Act now or pay the price: UK Building Safety Act - Responsible Actors Scheme now in force

Legislative framework

The responsible actors scheme was envisaged in sections 126 -129 of the Building Safety Act 2022, and has now been put into effect through the Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023 which came into force on 4 July 2023.

The regulations require eligible developers to sign up to the scheme. If they fail to do so, or fail to comply with their obligations to remedy fire safety defects, they can be placed on a “prohibitions list”, which stops them from securing planning permission, or building control approval for any further development.

Before the regulations came into force, the government wrote to major house developers and large developers, in fairly direct terms, back in January requiring them to sign developer remediation contracts by 13 March. Those contracts now form the basis of developers’ obligations under the scheme.

Relevant Buildings

The scheme applies to developers of “relevant buildings” in England, which must be:

• residential buildings (buildings containing at least one residential unit held under a lease of over 21 years, or as commonhold, or owned by a social housing provider);
• at least 11 metres high;
• developed during the “relevant period” (5 April 1992 – 4 April 2022).

The scheme does not apply to social housing providers.

Eligibility for the scheme

Developers will be eligible to join the scheme if they are:

• “residential property developers” (whose principal business is residential property development); or
• eligible for government remediation funds (including the private sector ACM cladding remediation fund, the social sector ACM cladding remediation fund, or the building safety fund) and have been notified of that eligibility.

In either case, they must have been responsible (either directly, or through a group company) for developing or refurbishing at least one “relevant building” during the “relevant period” –  as outlined above.

They must also meet the “profit condition” by having average adjusted operating profits of over £10 million for the financial years ending 2017, 2018 and 2019.

In a group structure, only one group company (the “designated person”) is required to become a member of the scheme.

The regulations contain anti-avoidance provisions which mean that if a company is wound up in an attempt to avoid being required to join the scheme, another group company – even if it would not otherwise be eligible – must join the scheme.

Voluntary membership

Other companies responsible for development of a relevant building during the relevant period, which requires remediation in line with the terms of the developer remediation contract which do not meet the profit condition, may also voluntarily become members of the scheme.

Joining the scheme

Those eligible to join the scheme will be served notice, “inviting” them to become members of the scheme.

Within 60 days of that notice, they must either enter into a “Self Remediation Contract” (which takes the form of the final version of the developer remediation contract circulated by the government on 16 March 2023, or serve a counter-notice with evidence of why they are not eligible to join the scheme.

If they fail to do either of these things, the developer will be treated as someone eligible to join the scheme who has failed to do so, and added to the “prohibitions list”.

The government will produce a list of members of the scheme, as well as a prohibitions list.

Obligations on members of the scheme

Under the developer remediation contract, developers must:

• • identify the buildings they are responsible for which require fire safety remedial works;
  • procure or carry out those works;
  • accept responsibility for the cost of those works;
  • repay any government remediation fund for any amounts already received; and
  • avoid any restructuring which would prevent the developer from complying with its obligations.

Developers must provide information to the government to enable them to monitor and enforce compliance.

If a developer fails to comply with their obligations under the developer remediation contact, they can be served with a warning notice and, if not remedied within 28 days, have their membership to the scheme revoked.

The prohibitions list

Anyone who is eligible to join the scheme but has failed to do so, or has had their membership revoked will be put on the prohibitions list, and will be unable to secure planning permission and building control approval for subsequent developments.

These prohibitions do not have retrospective effect, so apply from the date of the regulations only. They also contain various carve-outs, including for critical infrastructure

Planning prohibition

Developers on the prohibitions list cannot carry out “major developments”, which means:

• schemes providing 10 or more residential units;
• schemes on a site of at least 0.5 hectares in size (providing 10 or more residential units);
• commercial developments creating at least 1,000 square metres of floor space; and
• commercial developments on a site measuring over 1 hectare.

Developers must notify the local planning authority of their “prohibited status” when they apply for planning permission, or acquire or sell an interest in land with the benefit of planning permission.

The regulations amend the terms of the Town and Country Planning Act 1990 to enforce this prohibition.

Building control prohibition

Similarly, developers on the prohibitions list are prevented from providing the various notices necessary or applying for building control approval.

What this means for developers

The responsible actors scheme is a key part of the government’s desire to push responsibility for fire safety remedial works onto the developers responsible for construction of those buildings, and has a wide remit, going back 30 years.

Due to government pressure back in January, at the last count, 49 developers had already signed the developer remediation contract by the March deadline, and 6 of the largest residential developers are already listed on the scheme’s “members list”. Thus the effects of the regulations were felt even before they came into force.

However, they nonetheless represent a massive shift in the development industry and their continuing effect will be felt for some time to come. In particular, it remains to be seen how the scheme may impact development funding if lenders are unwilling to lend to developers who are at risk of being placed on the prohibitions list.

In short, developers who receive an invitation to join the scheme or believe they may be eligible need to act now to avoid paying the price later.

This is a run-down of the key provisions, but we can provide more detailed advice if you think you are eligible to join the responsible actors scheme and would like some tailored guidance.

Authored by Lucy Redman and Paul Tonkin.