial costs that are not limited to the simple costs of removal and replacement.

Sites under construction

There are critical questions over what will happen with sites already under construction where it is proposed that cladding will be used.

• Will they still be built out as designed if they feature cladding that may be banned under the consultation - or will developers delay building work and await the outcome of the consultation?
• If development completions are delayed pending the consultation findings, significant costs are likely to be incurred, especially if designs and construction need to be altered.

Construction firms ands building owners do have the support of the government’s Building Safety Programme established by The Ministry of Housing, Communities and Local Government (‘MHCLG’).

With the support of local fire and rescue services and a panel of independent expert advisers, MHCLG says it is supporting owners of high-rise buildings (including hotels) in taking immediate steps to ensure their residents’ safety and in making decisions on any remedial work that is necessary.

The Government says it is aware that local authorities and other building owners are also seeking clarification of actions they should take in relation to buildings with other external wall systems.

Consumers are likely to pay

If (as seems likely) developers bear the costs of cladding removal and design changes, these are likely to be passed on ultimately to end consumers – i.e. property buyers – leading to further inflated building prices.

The Government, having already committed to £400 million, is unlikely to be willing to commit to further sums to assist developers with extra costs resulting from a ban on certain types of cladding.

Similarly, insurers are unlikely to be willing to bear the costs of removal of cladding currently deemed safe under current building regulations, but which subsequently ends up banned under the consultation.

Some combustible cladding is extremely effective in thermal insulation and so-called ‘safer’ cladding can be more expensive to buy and install.

Therefore, it is difficult not to see developers (who hold the trump card on the basis of the need for new properties to be built, and quickly) passing on costs to their property buyers - be they organisations, businesses or consumers.

Bevan Brittan Pre-Consultation Survey

The consultation asks some wide-ranging questions, and - with the process closing on 14 August - there is not a lot of time to respond. Bevan Brittan is undertaking a pre-consultation survey in order to gain input from our clients and colleagues. Please could you take 5 minutes to complete the questions in our survey.