Housebuilders have five weeks to agree cladding deal – what does it mean for leaseholders?

Major developers have little more than five weeks to agree to a cladding remediation contract, or face being frozen out of the housing market.

The government has issued the ultimatum in an effort to offer greater security to thousands of innocent leaseholders still living in high-rise flats with unsafe cladding.

Housebuilders received the legally binding contracts from the Department for Levelling Up, Housing and Communities (DLUHC) last week, and are now required to sign.

The government has indicated there will be 'significant consequences' should they fail to comply with the terms.

Here, Which? delves into what impact this will have on the nationwide cladding scandal, and how leaseholders will be affected.

What does the contract mean for leaseholders?

For years, leaseholders living in flats with dangerous cladding have been crippled by unfair costs.

This new legislation, due to be implemented in spring, aims to ensure that no leaseholder living in a building more than 11 metres (five storeys) in height will have to pay for the removal of dangerous cladding. 

The contract will require developers to inform residents how they will meet remediation commitments. Once work to replace unsafe cladding is complete, an independent fire safety assessment will be carried out – if the work is found to be shoddy, the developer will have to fix it.

Developers will also be required to reimburse taxpayers' money already spent on repairing unsafe tower blocks.

What about leaseholders in buildings under 11 metres tall?

The law will not cover buildings with fewer than five storeys in height.

The government does not believe protection needs to be extended to low-rise buildings, as outlined by a parliamentary secretary in the House of Lords last week.

Baroness Scott of Bybrook said: 'I would like to emphasise that the risk to life from historical fire safety defects is much lower in buildings under 11 metres. That is no excuse, but it is rare for these buildings to require building-safety-related remediation works. 

'The government’s assessment therefore remains that extending the protection to buildings under 11 metres is probably neither needed nor proportionate, but we will work with leaseholders and agents of these buildings if they have specific issues.'

Critics remain frustrated about the 'oversight', and continue to the lobby the government for further leaseholder support. 

But in the wake of the crackdown on high-rise developers, the End Our Cladding Scandal group has welcomed the move, hailing it as a 'positive step forward'.

Major developers poised to sign-up

Last year, 49 development firms pledged to the government that they would take responsibility to fix and pay for repair work to their own buildings. 

Those pledges are now poised to turn into legally binding commitments, with the government hopeful all those who gave their word will now sign on the dotted line.

Two of the country's biggest housebuilders, Persimmon and Barratt, have indicated they will agree to the legislation. 

Persimmon stresses that the 'contract reflects our existing commitments to repair homes', while Barratt says it will be 'carefully considering the detail with a view to signing it over the coming weeks'.

Under the contract, developers will commit an estimated £2bn or more for repairs to buildings they developed or refurbished over the past 30 years.

• Find out more: your rights if you live in a unsafe building

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'Significant consequences' for failing to comply

Housebuilders that refuse to sign the contract by 13 March will be banned from carrying out further development. Under the Responsible Actors Scheme, they will not receive building control sign-offs for schemes they already have under construction, essentially freezing them out of the housing market.

Speaking last week, Michael Gove, the secretary of state for the DLUHC, said: 'I expect developers to sign the contract by 13 March.

'This includes every company that signed the pledge, as well as several companies that have regrettably not done so. 

'If you built unsafe buildings over 11 metres but did not sign the pledge, I am putting you on notice; expect to be asked to step up in the near future.

'There will be nowhere to hide for those who fail to step up to their responsibilities. I will not hesitate to act and they will face significant consequences.'

What about smaller developers?

The stark warning is hoped to result in signatures from all major developers, yet there is uncertainty over smaller and more local firms, as the contracts have only been sent to the larger housebuilders.

It therefore means that in April, when legislation is introduced, the high-rise blocks built by smaller developers will not legally need to be remediated. 

Gove said an expansion of the scheme 'to make sure we capture all those who built unsafe buildings' will be consulted on 'in due course'.

• Find out more: five costs the cladding scandal has piled on homeowners

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Other steps being taken to address the cladding scandal

Last month, six major banks shifted their lending policies on offering mortgages on flats in high-rise buildings with cladding.

Barclays, HSBC, Lloyds Banking Group, Nationwide, NatWest and Santander will now consider mortgage applications on affected properties, allowing trapped flat owners to sell or remortgage their homes more easily.

The government's Building Safety Levy plans to raise £3bn to help fund the remediation of unsafe tower blocks for which developers cannot be traced or identified. 

Courts have also been given new powers to stop 'shadowy shell companies' being used by housebuilders.

What's more, the government plans to ban managing agents and freeholders from taking commissions when they take out building insurance, and make service charges more transparent.

Campaign groups who have long called for action say the measures are 'overdue' following the Grenfell Tower tragedy in 2017. 

• Find out more: our coverage of the cladding scandal