The new building safety regime
From consultation to implementation: the Government’s response
The new building safety regime
From consultation to implementation: the Government’s response
August 2023 saw a number of documents published by the Department for Levelling Up, Housing & Communities (‘DLUHC’) which will be of particular interest to our clients and insurance partners alike.
In the documentation, the Government set out how they were responding to three consultations which ran during Summer 2022 on various aspects of the new building safety regime. These responses offer intriguing insights and begin to give some guidance on how the new regime will work.
You can find the consultation responses on the following pages:
- The safety regime for occupied higher-risk buildings
- Changes to building control and approved inspectors
- The new building control regime for higher risk and other buildings
Additionally, secondary legislation was also laid down in Parliament, offering more detail on a wide range of matters from the new building control regime, the golden thread, and the management of safety risks. These regulations are set to come into force on 1 October 2023, leaving industry with little time to scrutinise the detail. You can access the current secondary legislation here, with more expected this month (September 2023).
Whilst we will all need to begin the process of picking our way through the significant volume of documentation, there are some areas which are particularly striking:
Roles and responsibilities of ‘duty holders’
The original consultation document, amongst other things, proposed:
ensure that, if built, the building work to which the design relates would be in compliance with all relevant requirements;
And principal designers must:
ensure that they, and all designers working on the project, co-operate, communicate and co-ordinate their work with the client, the Principal Contractor, and other designers;
Contractors are required to ensure similar aspects in connection with any building work undertaken.
Along with other commentators, we have for some time argued that the absolute nature of the obligations could not only exacerbate the problems faced within the Professional Indemnity insurance market, but also, more importantly, mean that some insureds might face serious insurance hurdles in complying with the new regime and the contractual terms which will inevitable be created because of it. The reasons for our view are two-fold:
- Some insureds might not have any insurance protection against civil claims founded on breach of these obligations because of the ‘negligence only’ triggers in their policies. It is possible to have done nothing ‘negligent’ but still be liable under the proposed regime.
- Even in situations where the insured does have insurance cover for these legal liabilities, the added medium to long-term costs of funding these claims could have a serious impact on the performance of the PI market. In turn, this could easily lead to further cost increases and/or coverage restrictions and, in extremis, exclusions for such claims.
Whilst the Government intends to press on with much of the new regime unchanged, they recognise the potential difficulties with the ‘strict liability’ requirement for designers and principal designers. Consequently, they plan to delay its implementation and work with the industry to build sufficient market support.
Consequently, most of the duties placed on designers and principal designers (mainly Regs. 11J, 11K and 11M in the Building Regulations (Amendment) (England) Regulations 2023) now introduce a caveat that the designer/principal designer must ‘take all reasonable steps’ to discharge the relevant duty (with the exception of the duty to co-operate, which is still ‘strict’).
Whilst there is little that can be done to further mitigate the statutory duty, it will be important for all firms to:
- Understand the new duties under the revised regulations.
- Stay up to date – as we have seen, duties and guidance may change.
- The role is, to a degree, new, untested and will have a steep learning curve. Adequate resources will need to be allocated to it.
- Watch out for contract terms that seek to impose a simple ‘strict’ liability – they should go no further than the requirements in the regulations. When (and if) the temporary ‘watering down’ of the regulations end, ‘strict’ contractual duties should still be avoided.
We will continue to counsel that a strict liability model in isolation might not have the results intended. Our consistent stance throughout this process of consultation is that it may be superficially attractive to legislators to wield the stick of strict liability, but in the context of the liability framework which currently exists for professionals, the risk is that (as we argued here) it will only overlay additional problems over professions already overburdened with liabilities that should rightly lie elsewhere with disastrous results for the built environment.
If it is to be pursued, then it surely must go hand-in-hand with a wholesale shift of the designer’s standing and influence over the project and with it a re-writing of the contractual documentation that governs their appointment. If the professions are truly to take over the mantle of ensuring the safety of buildings as constructed in accordance with their design, then the necessary corollary needs to be the power to bring that about. And that means the way buildings are procured under the Act needs careful consideration and in all likelihood a new approach. The hope is that it will be and that forms part of the ‘culture change’ the Government are seeking to bring about.
The importance of the client
A welcome message in the consultation response is that the Government recognise the crucial role clients, especially commercial clients, play in a project’s success or failure. In the words of DLUHC they “have a major influence over the way a project is procured, managed and funded…they control the contract, the finances and the time available for the project”.
As a result, a new section of the Building Regulations will be introduced which, amongst other things, will require clients to make suitable arrangements to:
- Ensure design work is carried out so that the building work to which the design relates, if built, would comply with the requirements
- Ensure building work is carried out in accordance with the requirements
- On high risk building work, arrange for certain information to be provided.
Many of the client’s new responsibilities are ‘absolute’ obligations which impose onerous and wide-ranging liabilities. Government recognise that many ‘commercial’ clients will need help to undertake these duties, including having others undertake them on their behalf. In common with CDM, whilst the client can delegate the function, they cannot transfer accountability.
The Government also recognise that domestic clients will not have the capability to discharge these responsibilities and therefore there is provision in the legislation for these duties to rest with those undertaking design and building work.
