Phase 2 of the Grenfell inquiry report was published in September. Ian Quayle considers its implications for property practitioners. 

The recent publication of the Grenfell Tower Inquiry: Phase 2 Report (inquiry report) on 4 September 2024 (tinyurl.com/ muzsxtu8) has implications for the construction industry, building owners, leaseholders and society at large. In this article, I focus on the effect of the findings on lawyers advising on transactional matters for clients involved in the ownership and management of higher-risk buildings and/or the leaseholders of flats and apartments.  

The necessary reform on the back of the report is still to come, but in the future reform will be introduced to give effect to its recommendations.  

Current position  

It’s important that a property lawyer undertaking residential or commercial property transactional work is aware of the risk status/classification of any building forming part of a transaction. 

The relevant building classification has positive benefits for both residential leaseholders and commercial tenants due to the application of schedule 8 of the Building Safety Act 2022 (BSA). Although the schedule is titled ‘Remediation costs under qualifying leases’, the addition of ‘et cetera’ to the title highlights that schedule 8 protects not only residential long leaseholders holding qualifying leases, but all residential leaseholders and commercial tenants (to varying degrees), where landlords are transmitting remediation costs for relevant defects into service charges.  

Here, however, we will focus on the status of higher-risk buildings (HRBs) and part 4 of the BSA.  

What are HRBs?  

An HRB is a building that is over 18m tall or consists of at least seven storeys and has at least two residential units. Unfortunately, what appears to be a clear and simple definition (at least within the scope of the BSA) has been complicated by how the height of a building is calculated and/or how the number of storeys is counted. The practical consequence of this is that clients and lawyers alike are unable or unwilling to determine the status of the building by reference to the BSA and its ancillary regulations. 

Registration of an HRB  

The government guidance initially provided some useful clarification on the need for an HRB to be registered with the Building Safety Regulator under the Building Safety (Registration of Higher-Risk Buildings and Review of Decisions) (England) Regulations 2023, which came into force in April 2023. The deadline for registration for existing buildings was 9 September 2023 and new buildings must be registered and have a relevant completion certificate or final certificate before residents can occupy it.  

Definition of an HRB  

An additional burden for transactional property lawyers arises as both the BSA and the accompanying regulations acknowledge that an HRB may contain one or more high-rise residential structures. So, whether a residential structure is a single building depends on whether that structure is connected to another structure either by a walkway, lobby or basement that contains a residential unit or an internal wall containing normal-use doors. If a higher-risk building is made up of more than one high-rise residential structure, it is necessary for the higher risk building to be registered, and for the Building Safety Regulator to be provided with information for each structure.  

Another complication arises due to the Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2023, made under section 62 of the BSA. Regulation 4 details what constitutes a “building” for this purpose by reference to the “structure” (which is defined as a “roofed construction with walls”), so that where:  

• a “structure” that is not attached to any other “structure”, that structure is a “building” 

•  a structure which is not attached to any other structure contains two or more “independent sections”, each “section” is a “building”, and 

• two or more structures are “attached”, that set of structures comprises a single “building”, but if they contain one or more “independent sections”, each such section is a “building”. 

An “independent section” is defined as “a section that: 

(a) has access, which can be reached from anywhere in the section, for persons to enter and exit the wider building; and  

(b) either  

(i) has no access to any other section of the wider building, or  

(ii) only has access to another section of the wider building which does not contain a residential unit.”  

For this purpose, access is a doorway or similar opening except where it is intended for “exceptional use”, including emergency use or for maintenance purposes. 

Exclusions 

It’s important to understand that the Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2023 exclude the following from being HRBs for the purposes of the BSA:  

• hospitals and care homes  

• secure residential institutions 

• hotels and motels  

• military premises, and  

• prisons as long as the building is comprised entirely of the types the regulations specify. 

Building and fire safety risks  

Part 4 of the BSA concerns HRBs and refers to “building safety risk”. This term is defined by section 62(1) to mean a risk to the safety of people “in or about” a building from the spread of fire, structural failure and any other prescribed matter that occurs.  

