Update: Building Safety Fund

In March 2020, the Government announced that it would be launching a new £1bn Building Safety Fund (“the Fund”) to provide funding to both public and private sector building owners for the remediation of external wall systems containing dangerous non-aluminium composite material (ACM) cladding in buildings over 18m.

The government has now issued the prospectus for the Fund which sets out its scope and further details regarding the registration process. These are summarised below.

The Process

Applications are to be made via a two-stage process:

  1. The first stage is registration for the Fund which will open on 1 June 2020 and will remain open until 31 July 2020. At registration, applicants will be asked to self-certify the eligibility of the cladding system and to provide initial information regarding the composition of the external wall of the relevant building. A list of the intended questions may be found here.
  2. The second stage is following registration the Department will contact applicants and request evidence which supports their technical eligibility for the Fund i.e. evidence as to the height of the Building and the external wall construction. This may include, for example, providing as built drawings, operation & maintenance manuals, reports from suitably qualified construction professional and/or photographs of product labelling.

The Department will work with building owners to ascertain the build-up of the external wall and determine eligibility for the Fund. The full details of the application process for buildings which fulfil the criteria will only be available at the end of July 2020. However registering by 31 July will be essential to any building owner who thinks they may qualify as funding will only be available to those who register (with the exception of social housing providers seeking partial recovery of increased service charge – see below).

Applications will be dealt with on a first come first served basis. Once the funding is allocated up to the £1bn limit, no further applications will be accepted.

Thereafter, a full funding application based on a tender price will need to be submitted before December 2020.

Scope of the Fund

Who may apply – In the private sector, the Fund is available to building owners, freeholders or the responsible entity for buildings over 18m (within a 30cm tolerance) which have, or may have, unsafe non-ACM cladding systems as part of the external wall and where there are leaseholders who would otherwise have to pay for the cost of remediation through a service charge.

In the social sector, the Fund is available to registered providers of social housing either:

  • Where they have residential leaseholders who would otherwise have to pay for the cost of remediation through a service charge; or
  • Where the cost of the required remediation works would threaten the financial viability of the provider or the Housing Revenue Account.

Registered providers of social housing with leasehold tenants may also make a partial claim under the Fund for the equivalent of the service charge increase which would otherwise be passed to leaseholders, including those in shared ownership properties. There is no need to register under the scheme for this funding.

What is covered – The Fund will cover capital remediation costs which are directly related to the replacement of unsafe non-ACM cladding systems. Therefore the Fund will not cover associated costs such as expert fees, the costs of interim mitigation measures such as a waking watch or other necessary fire safety works which do not relate to unsafe cladding (for example, internal fire-stopping).

Further, the Fund will not cover remediation costs for works which were committed to, or where work had started on site, prior to 11 March 2020.

State Aid – The State Aid Rules are aimed at preventing the government from giving advantages to some businesses over others in a way which could distort competition. Funding under the Fund will be granted as de minimis aid under EU Regulation 1407/2013 (De Minimis Aid Regulation) as published in the Official Journal of the European Union on 24 December 2013. The de minimis State Aid Rules impose a financial cap of €200,000 over three years for any State Aid provided to that undertaking.

The Government’s announcement states that where funding is provided to, or in respect of service charges payable by Registered Providers of Social Housing, these are likely to qualify as exempt from State Aid Rules. This must be a reference to the Social and General Economic Interest exemption. This will only apply to a RP’s social housing stock; it would not, in our view, apply to any PRS units which a RP holds under its investment powers.

For more information please contact Mark London or Merrik Morgan.

The Government has issued its prospectus for the promised £1billion fund to remediate non-ACM cladding.

RPs will need to decide before 31 July whether they (or, where applicable, a group entity) should register for the Fund, but the decision may not be as straightforward as one would think. In our recent article, we provide an outline of the Non-ACM Building Safety Fund and the steps RPs should be taking.

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