Daniel Stern, Head of Property Litigation here at Slater Heelis, has been highly involved in the cladding issue debate since the Grenfell Tower tragedy in 2017. In this article, he shares his thoughts on a possible solution to the cladding issue.
Having had a number of articles published regarding the cladding issue which is currently gripping the country’s residential long leaseholders, and having advised clients in a number of prominent apartment blocks in this country regarding the issue, there appears to be some debate about how to resolve the issue and who should bear the cost of that liability.
I thought that I would try to lend my experience to that and raise a possible solution. I invite readers to comment on this to assist the unfortunate parties with resolving this issue once and for all.
Background
By way of brief background, for those who do not already know, the cladding issue arose as a result of the Grenfell Tower tragedy. The tragedy involved a residential block in London which, through a fire starting in one of the flats in the block, swiftly went up in flames and tragically many people lost their lives. The investigation which ensued thereafter determined that a large cause of the fire spreading so quickly was the flammable cladding which had been installed on the exterior of the building.
Consequent upon that, the Government reviewed its building regulations. It determined that any apartment block above a specific height with this type of, or similar, cladding would need to have it replaced.
The Problem
Typically, the terms of the long leases means that the cost of those works will usually, as a matter of law, be passed down to leaseholders. As such, they bear the financial brunt of the issue.
Leaseholders are understandably saying that this is not fair and that they purchased their apartment in good faith; that it passed the relevant inspections and building regulations requirements at the time that it was built, and that they did not anticipate this additional cost. This is true.
It is, however, also true to say that regulations develop and improve as a result of experiences, bad or good. As regulations are tightened, inspections have broadened and hopefully safety standards improved for everyone. Grenfell is one such instance in history of where this has happened.
Many leaseholders are saying that they cannot afford to pay the cost of these changes to their apartment blocks and some are even talking about bankruptcy being a consequence of those heavy financial demands.
Is there a possible solution?
One thing I have considered, and a possible solution I would like to suggest, is whether a long term loan scheme could be implemented by the Government at very low interest rates, secured by a charge against the relevant apartment.
The affected long leaseholder might, for instance, borrow the sum of money required to settle their share of the remediation costs, and pay it off at, for instance, £50 per month over a 25 year term.
The details of this would obviously need ironing out but the scheme might be something similar to the student loan scheme, except in this case when that person sells their flat, the loan would be transferred to the new buyer who would have to continue paying the loan through the Government. There obviously would be some adjustment to the sale price as a result of the Charge being secured against the property but this would, I hope, be minimal due to the length of its term and the minimal impact of the loan repayments.
This seems to me to be a more equitable way of managing the financial burden of the cladding issue, than debating whether the cost should fall onto the shoulders of developers, leaseholders or the Government (none of which I think are to blame for the issue having arisen in the first instance).
Please feel free to share your views and your experiences and join in the debate or recommend any other possible solutions with us!
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Should you wish to speak with our team about any other property litigation issue, they are on hand to help. You can call us on 0161 969 3131 or fill in our contact form and one of the team will be in touch.
If you would like to share your thoughts on Daniel’s suggested solution to the cladding issue, we are eager to hear your views. Email us at [email protected] with any comments or thoughts you may have on this.