Thanks to the kind support of ShareAction, a leaseholder affected by the building safety crisis attended Berkeley Group’s AGM on 8th September to question the Board on behalf of our campaign, and this was followed by a meeting on 13th October, to discuss the issues raised in more depth.
Over the coming months, we will be bringing the building safety crisis to the attention of shareholders at several Annual General Meetings (AGMs) and directly engaging with developers and other stakeholders, to challenge them to do more to ensure homes are made safe at the pace leaseholders and residents urgently need and deserve.
Developer self-remediation is currently expected to fix 1,100 mid and high-rise buildings with life-critical fire-safety defects, which is estimated to be 10-15% of the total buildings needing remediation across the country. Berkeley Group is one of 51 developers that have signed the government contract to date, although our campaign will continue to push for all developers to be brought into the scheme or otherwise held accountable for the unsafe homes they sold to innocent leaseholders.
In addition to developers, we also want to see a wider pool of responsible parties – from contractors to product manufacturers, building control, architects, warranty providers and others – being compelled to pay towards making buildings safe, much more quickly. None of these professionals were so slow to take profit and earnings from our defective homes.
At our recent meeting with Secretary of State, Michael Gove, and the Department of Levelling Up, Housing and Communities (DLUHC), we asked for assurances that developers would be held to account in terms of remediation timeframes. We agreed to continue sharing examples with the Department of companies that are delaying making homes safe, and Mr Gove said he would personally follow up where developers are not meeting their contracted responsibilities.
A commitment to put right “any defect in our buildings for which we are responsible”
The Berkeley Group (“Berkeley”) includes the brands Berkeley, St James, St George, St Edward, St Joseph and St William. At their AGM, we asked the Board:
• Where Berkeley was responsible for developing and selling homes in buildings under 11 metres with building safety defects – can the Board please outline who it expects to pay for the remediation costs?
• For buildings above 11 metres, can the Board please outline why Berkeley is ordering new fire risk assessments using their own assessors, which often appears to be reducing the scope of remediation for these buildings, and why remediation on many projects continues to be delayed, when leaseholders have already waited six years?
• And finally: Would the Board be willing to meet with representatives of the End Our Cladding Scandal campaign to discuss these urgent issues further?
Rob Perrins, Berkeley’s CEO, responded that the company will always put right “any defect in our buildings for which we are responsible.” He said fire risk assessments are being carried out using “independent” assessors and where the outcomes are different from previous assessments, he claimed this was “due to changes in legislation over time.” With regards to the long delay in making all homes safe, he acknowledged that the pace is “slow” and the fact that this affects leaseholders, and he said they are prioritising the highest risk buildings first.
Berkeley’s directors were very willing to meet with our campaign team, and we appreciate them also joining an additional meeting to discuss a specific case in detail with that building’s resident directors.
Self-remediation activity before the Developer Pledge
We met with Karl Whiteman, a Divisional Managing Director who has led the Board’s approach to building safety and acted as an Industry Sponsor for Building Safety on the Construction Leadership Council; James Fraser, Finance Director in the Group Risk department, who leads on interaction with DLUHC and reporting on building safety; and Laraine Phillips, from the Group Legal department, who is involved in DLUHC engagement and was part of the working group that developed the EWS1 process.
Berkeley’s team highlighted some of the challenges the company feels it has experienced since Grenfell, including the many changes in building safety approach from the Government and other stakeholders. They also suggested our campaign team has better access to DLUHC Ministers than Berkeley enjoys. Given the extent to which leaseholders have been paying the price for a crisis they didn’t cause for the last six years, we would hope that would be the case; but we are also aware that developers have far greater access to Prime Ministers and Chancellors to discuss their interests, while holders of both those positions have so far not engaged with the victims of the building safety crisis, so the playing field certainly isn’t even.
Our campaign will always engage constructively with other stakeholders to ensure homes are made safe at pace and at no cost to leaseholders, but we also made it clear that we do not regard developers as having experienced anything close to the challenging – and sometimes life-changing – circumstances that many thousands of leaseholders and residents have endured, as a result of buying homes that should always have been safe.
