Fortune Favours The Brave

Navigating the Building Safety Act for Insolvency Practitioners & Property Receivers (P2)

• Howden Insurance Brokers Ltd • Episode 2

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Welcome back to part two, where our host Dan Williams, together with Steve Cox and Emily Clift, helps to unlock the complexities of the Building Safety Act and steer through its implications for insolvency practitioners and property receivers.
 
This episode peels back the layers on the occupation phase of high-risk buildings, detailing the pivotal role of IPs in upholding the safety and compliance demanded by this new legislation. They dissect the responsibilities of the newly-minted duty holders - the accountable person and the principal accountable person - and the steps necessary for IPs to ensure these high-risk buildings meet the rigorous standards set forth by the Building Safety Regulator.

This is no ordinary walk through legal jargon; it's a strategic briefing on navigating the high-stakes environment of building safety management. By dissecting case studies and the latest guidelines, Dan's conversation with Steve and Emily transforms complex regulations into actionable insights. They arm you with the knowledge needed to tackle building assessments head-on, manage older constructions with due diligence, and grasp the extended limitation period for habitation claims that hangs in the balance of the Supreme Court.

For IPs and receivers, this episode is an essential toolkit for mastering compliance, championing resident safety, and steering clear of the legal entanglements that lurk in the shadows of high-risk property management.

Katy Norman:

Welcome to Howden's podcast Fortune Favors the Brave. We all take risks in our everyday life, and business is no different. In this podcast, we're speaking to the experts about a topical challenge or issue and what business leaders can do to overcome it.

Dan Williams:

Welcome back to Fortune Favors the Brave, where we will continue our discussion around the Building Safety Act in relation to insolvency practitioners and property receivers. In this episode, we will focus on the occupation phase. So welcome back to our guests, steve Cox from Howden and Emily Cliff from Kennedy's. So, with regards to the occupation phase of a high-risk building, quite a common scenario that an administrator or property receiver will be appointed over a property that's picked up within that high-risk definition. Steve, in terms of the key duties that an officeholder would have in relation to the occupation phase, what would be some of the key highlights that they would need to consider?

Steve Cox:

Yeah, so I think probably worth exploring first is the sort of the duties and who the duty holders are under the occupation phase. The Act introduces new duty holders being the accountable person and the principal accountable person. An accountable person is an organisational or an individual that's got legal obligation to repair common parts of a building. Where there is only one accountable person, they will also be the principal accountable person. Where there's multiple accountable persons, the principal accountable person is going to be that person that has responsibility for the structure and the exterior of the building. Worth noting at the outset that office holders will not be accountable persons or principal accountable persons, but they may owe duties to them. So, returning to your question, what those key duties are, it's essentially the the ip or the receiver will be looking to to pick up and fulfill the the various requirements of the occupation phase of the Act on behalf of either the company or the property owner that they are acting for. Those primary duties are initially to register the building, the BSR. The registration window opened on the 1st of April 2023. It actually closed on the 30th of September, so theoretically, all higher risk buildings should have already been registered, but probably fair to say that's not going to be the case.

Steve Cox:

Once it's been registered, there needs to be a safety case report developed by the principal accountable person, and the purpose of that is to identify building safety risks and how they will be prevented or the consequences of those risks mitigated. Worth defining what a building safety risk is under the Act, it is the risk of the spread of fire or structural failure. When requested to by the BSR, the building safety regulator, the principal accountable person also needs to apply for a building assessment certificate within 28 days of receiving that request. They will also need to prepare a resident engagement strategy and a complaint system. This is to address one of the key issues identified by Dame Judith Hackie in her report that actually, in quite a lot of cases, the concerns of residents weren't being appropriately listened to by property owners or other responsible persons for buildings. And then, finally, the principal accountable person needs to operate and maintain a mandatory occurrence reporting system so any significant issues are highlighted to the regulator.

