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Large house builders commit to ‘government pledge’ to remediate blocks they own
Two of the country’s largest house builders have committed to signing up to a government “building safety pledge” that will see them help fund the remediation of blocks taller than 11 metres.
Persimmon and Crest Nicholson released statements to the stock market this morning which indicated that they have signed up to the government’s pledge, which is understood to commit them to fixing fire safety issues on their buildings that are taller than 11 metres.
Persimmon said the pledge will address life-critical fire safety issues on all blocks of 11 metres and taller in England which it developed in the 30 years prior to 5 April 2022. It also means the developer will not claim any funds from the government’s Building Safety Fund.
Crest Nicholson also said it had signed the pledge, but was not able to confirm whether these were the same commitments as Persimmon.
However, the commitments mean it is still not clear where this leaves ‘orphan blocks’, where there is no developer to hold to account because the company that built it no longer exists. The government has previously stated that it wants to raise £4bn from developers to cover these costs.
The commitments by Persimmon appear to echo earlier proposals put forward by Stewart Baseley, the executive chair of the Home Builders Federation, in a letter at the end of February.
But a week after the letter was sent, housing secretary Michael Gove seemed to dismiss this commitment, saying the proposals put forward by the trade body “fell short” of what was needed.
In his letter, Mr Gove said the proposals “fell short of full and unconditional self-remediation that he and leaseholders living in unsafe blocks expected to agree”.
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Persimmon has so far set aside £75m for remediation work and confirmed that four of the 33 developments it identified as needing work have now secured successful External Wall System 1 certificates.
Dean Finch, group chief executive of Persimmon, said: “Over a year ago, we said that leaseholders in multi-storey buildings Persimmon constructed should not have to pay for the remediation of cladding and fire-related issues.
“We are pleased to reaffirm this commitment today and sign the government’s developer pledge.”
In a statement to the stock market this morning, Crest Nicholson said its board has confirmed to the Department for Levelling-Up, Housing and Communities its intention to sign the building safety pledge, which it believes is in the best interests of the organisation.
As a result of this commitment, the house builder said it will need to record “a further exceptional charge” in its financial statements and estimated that this charge would be in the range of £80m to £120m. This would be on top of the £48m already committed since the Grenfell tragedy in 2017.
Crest Nicholson and Persimmon appear to be the first house builders to commit to the government’s building safety pledge, which was first outlined by Mr Gove in January.
At the time, Mr Gove called for a commitment from developers to fund the remediation of buildings between 11 and 18 metres. It also included a commitment from builders to start contributing to a fund, which is expected to be in the region of £4bn, to cover the remediation of blocks that large developers did not build.
Mr Gove has been locked in negotiations with large developers over the proposals since January and previously threatened that he would legislate to force them to pay unless an agreement was reached.
In February, the government threatened to effectively shut down developers that refused to pay. The announcement resulted a slide in share prices for the country’s largest house builders.
At the end of last week, Inside Housing learned that a deal between the government and large house builders to cover the cost of fixing fire safety issues on blocks they built was close.
In today’s statement, Crest Nicholson said it has “acted swiftly to identify and remedy any legacy buildings where it has a constructive or legal obligation to do so”.
It said it acknowledged the “significant distress caused to residents and as such has always sought to engage constructively with residents, building owners, government and other affected stakeholders”.
In response to its decision to commit to the government’s building safety pledge, Crest Nicholson said it had a strong balance sheet with net cash of £253m, allowing it to meet expected outflows to remediate the affected buildings.
The developer added: “This is a complex and judgemental area, and the group will continue to work at speed to refine its latest estimate of these costs.
“The group is also considering whether any further regulatory approvals are required in respect of this proposed charge and will provide any update on this and the exact amount to be recognised as soon as it is appropriate to do so.”
A Department for Levelling-Up, Housing and Communities spokesperson said: “Since January we have been clear in our expectations of developers, including an agreement to remediate buildings they have had a role in developing and to contribute to a wider fund to fix unsafe cladding.
“Our position has not changed. We welcome the developers who have signed pledges so far and we have the powers to impose a solution in law if those in scope do not do the same.
"We will provide an update on the outcome of negotiations in due course.”
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