The new building safety regime

Introduction

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 came into force on 1

October 2023, leaving industry with little time to scrutinise the detail. You can access

the current secondary legislation here.

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:

Designers must:

ensure that, if built, the building work to which the design relates would be in

compliance with all relevant requirements [of the building regulations];

And principal designers must:

Co-ordinate matters relating to the design work to ensure that, if built, the building

work to which that design relates will comply with building regulations.

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 inevitably 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. The upshot of this is that 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 Regulations. 11J, 11K and 11M in the Building Regulations (Amendment)

(England) Regulations 2023) now introduce a caveat which requires, amongst other

things, that:

Designers must:

Take all reasonable steps to ensure that, if built, the building work to which the

design relates would be in compliance with all relevant requirements [of the building

regulations]’

And principal designers must:

coordinate matters relating to the design work… so that all reasonable steps are

taken to ensure that the design is such that if the building work to which the design

relates were built in accordance with that design the building work would be in

compliance with all relevant requirements [of the building regulations];

The notable exception is the duty to co- operate which is still ‘strict’.

Whilst there is little that can be done to further mitigate the statutory duties, 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 roles are, to a degree, new, untested and will have a steep learning

curve. Adequate resources will need to be allocated to them.

• 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 ends, ‘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.

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 building safety, 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 this aspect 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

pr ocured, 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:

• 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.

• 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.

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 st rengthen 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 control regime

Alongside some of the other secondary legislation, the new building control regime

for higher-risk buildings and other work came 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.

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.

Competency

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 aren’t

competent 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;

o

o advice on how competency can be demonstrated; and

o for those (almost lay) people acting as clients, 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 certain 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 on the findings of the Grenfell inquiry. This

seems to be 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 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.