Update: Building Safety Fund – Social Housing Providers

The Government has now published further guidance to social housing providers on the claims process they will need to follow in order to make an application in the second round for the £1 billion remediation fund for non-ACM cladding.

The government is clearly keen to see remediation works take place swiftly and as such, the fund monies will only be available within the 2020/21 financial year. Payments under the fund will be made on a first come first serve basis and only to applicants who can satisfy the Government that they could otherwise claim the cost of the remedial works from their leaseholders and that the principle contractor will be on site and that works will have commenced by the 31 March 2021 (and not before 11 March 2020).

Who is eligible?

The person eligible to apply for funding under the grant will be the responsible entity for the building. This is the organisation that has the right to carry out works on the building and has the right to then recover those from the leaseholders in the form of a service charge.

The Government will request evidence of such eligibility during the application process, such as by requesting copies of sample leases from the claiming organisation.

What can be claimed for?

Applicants will only be able to apply for remediation of unsafe non-ACM cladding on high rise residential buildings that are at least 18 meters in height. The sort of costs eligible under the fund might include the replacement of the cladding, professional fees and managing fees.

The fund will not, however, allow for the betterment of the building, for example wider redecoration or replacement of internal or non-structural areas that are not directly related to the non-ACM cladding. This is true even if such works are taking place at the same time as the remediation of the non-ACM cladding. The fund will also not cover further fire safety works that do not directly relate to the non-ACM cladding.

When can I apply?

The application process opened on Friday 31 July 2020 and application forms must be returned by 31 December 2020. As mentioned, the fund is limited to £1 billion on a first come first serve basis, and uptake is expected to be high. As such, to ensure that all the required funds are received, providers of social housing should ensure that they make their application as soon as reasonably practicable.

It should also be noted that building owners will be expected to apply on a building by basis to ensure that works on one building are not delayed by issues relating to another building. For instance, if the applicant could not provide sufficient evidence that works would begin before 21 March 2021 on all but one building, the Government is keen to ensure that the works on the remaining buildings continue unimpeded.

Evidence requirements

The Government will request evidence from a percentage of claims to confirm and validate their eligibility. It is therefore recommended that the following documentation is collated on each relevant building in the event that it is requested:

  • Original specifications or drawings.
  • As-built drawings.
  • The operation and maintenance manual for the building.
  • The Regulation 38 package of fire safety information.
  • A survey of the cladding system carried out by a building surveyor or fire engineer.
  • Photographic evidence of the materials (including product labelling where available) as installed in the external wall system.
  • A copy of a precedent lease for each building

Confirmation that the cost of the remedial works is recoverable under the service charge provisions of the lease should also be sought before making an application.

Applicants will be expected to self-certify any evidence that is used in support of their claim, with a declaration of truth being required.

State Aid

Any payments made under the Fund must comply with state aid regulations. State aid is any advantage granted by public authorities through state resources on a selective basis to any “Undertaking” (i.e. any entity engaged in an economic activity) that could potentially distort competition and trade in the UK or the EU.

Although it will be the applicant that will receive monies from the Fund, for state aid purposes the funding is deemed to be for the benefit of the leaseholders in the relevant building who would otherwise incur the cost of the remedial works through service charge provisions. The Government is relying upon the de minimis exemption under state aid rules to ensure that the funding is permitted state aid. Under the de minimis exemption the maximum amount of public funding (from all UK sources, including central and local government) that can be provided to any one Undertaking is €200,000 over a three-year fiscal period.

The Fund prospectus makes clear that an Undertaking is any leaseholder in the building who uses their property for financial gain, for example if they rent it out or use it for business purposes. A leaseholder that owns and occupies their dwelling as their principal home is not regarded as an Undertaking.

RPs applying under the social sector tranche of the Fund must take reasonable steps to identify Undertakings and should start distributing State Aid Declarations (“Declarations”) to such leaseholders now. Declarations should be accompanied by an explanation that those leaseholders that consider themselves to be Undertakings must sign and return the Declaration to the RP and that leaseholders who are not Undertakings do not have to sign and return a Declaration. A form of wording to send out to leaseholders can be found here.

A Declaration will not need to be completed by a shared ownership leaseholder who has not staircased to 100% ownership, as they are not classed as an Undertaking. A Declaration will be required from all other leaseholders (for example those properties which have been sold on open market terms, or under right to buy legislation, or leaseholders that have staircased to 100%) who are responsible for paying a service charge and who who have let their property for financial gain.

Where an Applicant does not receive back a completed and signed Declaration from a leaseholder within 30 days, the Applicant may then assume that the leaseholder is not an Undertaking as long as it has taken reasonable steps to identify Undertakings and it is reasonable to assume that a leaseholder who has not provided a Declaration is unlikely to be an Undertaking. If at any point during the application process (including after funding is approved) an Applicant does receive a signed and completed Declaration back from a leaseholder, the Applicant must update their delivery partner accordingly.

For more information please contact Mark London, Rachel Jones, Merrik Morgan or Yaasica Hamilton-Haye.

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