On 25 April 2023, the Government published the draft affirmative regulations Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023 which will govern a Responsible Actors Scheme (Scheme) for residential developers under sections 126-129 of the Building Safety Act 2022. It is anticipated that the regulations will be brought into law in England during summer 2023.
The purpose of the Scheme is to recognise action taken by responsible developers to identify and remediate, or pay to remediate, life-critical fire safety defects in residential buildings more than 11 metres in height that they developed or refurbished in England during the 30-year period prior to 5 April 2022. Members of the Scheme will be required to enter into and comply with the terms of a ‘Self-Remediation Contract’ – in other words the Developer Remediation Contract – which was issued by the Government on 30 January 2023 and has now been signed by the vast majority of the UK’s largest housebuilders. If they do not comply, the consequences will be far from trivial: they will be prohibited from carrying out major developments and obtaining building control approvals.
Eligibility criteria
Once a developer has fulfilled one or more of the following criteria, they will be eligible to join the Scheme. The relevant criteria are:
First criteria
- they are a developer whose principal business is “residential property development”, and they were responsible (other than solely as contractor) for the development or refurbishment of one or more “relevant buildings”; and
- they are a developer who meets the “profits condition”.
“Relevant building” is a building that:
- Is a residential building. A “residential building” is a self-contained building or self-contained part of a building, which:
- contains at least one dwelling held under a lease with a term exceeding 21 years or as commonhold land; or
- is owned by a registered provider of social housing (although, Regulation 6 of the draft RAS Regulations 2023 excludes such parties from eligibility for the RAS).
(a building does not cease to be a residential building just because it also contains non-residential premises.)
- Is at least 11 metres high.
- Is located in England.
- Was developed or refurbished during the “relevant period”, which is between 5 April 1992 and 4 April 2022.
“Profits condition” will broadly apply to any developer whose average annual operating profit over a three-year period (companies’ financial years ending 2017, 2018, and 2019) was £10m or higher (Regulation 11 draft RAS Regulations 2023).
Second criteria
- they are a developer who meets the “profits condition”; and
- they have developed or refurbished (other than just as contractor) multiple buildings that have been assessed as eligible for a relevant government cladding remediation scheme.
“Residential property development” covers those whose “principal business is residential property development” and the tests for establishing this are set out in Regulation 10 draft RAS Regulations 2023. Regulation 10(2)(b)(1) covers the Government’s intention that the Scheme would not apply to those who acted “solely as a contractor”.
The relevant government cladding remediation schemes are:
- the Building Safety Fund;
- the Private Sector ACM Cladding Remediation Fund; and
- the Social Sector ACM Cladding Remediation Fund.
Third criteria
- they are a developer who developed or refurbished (other than just as contractor) at least one “relevant building” that qualifies for remediation under the terms set out in the developer remediation contract and they volunteer to sign the contract and join the Scheme.
(Regulations 7, 8 and 9)
The test for whether a particular entity developed a property is widely drafted and includes group companies, even if they were not part of the group when the activity occurred (Regulations 7(2), 8(2) and 9(2)).
What is the procedure for joining the Scheme?
Once the criterion is met, the Government will invite the developer to sign up to the Scheme. A developer is required to sign up or make representations explaining why it is not eligible within 60 days. If a developer has not received an invitation from the Government, it is entitled to seek direction from them as to its eligibility (Regulations 13-16).
As well as maintaining a list of members of the Scheme, the Government will also keep a ‘prohibitions list’ of those eligible developers who either fail to join or, as a member, comply with its requirements (Regulation 20).
The Self-Remediation Contract
As a condition of membership, eligible developers who become members of the Scheme are required to sign up to a Self-Remediation Contract with the Secretary of State (Regulation 20). Where a developer has already entered into a contract on the same or substantially the same terms before the regulations come into force, they are treated as having satisfied that condition. This, of course, would apply to those developers who have signed the Developer Remediation Contract.
Under the terms of the Self-Remediation Contract (SRC Terms) developers are required to:
- identify those buildings for which they are responsible which require works to remedy fire safety defects;
- undertake, or procure at their own cost, the works necessary to remediate or fully mitigate any fire safety defects in their own buildings, where this is required and in accordance with the standards applicable to those works as provided for in the SRC Terms;
- accept responsibility for undertaking, or procuring, remediation works at their own cost to such buildings as they are required to or agree to accept under the SRC Terms;
- make payment to the Government of any amounts paid out by any government fund for remediation works on their own buildings as required by the SRC Terms;
- not undertake or procure others to undertake restructuring or other actions that would, or would reasonably be expected to, result in the member being unable to fulfil its obligations under the SRC Terms except in the circumstances allowed under the SRC Terms; and
- comply with all other obligations to which they are subject under the SRC Terms.
The Government may in the future add additional membership conditions through further secondary legislation.
What happens if a developer fails to sign up to the Scheme?
For those developers that are eligible but fail to sign up to the Scheme or do not comply with its requirements, there are significant consequences. Such developers will be known as a “prohibited person” and will be:
- prohibited from carrying out major development in England where major developed has the meaning given to it by article 2 of the Town and Country Planning (Development Management Procedure) (England) Order 2015 (SI 2015/595). This, among others, includes schemes providing ten or more residential units, residential schemes on a site at least 0.5 hectares in size, commercial development creating at least 1000 square meters of floorspace and development on a site more than 1 hectare in size;
- prohibited from gaining building control approval in respect of any building work requiring such approval, including approval to start work as well as completion or final certificates for completed work which in some cases may result in a notice to terminate or suspend work; and
- published on a list of entities to which the prohibitions set out in the regulations will be applied.
Prohibited persons must also notify the relevant local authority of this status when making applicable planning applications, and the Local Planning Authority where they acquire or transfer an interest in land that has the benefit of planning permission for major development (Regulations 30 and 31). A breach of the prohibition constitutes a breach of planning control.
The Scheme also includes a list of documents a prohibited person is prevented from giving, including:
- deposit of full plans, notices of passing of plans, and plans certificates;
- initial notices;
- completion certificates, final certificates, and certificates for buildings occupied before work is completed;
- any other building control approvals, including:
- building notices;
- amendment notices;
- a notice of variation of work to which an initial notice relates; and
- regularisation certificates.
What happens next?
Any developers meeting the eligibility requirements should be aware of the regulations, even if they have already signed up to the Developer Remediation Contract, and where they have already signed they must ensure compliance with its terms. Failure to do so may result in a warning and ultimate expulsion from the Scheme, with the consequences that apply to a prohibited person. As the Developer Remediation Contract is complex, developers should also make sure that they fully understand their obligations under it.
More information on the draft regulations can be found in the Explanatory Memorandum.