Draft Regulations have this week been published in respect of the Responsible Actors Scheme – the industry scheme for residential developers arising out of the Building Safety Act 2022.
Aim of the scheme
Like the Act itself, the purpose of the Scheme is to
secure the safety of people in or about buildings
improve the standard of buildings by securing that the building industry remedies defects in buildings relating to fire safety; and
ensure that the building industry contributes to costs associated with remedying such defects
Applicability of the scheme
The scheme will apply to residential buildings (which are self-contained in whole or the relevant part), which are at least 11m high, which contains at least one dwelling held under a least of at least 21 years or is owned by a Registered Provider, and which was developed between 5 April 1992 and 4 April 2022. Mixed-use buildings which comply with all these required are also included.
Eligibility for membership
The scheme is open to residential property developers: -
- whose principal business is residential property development,
- who have been responsible for the development or refurbishment of one or more relevant buildings in the relevant period;
- who satisfy the profit condition set out in the draft Regulations; and
- who were responsible for the development or refurbishment of two or more buildings assessed as being eligible for funding for cladding remediation.
Such developers will be invited by the Secretary of State to join the scheme.
The definition of “principal business being residential property development” is that 50% or more of the company’s total adjusted operating profits for the specified period were derived from the development of residential property in the UK during the relevant period.
The profit condition, which applies to members, is that the company’s average adjusted operating profits are greater or equal to £10 million in the specified period. But if the company is deemed to be a residential property developer it will not cease to be eligible to be a member of the scheme simply because its adjusted operating profits fall below £10 million in any financial year after the specified period has ended.
Developers can volunteer to join the scheme if they have been responsible for the development or refurbishment of one or more relevant buildings in the relevant period, and at least one of the buildings would require remediation under the self remediation terms.
In addition, the Secretary of State may decide that in the event of an eligible company being wound up, another company in the group, including a company which does not itself meet the criteria, is to be treated as eligible to join the scheme. The aim of this provision is to prevent companies being wound up to avoid membership.
Procedure for joining
Companies will be invited to join the scheme by the Secretary of State if they meet the conditions outlined above, or if they have entered into a self remediation contract. Once an invitation has been received, the recipient must within 60 days both join and enter into the self remediation contact, and then notify the Secretary of State. If it fails to do so, the company will be put on prohibited list.
Companies who volunteered to join the scheme will be notified if they will be accepted. If they are, then they must also apply within 60 days.
Revocation of membership
Companies can have their membership revoked if they fail to comply with the scheme’s membership conditions, fail to provide information required by the Secretary of State or provide false or misleading information, or avoid membership. In such a case they will get a 28-day warning, and if they are still in breach, the Secretary of State will give the grounds for the proposed revocation and the reasons why they believe the grounds exist. The company can make representations or remedy the issue, but if they fail to do so then after a further 28 days their membership will be revoked.
Prohibition from development
But why does all this matter?
Because companies who were eligible to join but didn’t, or those whose memberships were revoked, or those who are controlled by an eligible non-members can be prohibited from carrying out major development of land in England, either themselves or through a contractor or agent.
Prohibited persons must declare themselves to be prohibited when applying for planning consent or Building Regs approval (unless the consent has already been applied for when the Regulations come into force, but any subsequent application will be caught). The company cannot be given any Building Regs notices, and plans and other documents provided will be invalid. The only exception is for developments which are for critical national infrastructure.
“Major development” is as defined in article 2 of the Town and Country Planning (Development Management Procedure) (England) Order 2015(a). This is development involving any one or more of the following:
the winning and working of minerals or the use of land for mineral-working deposits;
the provision of dwellinghouses where
the number of dwellinghouses to be provided is 10 or more; or
the development is to be carried out on a site having an area of 0.5 hectares or more;
the provision of a building or buildings where the floor space to be created by the development is 1,000 square metres or more; or
development carried out on a site having an area of 1 hectare or more.
There is an exception to prohibition if the development is for a single dwelling for an individual purchaser, providing that it is an arm’s-length transaction, where a prohibition would materially prejudice the purchaser’s interests.
Self remediation contracts
Developers are required to identify buildings for which they are responsible, and which require works to remedy fire safety defects. Once identified, they must:
undertake or procure, at their own cost, the works necessary to remediate or fully mitigate such fire safety defects; and
make payment to the government of any monies paid out on their buildings by one of the government funds.
Developers are prohibited from restructuring companies to avoid this liability or making payment.
The draft Regulations are much what was expected and follow directly on from the pledge that developers have signed. Clearly the prohibition on development is the stick; there is no carrot. The government’s position is just “improve or get out of the industry”.
If you have any questions about The updated Building Safety Regulations 2023, our Construction and Engineering team will be happy to help. Please get in touch for further information.