There will be much to digest even on this aspect, but our first impressions are that:
- In a similar way to the CDM regulations, there will be a requirement placed on designers to satisfy themselves that the client is aware of their duties before they start work. It will be important to ensure that the client is aware of both regimes. There is the potential for confusion, particularly with inexperienced clients, as the Government elsewhere concede,.
- Commercial clients wanting to delegate these roles are likely to frame the contractual obligations in a similar way (i.e. in ‘absolute’ terms). Our usual response to such obligations would be to try to reduce their onerousness by limiting them to ‘using reasonable endeavours’ or linking them back to reasonable skill and care. Whilst those amendments are likely to be proposed by us and others, it seems likely that they will be strongly resisted. Care needs to be taken to ensure that however the obligation is flowed down, it is done in a way which doesn’t prejudice the operation of the insurance cover. Whilst most G&A clients are unlikely to face clauses which will create uninsured liabilities, in the early months of the new regime bedding in, it is prudent to take extra care to avoid inadvertently assuming materially enhanced obligations and risks.
- On a more positive note, the acknowledgement of the importance of the client’s role on projects only adds to our arguments (made elsewhere) about the extent to which the client needs to take more responsibility for matters such as the risk presented by their supply chain.
With the new duties on the client in respect of compliance with regulations and responsibility for supply chain competence, we’d hope that this will improve the client’s appreciation of the overall risk embedded within the team they pick. It also should strengthen the hand of those concerned about the inequity of the ‘joint and several’ liability principle. For how long can the bona fide members of the supply chain continue to underwrite the insolvency risk of others?
Seeing double – CDM confusion
An issue raised by many G&A clients is the potential confusion between the use of the same duty holder roles under the Building Safety Act and the CDM Regulations, particularly in relation to the principal contractor and principal designer role. A key concern has been the potential for confusion over roles, responsibilities and the interface risk of failures in communication.
The Government’s response partially addresses these concerns by suggesting that they do not expect separate duty holders for CDM purposes and for building regulations purposes. The same duty holder can hold principal designer status under each regime.
That said, they do foresee situations where the two roles might have different incumbents and therefore communication and careful delineation of roles and responsibilities will be critical.
Implementation of ‘Higher Risk Building’ building control regime
Alongside some of the other secondary legislation, the new building control regime for high-risk buildings and other work is expected to come into force on 1 October 2023.
In keeping with established practice with changes to the building regulations, there will be a transitional period for higher risk building work on individual buildings.
The broader, simpler and more important point is that the Building Safety Act is here and everyone will need to quickly begin to understand how they can comply with it.
There is much in the documentation relating to:
- competency of duty holders;
- enhanced competency rules for those working on higher risk projects; and
- the requirements for checking and declaring competency.
We’d note a number of points:
- Clients making appointments to undertake design or building work must take ‘all reasonable steps’ to ensure they have the right competence or ‘organisational capability’. ‘All reasonable steps’ will be construed in light of the complexity of the project. For higher risk projects, clients will be required to go further. The corollary of this is that all those appointed to undertake design or building work mustn’t accept an appointment if they don’t have the competence to do the work.
- The missing element here is sufficient guidance as to precisely define what competencies the new duty holders require and how to assess competency. Whilst various institutions are implementing training to ensure their members are up-to-speed, our current feeling is that there is definitely a knowledge gap here which needs to be filled with:
- practical examples of the roles;
- advice on how competency can be demonstrated; and
- for those (almost lay) people, how competency can be assessed.
We await these examples from the regulator, hopefully in the very near future.
- The Government repeatedly encourage, recommend and often require early engagement with the regulator and it’s clear that much more ‘front end’ work will be required from the industry in order to meet the gateways and timelines proposed.
Interestingly, Government expect that the appointment of the principal contractor and the principal designer will happen before the building control application for higher risk work is sent to the regulator (i.e. before gateway 2). The obvious question is what this might mean for ‘design and build’ procurement?
And the reaction from the insurers?
Whilst there is considerable debate in the insurance market about the impact of the new regime, we are aware of no insurers taking any firm position at this early juncture. There is a general feeling that providing that the culture change put forward by Government can take place then, over the medium term, the upshot of the legislation will generally be positive. There is some serious concern about the short-term impact of aspects, such as the extended liability periods under the Defective Premises Act but in the absence of significant claims activity, the market has not yet reacted.
As we have referenced before, it feels like we remain in a holding pattern pending the final report from Sir Martin Moore-Bick. This is the event on which the majority of the litigation around cladding issues and fire safety more generally is waiting.
Once the report has been digested, the body of associated (and paused) litigation is likely to re-start and we will all begin to better understand whether the insurers’ actions over the last few years has been proportionate and sufficient. If it has, or if it has even been too severe, then the gentle softening trend that we have seen over recent months will likely continue. If it hasn’t, then 2024/25 could potentially see a stronger underwriting response. It certainly seems that no one is currently in a position to say with any certainty which is more likely. Rest assured, we will be providing a more complete market update for clients in the coming weeks.
We hope that this necessarily ‘whistle-stop’ tour of the recent tranche of documentation from Government provides a helpful overview of areas of interest. There will need to be a huge collective effort in the months ahead to make sense of it and we intend to continue to share any insights secured via our industry engagements.