We have no favourites amongst developers, but Berkeley is perhaps unfortunate to be overrepresented amongst our campaign team; around 15% have become volunteer campaigners because of their experience as leaseholders in Berkeley buildings, including Richmond House in Worcester Park. Our attendees at the meeting included three leaseholders from Berkeley buildings, which allowed us to illustrate some of the wider issues using specific examples.
We started the meeting by acknowledging that, compared to its competitors, Berkeley appears to have fewer buildings still awaiting remediation – although every outstanding building is, of course, one too many. Berkeley later pointed out that the company has retained a lot of freeholds rather than selling them to third parties, which they advised has also helped to ensure more direct communication in some cases.
We were told that post-Grenfell, prior to any significant government response, Berkeley proactively looked at their entire portfolio of multi-occupancy buildings of all heights, particularly the means of escape. This is consistent with the information we have received from some leaseholders, who told us that Berkeley fixed safety issues in their buildings – often internal defects such as compartmentation and cavity barrier issues – long before the developer pledge was signed in April 2022.
In a majority of these cases, leaseholders were trapped for several years before the work was agreed and carried out. It is positive that those cases are now resolved but we have received several reports from leaseholders that sufficient action was only triggered once they had engaged legal representation and/or their MP became active on the issue, for example in the Lewisham Deptford constituency.
Buildings still awaiting remediation, six years into the building safety crisis
Berkeley told us that they have developed 1,800+ multi-occupancy buildings and they have subsequently advised that 800+ are over 11 metres and therefore relevant for the developer self-remediation contract (see note *). A smaller cohort of buildings meets the criteria listed in the RICS guidance as being relevant for EWS1 purposes, although we do not know how many as Berkeley did not share this. Berkeley says 98% of these buildings, where they have a legal interest (allowing them access), have an EWS1 rating of B1 or above (see note **). They believe this is higher than any other major developer, and from our experience we recognise this could be true.
In reality, remediation work and EWS1 forms are often commissioned for buildings which fall outside the RICS guidance (one of the case studies noted below, Development B, is a case in point – it is 4 storeys or fewer, does not have ACM/MCM/HPL cladding panels, but has had some internal remediation and has an EWS1). In our view a B1 EWS1 rating also does not always mean issues are fully resolved for leaseholders, so it isn’t the only measure that matters. As our later case studies will show, a B1 rating can still leave defects unremediated which other stakeholders may not accept as a “tolerable risk” – which can leave leaseholders paying the price, now and in the future, as a direct consequence of defects at the time of construction.
Additionally, there may be buildings under 11 metres that require remediation, but these are not classed as “relevant buildings” in the Building Safety Act, and therefore not covered by the developer self-remediation contract. Berkeley is known to have remediated some buildings under 11 metres, but more widely the Government is not yet holding developers to account for fixing safety defects in buildings of this height, no matter how high risk some may be. Our firm view is that wherever risk assessments call for remediation or mitigation measures, action to make the building safe must follow, regardless of building height, and that government funding schemes and developer self-remediation contracts should be extended to cover buildings of all heights.
While some developers are transparent in their annual reports about the exact number of buildings awaiting remediation and the value of the balance sheet provision set aside for this (e.g., Barratt), Berkeley is not. Our reasonable assumption is that a maximum of 36 mid and high-rise buildings developed by Berkeley (1,800 x 2%) are still awaiting or not yet completed remediation, including any buildings they intend to remediate under 11 metres (updated as per note * and **). This will not only include known buildings (already assessed) but is likely to include a forecast for future buildings not yet assessed.
The Government initially claimed the value of the developer self-remediation contracts was “over £2bn” for an estimated 1,100 buildings, which puts the average cost of remediation at approximately £2m per building, although this is based on estimated costs of works prior to the inflationary pressures seen in recent times. A reasonable estimate for the remediation of 36 buildings would therefore be in the region of £72m, depending on the mix of building heights, scope of work, costs recoverable from other parties, and so on (see note ***).
In its 2023 Annual Report, Berkeley reports £189m on its balance sheet at 30th April 2023 for a broader “post-completion development provision” (see image). Remediation of fire-safety issues can be assumed to be a significant portion of this, given that it is the only example listed in the notes, but it may not be the only item included – and for context, the value of the provision was already £80.1m prior to the Grenfell fire.