Emily Clift:

I think, steve, as we heard in the first part of the podcast and I should say as well that was an excellent summary the themes of the Building Safety Act. There's a lot more things to do and a lot more information to gather following the implementation of the Building Safety Act and you know, when an office holder comes into a new role as an IP for a property owner which is occupied by tenants, probably would you repeat your advice from the part one for the construction phase that the best advice is to get someone in quickly to help you to project, manage this horde of information and and steps that might need to be taken in relation to the building absolutely so.

Steve Cox:

It's a very similar position in as much as that the bsa doesn't actually replace any existing legislation. It's very much in addition to. So we have all of the various requirements under the fire safety order 2005, the fire safety England regulations 2022, which came into effect last year, a whole raft of health and safety legislation and other considerations, and that has, of course, now been added to by the building safety act. So it's going to be very, very important for anyone who has got responsibility for a high-risk building to make sure that they've got assistance from competent people to help comply with those various requirements. Probably, a managing agent is going to be best placed to assist with a lot of those duties. Certainly, if we're looking at residence engagements, operating, complaints procedures, as well as the day-to-day operation of buildings, they may not necessarily have the competencies to complete a safety case report or develop a safety management system, so in some cases it might be necessary to have different parties provide an assistance. Interestingly, in an earlier stage of the act, when it was a building safety bill, there was actually a requirement in there to appoint a building safety manager for every higher risk building. That was actually scrapped, I believe, due to concerns over additional cost to leaseholders, but in most cases that is still going to remain a very good idea. So having someone who has that, that competency in managing high-risk buildings, who understands what's required of a safety case report, understands what needs to go into a safety management system.

Steve Cox:

Unfortunately there's not a sort of register of approved building safety managers. It might be something that that appears further down the line, but for the moment it's really just looking for someone who's got the necessary skills experience. There are various courses and qualifications out there for building safety managers and probably a key one is the, the chartered institute of building. They have a diploma in building safety management that's been specifically designed for anyone looking to carry out this role. So certainly our advice, at least at the moment, would be if you are looking to appoint a building safety manager, look for someone with that CIOB diploma in building safety management and just on that point, steve.

Dan Williams:

in terms of the managing agents that an insolvency practitioner or a receiver may appoint to assist in that process, obviously the IP or receiver would appoint them and kind of entrust that they are adhering to the regulations and everything that needs to be done is being done. Is there any way of the IP or receiver almost kind of checking the homework of those managing agents, because presumably ignorance is no excuse in those scenarios and if certain aspects haven't been complied with, obviously the IP or receiver would want to make sure that they're fully aware and getting line of sight in terms of that compliance. Is there anything that an IP or receiver could do to assist in that process?

Steve Cox:

Yeah, absolutely Early engagement with the managing agent, if there is one in post already, is certainly going to be a key action and identifying what they are and are not doing.

Steve Cox:

As I mentioned previously, they may not be necessarily carrying out all of the actions in accordance with the BSA. So certainly having that conversation, working out what they are picking up and any gaps in that is going to be essential. They are picking up and any gaps in that is going to be essential. Again, if you're appointing a new managing agent, then at the outset having that conversation about what they will and will not be doing and then certainly in terms of checking what's being done, as you say, almost marking the homework of that agent, that's where, at Howden Restructuring Resolution, we can step in. We will undertake a survey for any property that meets the criteria of a high-risk building, as well as most other properties, and we will certainly be looking to engage with the managing agent or the building safety manager to have that conversation, to request evidence of compliance with the regulations where applicable, and that extends to the various other requirements that I mentioned, not necessarily just the BSA.

Dan Williams:

So, following on from the advice around ensuring that the agent's responsible for discharging those various duties and obligations under the Act are complied with, emily, from your perspective as a lawyer, what are the consequences for an IPO receiver if they don't comply with the obligations under the BSA?

Emily Clift:

I think the question is, firstly, what types of obligations are there on IPs under the BSA?

