On 4 July 2023, the Regulations came into force bringing into effect the Responsible Actors Scheme for residential developers (the Scheme) as part of secondary legislation following the Building Safety Act 2022 (the Act).
The aim of the Scheme is to ensure that developers take action to remediate critical safety defects in residential buildings that they developed or refurbished. Michael Gove has emphasised that the Scheme ensures that those developers who fail to commit to remediation “will be out of the house building business in England entirely unless and until they change their course”.
The Building Safety Act
The Building Safety Act includes within it explicit provisions that are making the sweeping changes considered to be needed to the construction and real estate sector following the Grenfell disaster. In addition, it has wide-ranging powers for the Secretary of State to issue secondary legislation to bring about that change.
Sections 126 to 129 of the Act established the right for the Secretary of State to create schemes to ensure developers remedy defects in buildings and contribute to the cost of remedying defects. The Scheme imposes prohibitions on development where eligible developers fail to join the scheme or fail to rectify building safety risks for which they are considered to be responsible.
Developer pledge letter
The Scheme follows more than a year of discussion with developers including those in the House Builders Federation. That dialogue was publicised as relating to the “developer pledge” letter – a public pledge from 52 developers (as at 26 June 2023) committing to carrying out and funding fire safety remediation works, which set out what is now the skeleton of the Scheme.
Following the pledge, those who had signed the pledge were invited to sign a further “developer remediation contract” which set out the precise obligations for developers to investigate buildings they had a hand in developing and then remediating those buildings. As at 26 June 2023, 49 developers invited to sign the contract have done so.
Obligations
Where a developer is eligible to be a member of the Scheme, it must join the Scheme. Once a member of the Scheme, the developer is obliged to remediate, or pay for the remediation of, life-critical fire safety defects in residential buildings. The Scheme member must also refund any grant money already spent on remediating fire safety defects in relevant buildings. Members will also be required to enter into the developer remediation contract.
Penalties for not joining the Scheme
Where a developer is eligible to be a member of the Scheme, it will be prohibited from carrying out major development of land. Major development of land includes any of the following:
- schemes providing 10 or more residential units;
- residential schemes on a site at least 0.5 hectares in size;
- commercial development of 1,000m or more floor
space; and - development sites over 1 hectare in size.
This prohibition may only be disapplied by application to the Secretary of State if the development relates to critical national infrastructure.
An eligible developer that fails to join the Scheme is also subject to building control prohibitions meaning the developer will not be able to give or receive relevant notices, certificates and applications. There are some limited exceptions to this rule, for example in relation to emergency repair work.
Who is caught?
The Scheme applies to:
- residential developers whose principal business (more than half of its business) is residential development, that have developed one or more residential building of at least 11m height; and that meet the “profits condition” discussed below;
- anyone that meets the “profits condition” and has developed or refurbished two or more residential buildings of at least 11m height that were eligible for
any of the cladding remediation grant funding; and - anyone that has developed or refurbished at least one residential buildings of at least 11m height and volunteers to join the scheme.
The “profits condition” is a page-worth of legislation (which would need detailed review in borderline cases) that boils down to an average annual operating profit over a 3-year period of £10 million or higher.
The Scheme does not apply to registered providers of social housing (or any of their wholly-owned subsidiaries). This does mean that where registered providers have entered into joint-ventures with developers, they might be caught.
It also appears that local authorities’ subsidiary local housing companies may be caught by the Scheme.
What now?
Over the coming months we should expect to hear DLUHC using the weight of the Regulations to enforce the requirements on developers to take responsibility for defects and repay grant funding.
