With the recent publication of the Government’s proposals “Building a Safer Future” in response to Dame Judith Hackitt’s final report following the Grenfell Tower disaster, now is a good time to take stock of where we have come over the last couple of years in terms of the fire safety regime for tall buildings and generally and where we may end up and, so far as insurers are concerned, the possible implications for insurance risks in the construction, design and property maintenance sectors.
Given the scale of the disaster on 14 June 2017, the Government were quick to announce – on 28 July 2017 – an independent review of the building regulations and fire safety by Dame Judith Hackitt, the former chair of the HSE. To her great credit, Dame Judith also worked quickly to produce an interim report on 18 December 2017 and her final report on 16 May 2018.
Most readers will recall only too clearly Dame Judith’s strong criticism of the “culture” of the building industry, which she said incentivised a “race to the bottom” in terms of standards, and also her description of the building regulation regime as being “not fit for purpose.” In her final report, she made 50 specific recommendations, but she sought to emphasise the need for wholesale change of the regulatory system not just the individual regulations surrounding cladding or fire safety.
To what extent has the Government taken on board her recommendations?
Over a year after the publication of her final report, the Government’s draft proposals, “Building a Safer Future” have been issued for public consultation. The Proposals cover the following issues:
- The types of buildings which the new regime will cover.
- The introduction of a new “Dutyholder” regime setting out statutory responsibility for the safety of such buildings.
- The involvement of residents in the new regime.
- The introduction of an effective regulatory and accountability framework for the new regime.
- Enforcement, compliance and sanctions.
We deal briefly below with each of these issues and the possible implications in terms of insurance risks.
What types of buildings will be included in the new regime?
The current fire safety regime for high rise buildings is based on the height at which the fire and rescue service’s equipment such as wheeled escape ladders can safely reach (although such ladders are now obsolete). Dame Judith recommended applying the new regime to buildings over 10 storeys, but the Government has, cautiously but understandably, proposed that it applies to all buildings of 6 storeys (18m) or more occupied by multiple households. The Government has also indicated that other low-rise buildings where people sleep (e.g. prisons, hospitals, schools and sheltered accommodation) may be included in the regime. It seems likely that they will include all high-risk buildings which means that the new fire safety regime (when introduced) will apply to all multiple occupancy buildings. Many of these buildings are managed by professional property managers and it is likely that they will have significantly more onerous liabilities as a result. We deal with this issue in more detail below.
Who will be legally responsible for complying with the new regime?
The Government intends to impose statutory duties on those responsible for the safety of the buildings during their life, termed “Dutyholders”. It is proposed that the dutyholder will have different responsibilities at different stages of the building life as follows:
- Design and build stage – during this stage specified dutyholders will be responsible for ensuring that the design and construction of the building complies with building regulations at various “gateway points”. The proposals specify three such points: (i) pre-planning; (ii) pre-construction; and (iii) pre-occupation. The proposals do not, as yet, specify who will be earmarked as such but it is likely that all relevant contractors, designers and other relevant professionals as well as the building owner/developer will be so specified.
- Occupation stage – during this stage, the Government proposes to create a new “accountable person” who will be the dutyholder responsible for making sure that the building is as safe as reasonably practicable when people are living in it. The accountable person may employ a “Building Safety Manager” to deal with day to day issues.
- Life cycle – the dutyholder will be responsible for the “golden thread” of building information, including fire safety, throughout the life cycle of the building which will be accessible to the regulator.
Ordinarily, the building owner will be primarily responsible as dutyholder throughout the life of the building. However, others may be responsible as well particularly during the design and build stage and the Government has also indicated that developers, managing agents and enfranchised leaseholders could also be dutyholders. Clearly this could have very serious implications for the liability of, say, managing agents of any buildings subject to this regime and insurers will need to consider carefully the implications in terms of risk. Indeed, many managing agents may not be willing or able to take on such a huge risk and insurers may not be willing to insure that risk.
How will residents be involved in the process?
It is proposed that the accountable person must provide residents with all the information they need to understand the fire safety protection in place and residents should be able to request more detailed information if they want. One assumes that most building owners will appoint their managing agent as the accountable person or as the Building Safety Manger and that person or entity will owe a statutory duty of care to the residents.
If introduced, as seems likely, this proposal is likely to be a fruitful area for complaints and claims by disgruntled or difficult residents in the future. While, in the absence of actual damage to the building, it may be difficult for the residents to prove loss, it is possible, indeed quite likely, that such complaints will lead to regulatory or disciplinary proceedings by the new regulator or, possibly, the professional’s own regulatory body. These types of proceedings are often protracted and expensive to deal with and will therefore increase the risk for regulated professionals who take on the role of accountable person or the Building Safety Manager.
New regulatory regime
Dame Judith proposed a new regulatory framework comprising various existing regulatory bodies such as Local Authorities and the HSE under what she called a Joint Competent Authority (JCA).
The Government have instead decided to introduce an entirely new regulatory regime for the safety of all buildings including high risk ones under a new “building safety regulator”. This person will be responsible for overseeing and enforcing the new regime effectively in order to increase standards of competence in relation to all people involved in the design, construction and management of high risk buildings and more generally. It is intended that the regulator will have a wide-ranging role including in relation to (i) construction products critical to safety, (ii) strengthening regulations and (iii) setting minimum standards for independent assurance schemes in relation to construction products.
It is of course too early to say what the effect of this proposed new regulator will have on the industry. However, as is clear from the next section, one of the main reasons for its introduction is to ramp up the enforcement and sanctions regime which will have obvious implications in terms of insurance. Even if, as is currently the case, fines and penalties are excluded under most policies, many provide cover for the defence of such regulatory proceedings which will add significantly to the insurance risk.
Enforcement, compliance and sanctions
Dame Judith’s report found that those responsible for the safety of buildings were not often held to account by current regulators. It is proposed to create a new criminal offence and to give the new building safety regulator powers to take quick and effective action including penalties and fines.
It is also proposed to give private individuals a statutory right of action where buildings do not meet building regulation standards and they have suffered harm as a result. As indicated above, this proposal extends and reinforces the scope for claimant residents to pursue dutyholders and/or the accountable person or Building Safety Manager either personally or via the regulator.
The consultation period has now ended and it will be very interesting to see to what extent these proposals make it into law. Watch this space!
If you would like to know more about this matter, please speak to your contact at Plexus:
Simon Combe, Partner
T: 0207 220 5983 | M: 07770 437 787 | E: email@example.com
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