Emily Clift:

And at the moment not everything has been implemented in terms of subsidiary legislation and even parts of the BSA itself. For example, section 125A of the BSA, which is about IPs' duties to notify the various authorities upon being appointed over a company which owns residential buildings et cetera. That hasn't yet been implemented.

Emily Clift:

And if we look back to the rules about the construction phase duties upon IPs and what the government guidance has been so far on that for IPs guidance has been so far on that for IPs and draw some analogies, we're expecting that the regulator is going to look to IPs as sort of partners to help them assist in getting the legal entities who own the buildings et cetera to comply with the landowner's obligations under the BSA.

Emily Clift:

So we're not looking necessarily at direct new legal obligations on IPs, which is good news. Obviously, from a practical perspective, ips are still under their normal statutory duties to try and do the best they can for the company that they come in to assist or to get good sales proceeds for properties if they're appointed as a receiver. And from a practical perspective it's going to be very difficult to discharge that duty if things like building safety information becomes lost or someone who a managing agent that isn't very competent is in situ and appointed over the building. So from a practical perspective, ips just via their statutory duties, do need to stand up and pay attention to the rules, but they're not necessarily going to be first in the firing line.

Steve Cox:

Yeah, it's an interesting one because under general health and safety, fire safety legislation the responsible person or the duty holder is often the person that has effective control over property, whereas in the BSA it's a very narrow definition of the duty holder or the accountable person or principal accountable person, and that is the person that has legal obligations for the property, and an IP or receiver is not going to normally fit into that definition. It is worth, however, considering that in the event of a major issue let's say we have another tragedy similar to Grenfell, for example if an IP or receiver was actually in effective control of that property at the time, there is certainly at least a very significant reputational risk there. You can imagine that the press getting hold of who actually had control of the property if some of those duties weren't complied with by the IP or the receiver, then that may come to light. So certainly potential consequences there, away from the sort of legal consequences that are definitely worth taking into consideration.

Dan Williams:

Yes, we all have to remember that this is about making buildings safer for people, ultimately, so understanding that the Act has been implemented in stages and appreciating that there is a key date effective 1st of April 2024. Can you just talk us through, Steve, what that actually means in practice?

Steve Cox:

Yeah, absolutely so. 1st of April. So at the time of recording, less than two weeks time, the BSR will be starting to get in touch with principal accountable persons to ask them to apply for building assessment certificates. Now that sounds far more voluntary than it actually is. At the point that they receive that quest, the principal accountable person needs to Submit their application. If they fail to do so, then that is an offence under the Act. Once the application is submitted, that allows the BSR to review the safety case report for that building, along with the key building information, and essentially make their decision as to whether they believe it is safe for occupation or not. Now that process is expected to take five years.

Steve Cox:

In reality it's probably going to take a lot longer than that, but it very much is a case that the buildings to be assessed initially will be prioritized based on a number of factors, including their height, the number of units and then also construction methods. So certainly we were all very aware that there have been issues identified with composite panel cladding, the type of wall systems that we saw on on Grenfell and then more recently on the apartment blocks in in Valencia a couple of months ago. Also, they'll be looking at buildings with LPS construction, so large panel system buildings. These are essential buildings where the structure is made up of precast concrete panels that are arranged vertically and horizontally to form the structure of the building. They don't have your traditional steel or concrete frame and that has been identified as significant structural risks, because it's easy to think of the BSA as primarily focusing on fire safety, but actually a lot of the risks out there are relating to the structures and, of course, a few months ago we saw the high-rise building in Bristol evacuated for those exact reasons.

Dan Williams:

And given the age of some of the buildings that will now fall into a high-risk building classification, what happens if, following the safety case report etc, and the process that the principal accountable person would need to go through following the request of the BSR, if that building is found to not meet those safety requirements? What does the process look like from that point?