It is positive that the volume of Berkeley buildings still to be remediated appears to be lower than for other developers – but back in June 2021, CEO Rob Perrins had told Bloomberg that the company was working through buildings individually and had given the impression there was only “a handful of buildings that still needed to be resolved”, so it seems to us that things may have moved backwards overall since then.
As we said to Berkeley’s team, we remain concerned that across the board, developers are treating building safety remediation as if it is not urgent and drip-feeding the impact on their financials over as many years as possible, prioritising their profits over our safety and ability to move on with our lives.
In the absence of any confirmation from Berkeley, our reasonable estimate is that 9-10 buildings may have been remediated in the last financial year, as only £19.3m of the provision was utilised (which may include items other than fire-safety remediation). If that pace were to continue, it could take a further four years to remediate all outstanding buildings – which would mean some people’s lives being on hold for an entire decade after Grenfell.
Berkeley was sufficiently profitable to spend £254m on share buybacks and dividends in the last financial year, so it clearly has the financial resources to get on with the job of making existing homes safe. The company wants to be a leader in “high-quality, safe homes for all” and says it wants to restore trust and confidence to the housing market through making progress on building safety. We therefore want to see Berkeley setting a benchmark for others in the industry, by committing to remediation of its remaining buildings at a much more urgent pace, so that customers living in Berkeley homes can get their lives back.
Development A: Unremediated combustible cladding and zero communication
The endless delays and anxiety for people still stuck in buildings with combustible cladding were explained by a leaseholder in a development of 400-plus homes in East London. Four years ago, they learned that the development’s eight buildings, including four high-rise buildings above 18 metres, had Trespa non-FR grade cladding on the top two floors as well as other fire safety defects. They described how wheelchair users and residents with mobility issues are worried about escaping in a fire, and that some families with young children go to sleep every night with fire extinguishers next to their bed.
An application was made to the government’s Building Safety Fund (BSF) as long ago as 2020, after all eight buildings received EWS1 ratings of B2 and fire engineers had confirmed that remediation was essential, but the process was so slow that it took two years to progress to the second stage. Then Berkeley signed the developer pledge – and everything changed. In the summer of 2022, leaseholders were informed that their buildings would be transferred out of the BSF and Berkeley would now appoint its own engineer to carry out PAS 9980 surveys and determine what remedial works would be undertaken.
Since then, there had been a total lack of communication with the leaseholders and residents who didn’t know when, or if, their homes would ever be made safe. We were shocked during our meeting to hear the outcome of the assessments in summer 2022 was that “no further works are required” on any of the buildings. Berkeley said this was communicated at the time to the managing agent, FirstPort – yet 15 months later this important news had never reached leaseholders, which is unacceptable.
This case highlights several of our wider concerns:
• Communication with leaseholders and residents is a commitment under the developer remediation contract, yet the reality is we are still battling to obtain clear information via freeholders and managing agents. Berkeley noted that they retain many freeholds themselves and they also have better engagement where Residents Management Companies (RMCs) or Right to Manage (RTM) are in place but said they “often” have issues with particular freeholders and managing agents including Fairhold Athena, E&M and FirstPort. Berkeley often lacks access to undertake a direct letter-drop to residents, but they were open to ideas for improving communication. In the first instance we think it should be straightforward to insist on managing agents providing evidence of all resident communications.
• Developers are selecting their own assessors, and we are concerned about their independence. Berkeley responded that, even where assessors have a previous relationship with Berkeley, “of course they will be independent” because they are not employees and they are professionally qualified engineers – but that has strong echoes of what used to be said about appointing privatised building control inspectors. Dutyholder choice is now being removed for building control, to ensure there are no favourable sign-offs under pressure or fear of losing future contracts from developers.
• Developers appear to be reducing the scope of work when they take over responsibility for remediation. Residents in Development A were told for several years that remediation was essential due to the level of risk, but now learn that combustible cladding will remain, even on high-rise buildings. Aside from the safety concerns, they are worried about the consequences if other stakeholders do not accept the verdict that the risk is tolerable – from fire chiefs and building insurers, to future buyers and property valuers. Since our meeting, leaseholders have told us they are now “stressing out about costs to come.”
