Developers responsible for dangerous defects in high-rise buildings have escaped their liabilities by liquidating themselves into nonexistence – and left thousands of innocent flat owners to pick up the bill.
Companies have been wound down after selling blocks of flats riddled with potentially lethal fire safety problems. This has left a multimillion-pound hole in the Government’s plan to make the industry pay for the cladding crisis.
Michael Gove, the Levelling Up Secretary, this week lambasted developers “playing fast and loose with the rules”. He promised that flat owners in buildings 11 metres (36ft) or taller would pay nothing towards fixing unsafe cladding – although they still face eye-watering bills to correct other issues.
However, many leaseholders have been blocked from claiming against the developer that built their homes as the companies concerned have since gone bust. Others were set up as “special purpose vehicles” and dissolved once the building had been sold, shirking future responsibilities. Martin Boyd of the Leasehold Knowledge Partnership, a campaign group, warned that the practice was “rife” in the building industry.
“Special purpose vehicles have been endemic throughout the cladding crisis. It is the easiest way for developers to sell on, with the added benefit of no future liability,” Mr Boyd said. The murky tactic leaves flat owners such as 60-year-old Christopher Grant* with no legal avenue to claim crippling remediation costs. Mr Grant bought a home in the Nova House development in Slough, Berks, before a myriad of defects were found following the Grenfell fire.
The building is having its cladding replaced, funded by local council and government loans. But leaseholders have to cover the cost of rectifying its non-compliant fire alarm system and compartmentation. The latter is vital in blocks of flats to contain the spread of fire. It will cost £60,000, said Mr Grant.
“Lawyers advised there was no point going after the developer. It was liquidated after the building was completed. We are claiming against the insurer, but it is contesting this,” he added.