Emily Clift:

Well, from a lawyer's perspective, I would, of course, suggest that the IP look to who might have been responsible for that, and one of the things that I'm sure very few IPs have failed to notice over the last year is that the limitation period for habitation has been extended to 30 years under the Building Safety Act in many scenarios, and so one must consider if perhaps the building was never built to code when it was built, and might there be recourse against some of these people who were involved at the outset, even on older buildings that have been occupied for decades already.

Dan Williams:

Are we correct in summarising, then, that the Building Safety Act, from a construction phase perspective, will obviously only apply to buildings constructed post-implementation of the Act, but the duties from an occupational phase perspective are retrospective, and we'll look back at older buildings that fall within that high-risk definition?

Steve Cox:

Yeah, absolutely so. Any building that meets the definition of a high-risk building, which, just to recap, is one that has two or more domestic units, that's, seven storeys or more, or 18 metres or greater in height, will fall under the requirements. So if that is a building that's constructed in the 1970s, for example, it's still going to fall under the requirements of the Act and that in itself will present some challenges because if we're looking at actually the key building information that's required and the information required to inform the safety case report, a lot of that may not be available. Quite often you're going to Quite often you're going to need fire strategies, you're going to need full information on the construction methods used in the building. So it might be necessary in some cases to actually instruct structural engineers or fire engineers to come in and retrospectively put that information together to enable it to be passed at that application for building assessment certificate.

Emily Clift:

Yes, steve, that's a very good point you make about. From a practical perspective, how do you find out how a building was built when it was built decades ago? And that's always going to be a bit difficult if you are looking to perhaps pursue the original designer as an IP, if you find out that something looks quite wrong in terms of the structure or the fire safety, even based on the codes when the building was constructed. And the present position is that the retrospectivity of the Building Safety Act, in terms of the extended limitation period, that it does have retrospective effect, that is a question that's going to be heard by the Supreme Court this December, so we will wait and see. That's in the case of BDW and URS, which I'm sure has come up on a lot of construction and legal news bulletins for those IPs who will be involved in this industry.

Dan Williams:

So, to summarise the occupation phase, steve, could you give us a quick overview of the key takeaways there?

Steve Cox:

Yeah, absolutely so. If we return to that scenario where you have an IP or receiver appointed over high-risk building, an IP or receiver appointed over high-risk building, our advice that the first thing to do will be to liaise with the managing agent to identify what is and is not being done already in terms of compliance with the Act, if necessary, appointing a building safety manager to step in and fill the gaps.

Emily Clift:

Yeah, and I think, dan, it's also important to liaise with the BSR, because they're looking for IPs to take on sort of a collaborative role and help to monitor that the information is being preserved and all these duties are being complied with.

Steve Cox:

Yeah, absolutely. And if we look at that first requirement, which is to register the building in the first place, it's going to be sometimes difficult to know if that has actually been done without that engagement with the BSR. In an ideal world it'd be possible to engage with the principal accountable person and obtain evidence that it has been registered. But again, if we're looking at a hostile appointment, for example, that may not be the case. Unfortunately, there's not a publicly accessible register of high-risk buildings, so if you can't obtain that evidence in the first instance, then it will be a case of of asking the question of the BSR are you aware of this building? Has it been registered?

Dan Williams:

well. Thank you both for those really insightful observations. I think there's been some really useful discussion points there and some some good takeaways for insolvency practitioners and property receivers to consider. Thank you both very much. So, steve Cox from Howden and Emily Cliff from Kennedy's. That's been a fantastic session to be part of. Thank you everybody for listening. That was part two of our podcast on the Building Safety Act from the perspective of insolvency practitioners and property receivers as part of the Howden Fortune Favors the Brave series. Thank you all very much.

Katy Norman:

Thank you for listening to this episode of Fortune Favors the Brave from Howden. To hear more episodes and subscribe to our channel, search Fortune Favors the Brave on your favorite podcast app.