Partner Gurpreet Sanghera analyses the news that developers will be forced to accept responsibility for the costs of the cladding crisis, in Edward Fennell’s Legal Diary
Gurpreet’s article was published in Edward Fennell’s Legal Diary, 4 March 2022, and can be found here.
Four and a half years since the Grenfell Tragedy, the Housing Minister Michael Gove has announced that developers will be forced to face the music and accept responsibility for the costs of fixing the cladding crisis.
Many developers have sought to avoid liability by relying on legal loopholes as many leaseholders have no direct cause of action against them or simply cannot afford to fund the costs of litigation.
Whilst commending several developers for doing the right thing, Gove made it clear that the time has come for developers to end the misery they have inflicted on innocent leaseholders faced with endless bills from their freeholders.
There is no doubt that many developers will have taken a step back in the hope that the government would step in and provide funding to fix the problem that they created. However, in a letter addressed to the Residential Property Developer Industry, Gove makes it clear that the government is prepared to take all necessary steps including restricting access to government funding and the imposition of a solution in law if necessary.
Developers are seeking to resist the proposed action by arguing that it would be unfair to place the entire cost on the developer without considering the roles of other parties, including the building safety regulator and cladding construction companies. The one shoe fits all approach may not be the best way forward. One possible way to redress the balance may be to create a mechanism that would enable developers to seek remedies from third parties, where it is subsequently established that they are also at fault.
What does seem to be clear however is that leaseholders should not be the ones to incur the costs and headache associated with fixing the problem and developers that have behaved badly should be penalised.
The introduction of a new 4% tax to be applied to larger developers on profits from 1 April 2022 will include those developers who have done the right thing. It may therefore seem unfair to penalise the entire industry for the failings of a few.