The concept of building safety risk is not irrevocable, and the BSA allows for additions to the list of risks that landlords are responsible for in an HRB.  

Where a building is higher risk or will gain that status on completion of construction, renovation or alteration, there are several consequences: 

1. Terms are implied into residential long leases due to section 133 of the BSA amending the Landlord and Tenant Act 1985. 
2. A new section 20D is inserted into the Landlord and Tenant Act 1985 requiring the landlord to take reasonable steps to ascertain both if grant funding is available to meet remediation costs, and whether money can be recovered from third parties, including insurers, developers or third parties involved in the design or maintenance of the building.
3. The building owner, accountable person or principal accountable person has additional building safety duties and obligations imposed on them.
4. It’s likely that residential leaseholders and commercial tenants are going to incur more service charge costs as a result of the additional management costs incurred as a result of point 2. 

The BSA also includes a number of fire safety measures, such as:  

• embedding fire safety in the design of buildings by introducing gateway 1, requiring HRB applicants to provide a fire statement demonstrating the approach to fire safety, and obliging the local planning authority to consult with the Health & Safety Executive (HSE) before determining a planning application  

• requiring a residents’ engagement strategy to be submitted in order to obtain a building assessment certificate (confirming compliance with obligations under the BSA following registration) 

• providing documentation to the residents or owners of residential units, including a fire safety case report setting out the risks in the building and how they will be managed, the residents’ engagement strategy and details of the complaints procedure, and 

• creating and retaining a “golden thread of information” relevant to the design and construction of the building, any building works, and the provision of prescribed documents – including any structural safety measures, maintenance and inspections undertaken, details of complaints and plans of the building that can be accessed by residents, the Building Safety Regulator and fire and rescue authorities. 

The BSA provides an opportunity for amending the definition of an HRB – see sections 120D–120H of the Building Act 1984 and sections 65–70 of the BSA.  

Recommendations of the inquiry  

A single regulator 

Despite the creation of the Building Safety Regulator in part 2 of the BSA, the inquiry report highlighted the fragmentation of construction regulation as problematic. The different government departments separately responsible for the building regulations and guidance, product regulation, the fire and rescue services and building control, was described as a “recipe for inefficiency and an obstacle to effective regulation”.  

The recommendation is for a single construction regulator – reporting to a single secretary of state, supported by a chief construction adviser responsible for all functions of the construction industry.  

Higher-risk buildings 

The inquiry report regards the current definition of an HRB to be arbitrary and recommends an urgent review of the definition of HRBs.  

As outlined above, the current definition is causing confusion for all concerned, but a more subjective and flexible definition could exacerbate the situation. Perhaps the answer lies in extending the existing requirements so that registration is not just dependent on height or storeys, but also on the mobility and vulnerability of occupants, the state and condition of the building and the existing fire safety measures. 

However, given the likelihood that some of these factors could fluctuate and the status of the building could change, making equivalent changes to building safety, landlord management and leaseholder compliance could create more uncertainty, not less.

Fire safety strategy 

The report also recommended introducing a statutory requirement for any building control applications (at gateway 2) for the construction or refurbishment of any HRB to be accompanied by a fire safety strategy, that is reviewed and resubmitted at the completion of any building works. The primary aim of the strategy is consideration of the needs of vulnerable people, including any additional facilities or time they may need to leave the building or reach a place of safety within it. 

This requirement is additional to the Phase 1 report recommendation that the owner/manager of an HRB should be required to prepare personal emergency evacuation plans for those with additional needs. 

Accessible record of recommendations 

The purpose of a publicly accessible record of recommendations is to ensure that any government is accountable for the decisions taken in relation to HRBs. This means if a government decides not to accept any recommendations that are made, it will have to record its reasons for doing so and report to parliament each year. 