The bitter irony is that these residents would be and feel safer if their developer had dissolved or had not been invited to the “Responsible Actors Scheme”, as they would have stayed in the BSF process. Berkeley agreed with us that if these buildings had remained in the BSF, the cladding “would have been stripped off and dealt with.”
Berkeley’s view is that concern about risk was previously “heightened beyond what is needed” and they argued that the greater proportionality which the PAS 9980 standard has introduced will primarily benefit residents, by ensuring works don’t drag on for years. We agree there needs to be better risk prioritisation to ensure work is not unnecessarily excessive and protracted, but of course our concern is that reducing the scope of work is more about protecting company profits than people’s safety. We remain very unconvinced that PAS 9980 is delivering the more objective, clear and consistent outcomes that it was supposed to; Berkeley’s team agreed that there is still potential for a lot of subjectivity in the assessments and pointed us towards an article by the code’s co-authors highlighting how PAS 9980 is frequently being misinterpreted in practice.
• There must be an independent dispute resolution process. Berkeley told us they had discussed this many times during negotiations with the Government on the self-remediation contract – and said they were surprised and disappointed when nothing was included in the final contract. One of their suggestions was that Technology and Construction Court (TCC) judges could be appointed on a panel to consider disputes. We completely agree about the need for a robust dispute resolution process and Michael Gove’s announcement of the developer “pledge” in April 2022 had clearly included a promise that developers would “respect an independent dispute resolution process established by government.” After our discussions with DLUHC in June 2022, we expected leaseholders to have representation in such a process. During meetings with the Secretary of State and the Department we have frequently repeated our call for this process to be introduced – and we would ask developers like Berkeley to continue their calls for such a process too.
Development B: Escalating costs for unremediated defects in a building under 11 metres
Some of the issues facing buildings under 11 metres were illustrated by a leaseholder from Development B in London. They had not expected any significant liability for building safety costs because the building had already received an EWS1 with a B1 rating a couple of years previously. Despite this, unremediated defects from the time of build are leading to serious financial consequences.
Only one provider would offer insurance cover for the building – with a subjectivity clause that required remediation to be undertaken, with an estimated cost of up to £20k per leaseholder. After significant negotiation, the insurer appears willing to review the extent of remediation required, but it needs more reassurance about the risk of fire spread. Carrying out a Fire Risk Assessment of the External Wall (FRAEW) might resolve the impasse, but leaseholders would incur even more costs, which they called on Berkeley to support financially. Collectively, they have already been forced to pay over £50k for surveys, reports and increased insurance costs, which will remain exorbitant until insurers are satisfied that the risk has been made tolerable.
Leaseholders have previously been able to sell their properties, but the escalating charges and potential for uncapped remediation costs are starting to impact ability to sell. A solution is needed that all stakeholders will accept now and in the future – including any future insurers, mortgage lenders and homebuyers.
Berkeley’s team described it as “an open question whose responsibility it is to pay” for buildings under 11 metres – but as we pointed out, these leaseholders are definitely not responsible for the inadequate cavity barriers that insurers consider to be a heightened risk. They are equally blameless as any other leaseholders in taller buildings and should not pay the price for defects that were not of their making.
Other stakeholders seem to agree. Insurers are encouraging legal action against developers in cases like this. Aviva, one of the country’s largest insurers as well as an influential freeholder of 750 buildings under 11 metres, recently told us, “We have always maintained that developer-led remediation is the fairest solution to resolving the building safety crisis, including in buildings under 11 metres.”
We appreciate the commitment made by Berkeley to review the documentation for this building in more detail and liaise further with the RMC directors as soon as possible. As well as engaging directly with the insurer on this case to try to help resolve the deadlock, they also agreed they can do more to engage the insurance industry more widely, as the same issue could affect multiple cases.
Development C: More support needed for leaseholders who remain trapped long-term
At Development C in South London, intrusive surveys have not even been conducted yet, let alone a remediation plan put in place. Due to the continued delays, leaseholders have had to apply for a Remediation Order against the freeholder.
