The Building Safety Fund (BSF), introduced in March 2020, provides welcome support for the removal and replacement of unsafe, non-ACM cladding on high rise buildings. The application guidance (the “Guidance”) sets out the range of factors considered when an application to the BSF is made which will be considered by MHCLG, Homes England and the Delivery Partner.
Whether these bodies can adequately assess and determine the elements within the BSF application process is questionable – and has become increasingly apparent – but all elements of the funding criteria must be considered in detail, especially where an application has been declined on the basis that the requirements have not been satisfied. We address some of the key requirements within the Guidance below:
Whether the Applicant details match publicly held records
Although this is potentially a simple issue, the Applicant could be a landlord, management company, right to manage company or First-tier Tribunal (“FTT”) appointed manager. It is vital that the Applicant is the correct party, but where there are multiple parties involved in a complex hierarchy of leases and management, matters can become complex in determining who is responsible for the works and to be considered as the “Applicant” for the purposes of the BSF process.
The legal relationship between the Applicant and the leaseholders and whether the leaseholders are obliged to pay service charge
This is arguably the most important and interpretable element of the application process and encompasses two parts. The first linking to issue above. Having the correct Applicant is important to ensure that they are the correct party to incur the cost and pass the same on to the leaseholders via the service charge. Secondly, and a point of legal interpretation, is whether the costs for the remediation works are service charges which would be paid by the leaseholders. In some cases, this can be simply assessed on a quick review of the lease terms however some leases are not so easily deciphered. Where there is an issue of contractual interpretation as to whether a service charge is payable, this is usually an matter to be determined by the FTT Property Chamber, not the Delivery Partner or MHCLG, as provided for under the application process. Applicants should therefore fully assess their leases and if the service charge provisions are not fundamentally clear, advice should be sought as to whether an appeal should be made where an application has been declined on this basis. Such appeals, in most cases, will be advisable.
Compliance with State Aid rules
Compliance with State Aid rules is imperative as the leaseholders are the parties that ultimately receive the benefit of the funding. The funding is allocated to what would otherwise be paid via the service charge. Any missing Sate Aid forms will prevent the leaseholders who have not submitted their forms from receiving the benefit of the funding.
Whether the costs are for eligible works and are reasonable
The costs to be incurred for remedial works must meet the criteria of the “eligible works” set out within the Guidance. The BSF does not cover all remedial works which may be present including timber cladding for example. Careful consideration of the eligible works is required. If an application has been made to cover all aspects of the works including elements which are not included within the “eligible works” then part of the application will likely be declined. An expert may be required to assess the finer details of the works in conjunction with the “eligible works”.
Whether the costs of the works are “reasonable” is again a matter of legal analysis and one that in most instances, rests within the FTT and not with MHCLG or the Delivery Partner. Whether costs are reasonable can be complex especially for works such as this. Any decision of MHCLG is not determinative if a dispute arises as to reasonableness in the future and where some leaseholders do not receive the benefit of the funding due to State Aid rules. Any dispute as to the reasonableness of the cost of the works can only sensibly be determined by the FTT.
When the Applicant will start on site or execute the ‘Works contract’
The dates within the Guidance have changed previously as it was extremely difficult for many applications to meet the deadlines.
Future issues as to compliance with the commencement of works onsite is that cladding experts and contractors will need to be instructed to remediate many buildings across the country. It is well known within the industry that there are potentially not enough contractors to meet the need within the short deadlines set within the Guidance for works to start.
A decline of funding on this basis would seem grossly unfair.
The reasonable efforts the Applicant have made to recover costs.
A very complex part of the application process is the evaluation and assessment of whether there are any possible causes of action against any other party in respect of the works. This can include action against any party involved with the construction of the building including the developer and contractors etc., new build warranty providers (albeit the benefit of such warranties do not usually sit with the Applicant) and building control, to name a few.
Setting out a claim against any third party will likely require detailed analysis and could result in lengthy litigation potentially lasting several years if liability is not accepted. A possible claim against a third party could result in the decline of an application, even where such a claim may not necessarily be advisable. Careful consideration should be given as to whether an unsuccessful application on this basis should be appealed and legal advice sought.
In most cases an appeal is likely to be required where costs would otherwise be placed through the service charge, if only to assist in any reasonableness challenges in the future regarding the costs incurred for the works.
At the end of March, government figures that were 2,820 total registrations to the fund in England, with just 624 (22%) of these being advanced to receive funding. A total of 354 were deemed ‘ineligible’ and 238 were being further checked. A further 364 applications included some, but apparently of the not all of the supporting evidence required. With the deadline of the 30th June drawing ever nearer, ensuring that applications are fully eligible is of paramount importance.
About the Author:
Associate Katie Edwards joined JB Leitch in 2011. Katie’s role within the busy technical and complex department encompasses a variety of litigation and actions (predominantly in the High Court and Upper Tribunal) including acting for landlords and/or management companies as applicant or respondent.
Katie’s considerable knowledge and experience encompasses building safety, lease changes, notices, advice on the use of balconies, compartmentation and advising landlords and managing agents on their responsibilities of work.