Problems with contractors

To alleviate problems with contractors, the report recommends:  

• a licensing scheme, operated by the construction regulator, for principal contractors that wish to undertake the construction or refurbishment of HRBs, and  

• that any application for building-control approval for the construction or refurbishment of an HRB (gateway 2) is supported by a personal undertaking from a director or senior manager of the principal contractor to take all reasonable care to ensure that, on completion and handover, the building meets the regulatory standards to make it safe 

Other compliance factors  

Other recommendations include the following: 

1. As mentioned, a single construction regulator to take control over construction product compliance and specifically account for legislative requirements, statutory guidance and industry standards. 
2. A formal requirement or specific qualification for fire engineers, with legislation to define and protect the profession, and an independent regulatory body set up for that purpose. 
3. Fire risk assessors that are subject to mandatory accreditation and set up by the government in order to assess and ensure adequate competence and standards. 

Leasehold and Freehold Reform Act 2024 

The Leasehold and Freehold Reform Act 2024 (LFRA) has affected some issues concerning HRBs, although it has not clarified some of the identification issues discussed, nor has it put into play the recommendations of the inquiry report. 

Some of the issues concerning HRBs that have been affected include section 119 of LFRA introducing a new section 125A to the BSA. This is aimed at improving local authority and regulator awareness of buildings where the person with repairing obligations in relation to the relevant buildings is insolvent. It imposes new duties on insolvency practitioners who are appointed in relation to a responsible person for a higher-risk (18m or seven storeys) or relevant building to give specified information within 14 days of their appointment for the area in which the building is situated. If the insolvency practitioner is appointed in relation to an accountable person they will have to give the required information to the Building Safety Regulator.  

Section 115 of LFRA amends section 123 of the BSA to provide expressly that the First-tier tribunal (FTT) may order a relevant landlord to “do one or both of the following by a specified time: 

(a) remedy specified relevant defects in a specified relevant building;  

(b)take specified relevant steps in relation to a specified relevant defect in a specified relevant building.” 

Consequences for practitioners  

The BSA and all relevant regulations and guidance have attempted to generate certainty as to what an HRB is, but the situation for advisers and their clients is still wholly confused. Despite the height / storey test, it’s difficult to confirm whether a residential leasehold involves a property in a higher-risk building. In practice, all that can be done is to rely on information provided by third parties or confirmation that the building has been registered as a high-rise residential building with the Building Safety Regulator.  

The recent case of Blomfield v Monier Road Limited (Smoke House & Curing House, Remus Road) (2023) has recently added to the confusion.  

The case involved an application for a remediation order but during the hearing, the FTT had to consider the extent of the works to which the order related and whether the original contractors should be entitled to carry out the works. Of interest to the lawyers was the debate concerning whether the building to which the remediation order related was a higher risk building. The FTT concluded that the building was an HRB since it included a roof terrace containing a garden, which could be deemed a seventh storey.  

The significance of this decision is that the FTT was not prepared to follow government guidance published on 21 June 2023, which provided that “a storey must be fully enclosed to be considered a storey”. The FTT condemned the guidance for contradicting the statutory provisions.  

As a result of this decision, the Ministry of Housing, Communities and Local Government published a notice at the start of the guidance confirming that it and the Building Safety Regulator are currently considering the views expressed by the FTT. The notice advises that until stated otherwise, the sector and regulatory bodies should continue referring to existing government guidance. 

Transactional property lawyers need to appreciate and warn relevant clients that flats or apartments in buildings that are not currently defined as HRBs could become so where: 

• an airspace development occurs, increasing the height or number of storeys beyond the current limits, or  

• a building that meets the current height or storey requirements but is exclusively occupied by commercial tenants is converted to include two or more residential dwellings (note such dwellings do not have to be let on residential long leases). 

Given the findings in the inquiry report, it seems that regulations amending the definition of HRBs will in future have to consider the nature of the use of the building and the status of its occupants, particularly vulnerable people. Whether these amendments make it easier to spot a higher-risk building for the purposes of the conveyancing process seems unlikely. 

This article was originally published in Property in Practice and is reproduced here with the kind permission of The Law Society.