We reported in our recent Law-Now (available here) on the Scottish Government’s anticipated cladding remediation bill. The first draft text of the Bill has now been published and introduces two key mechanisms to approach the risks arising from potentially dangerous cladding: the use of Scottish Building Assessments and a Cladding Assurances Register, and a Responsible Developers Scheme.
Scottish Building Assessments
The stated aim of the Bill is to undertake a census of Scotland’s housing stock, conducting Scottish Building Assessments (SBA) on those with potentially dangerous cladding. The focus is firmly on multi-residential buildings over 11m in height, and with a form of external cladding wall system. The buildings must also have been built or refurbished between 1 June 1992 and 1 June 2022, showing the emphasis on rectifying historic issues. The Bill does however provide scope for this to be extended to properties of other ages or heights in the future.
The Bill sets out a power for the Scottish Ministers to review properties and order an SBA be undertaken where this has not already been done. The output of the SBA will be a recommendation as to whether work is required on the property to eliminate or mitigate a risk to human life directly or indirectly created or exacerbated by a building’s external wall cladding system.
This formulation of the test raises difficult questions for properties where external cladding issues interface with other fire safety concerns, such as passive fire protection defects. Would an SBA recommend work on the external cladding system if it were only required in order to mitigate a risk arising from, for example, the presence of potentially combustible insulation or missing cavity barriers? This will only become clear once the technical standards against which properties will be assessed in an SBA are published by the Scottish Ministers. Until then, it is unclear whether there is the potential for the scope of the scheme to extend further than anticipated in touching on non-cladding fire issues. If not, there is a question as to what value completing the work required under an SBA would have if other fire safety issues have potentially been left unaddressed.
The Bill allows an SBA assessor to approach those involved in the construction of a building for information on its construction, specification and the materials used. This must either be provided, or a reason given for it no longer being available. As the Bill also makes it a criminal offence (with individual criminal liability) to knowingly or recklessly provide incorrect information to an SBA assessor, this places additional pressure on those involved in historic projects which might now come under scrutiny.
Cladding Assurances Register
The Bill also acknowledges the impact that uncertainty on this issue has had on property owners and in the housing market. It therefore proposes the creation of a Cladding Assurances Register which will list properties where an SBA has been undertaken and either (i) no work is recommended or (ii) all work recommended has been undertaken. This will be accessible by, among others, conveyancers and mortgage lenders, with the hope that the market for these properties will be strengthened by the assurance a review has been undertaken and issues resolved. This raises significant questions for professional consultants agreeing to undertake these assessments as to who is entitled to rely on them (and whether it is possible for a consultant to limit this) and what liabilities might result from an assessment incorrectly carried out. It is also unclear whether this is a role which professional liability insurers will be willing to offer cover for. The SBA is likely to be a highly technical specialist assessment, and if the Scottish rules prescribe that a wide range of parties are able to rely on its conclusions, that may be too high a risk to be attractive to insurers.
Responsible Developers Scheme
The Bill anticipates the cost of the Scottish Building Assessment programme and resulting remedial works being funded from the £400m funding received from the UK Government. While for England this is being part-funded by the Building Safety Levy, the Scottish Parliament does not currently have the devolved power for the same to be introduced in Scotland. This is being sought, and so a similar levy may yet be introduced.
The Bill does however envisage the creation of a Responsible Developers Scheme, similar to that put in place by the UK Government for England. The aim of this is to support negotiation of Scottish Government Developer Remediation contracts, again similar to those in England. A number of developers have already committed, in principle, to funding remediation work for Scottish properties. While the details are to be set out in secondary legislation, the intention seems to be to mirror the approach of the English system.
To encourage developers to join the register, significant penalties will apply to those who are eligible to join the Register but do not. The conditions of membership are to be set out but look likely to include having (i) proactively undertaking SBAs on properties they have a connection with, (ii) making financial contributions towards remedial works, and (iii) assisting in the provision of information. A list will be published of ‘prohibited developers’ who are in principle eligible for membership, but have not satisfied the conditions – for example, by not making financial contributions to rectification works. These ‘prohibited developers’ will face sanctions including restrictions on future developments in planning law.
This draft text follows closely behind the Scottish Government’s initial announcement of the future bill, showing that this remains near the top of their legislative agenda. The proposals are however firmly focussed on historic issues, though the establishment of a Responsible Developers Scheme could encourage cultural change within the industry for future developments.
The Bill does show that while acknowledging the approach of the UK Government, the Scottish Government intends to take its own path. One example is in the mechanism for addressing these issues – while the UK Government has firmly adopted a grant-based system, the Scottish Government will be using a direct procurement model going forwards. This could be justified by the lower volume of buildings potentially requiring remediation in Scotland as against England. Initial surveys suggest 732 buildings across Scotland which might require work, the vast majority of which are concentrated in the local authorities in Lothian, Glasgow and Aberdeen. This does though indicate the Scottish Government intends to keep a tight rein on the approach going forwards.
Funding approaches also diverge as a result of the legislative difficulty in establishing a Building Safety Levy in Scotland. This has turned the focus to encouraging developers to rectify issues – with potentially significant sanctions if they do not engage. If this has the presumably intended effect of developers meeting part of the cost, we are likely to continue to see claims being made against their project team to seek to recover this. Combined with the cladding products right of action under the Building Safety Act 2022, this could allow recovery back on projects dating back to 1992 – incentivising developers to pursue these historic claims against their contractors and design teams.
The Bill has therefore provided helpful clarity on the Scottish Government’s approach going forwards, even if much of the detail of the proposals is yet to come. Cladding issues will however remain on the agenda for some time to come.