Berkeley explained that they have been unable to access some buildings due to difficulties trying to agree the terms of licence with the freeholder, which needed to be revised after the developer self-remediation contract. The pressure applied by the legal action has resulted in the freeholder now signing the licence for this specific building, and intrusive surveys are now scheduled for the end of October and early November. But there is still no licence agreement for five other buildings in the same situation – and it is the leaseholders and residents whose lives remain on hold while the “responsible entities” fail to reach agreement.
As the Residents Association emphasised, in situations like this, “it is in Berkeley’s ongoing self-interest to remain as communicative as possible with the residents of the properties for which they are the Developer responsible.”
We highlighted the personal impact on a leaseholder whose family has had to move out of London. They can’t sell the property and are trapped with “unbearable” costs, which has significantly affected their health. We asked Berkeley what other measures they can take to help people, both here and elsewhere, where their building may still be caught in the crisis for many more months or years.
For example, in one development in Southwest London known to EOCS campaigners, Berkeley contributed almost all the incremental building insurance costs that were incurred while remediation was ongoing – but there was no response when we asked if Berkeley could do the same for all buildings where remediation is still outstanding.
We asked for “letters of comfort” to be issued automatically, which could also help more leaseholders to be able to sell and move on with their lives. Berkeley said they can’t intervene in specific cases unless the borrower authorises it and they seldom hear of cases where people are unable to sell, or lenders are asking for such assurances.
But other large developers such as Bellway are known to issue letters of comfort as a matter of course and a leaseholder in a large Barratt development told us recently, “We couldn’t have sold without a letter of comfort! Every bank considering lending wanted to see one! Barratt did one for each building in our development and [the managing agent] uploaded them to the portal so they can be accessed any time they are needed.” We also suggested Berkeley could help by providing as-built construction drawings, which are particularly useful in buildings under 11 metres and cases where buildings will be left unremediated.
Berkeley emphasised that they are open to feedback and hearing about cases where more action is needed. We know that many leaseholders remain concerned about “not rocking the boat” when they are having difficulties with a developer who they are reliant on to make their homes safe – but please do contact us as we can often share your information anonymously, and it helps us build up a picture of what is happening so that we can push for a fairer and faster end to the building safety crisis, for everyone.
Note: Building names are anonymous in this report at the request of their residents.
CALL TO ACTION!
If remediation work is still delayed at your building or you are at an impasse with your developer, freeholder or managing agent, please make sure you are escalating your concerns to DLUHC by emailing building.safety@levellingup.gov.uk. To speed things up, please include the topic in the email header, name your building, be specific about your circumstances, summarise the actions that you have taken to date, and attach written evidence if you have it (e.g., letters or reports). Please copy our team at endourcladdingscandal@gmail.com so that we can follow up where necessary.
Notes and corrections
We shared this blogpost with Berkeley and they subsequently provided the following clarifications.
* Berkeley advised during our meeting that they had developed “over 1,800 relevant buildings” and we assumed this meant “relevant buildings” as defined in the Building Safety Act and within the scope of the developer self-remediation contract, i.e. excluding buildings under 11 metres. We are happy to correct the record.
** Berkeley referred to “98% of relevant buildings” having an EWS1. Again, we assumed this referred to all “relevant buildings” as defined in the Building Safety Act and within the scope of the developer self-remediation contract; this has been updated.
*** Berkeley does not agree with our approach to estimating the number of buildings requiring remediation, or to estimating the share of the Post-Completion Development Provision in their published financial statements that relates to building fire-safety issues, by applying average national statistics of c.£2m per building. As we clearly stated, each developer’s remediation costs will vary “depending on the mix of building heights, scope of work, costs recoverable from other parties, and so on” – but our estimate is in line with the Government’s overall estimate for all developer self-remediation projects. It is also in line with the average fire-safety remediation provision per building for other major developers that have chosen to publish both the value of their provision and the volume of buildings covered (such as Barratt or Redrow). In the absence of published data or answers to our questions about the scale of buildings still awaiting remediation – the number of buildings where people’s lives still remain on hold – we feel it is completely reasonable to use the partial information available to estimate this, and that we have been clear about the assumptions behind our estimates.
DLUHC is expected to publish the first developer remediation data during November and we look forward to analysing that data when it is available.
The End Our Cladding Scandal campaign calls on the Government to lead an urgent, national effort to fix the building safety crisis.
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