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By Simon Tye – Legal Adviser
The government has allocated a fund of around £200 million, as its estimate of the cost of fully funding the removal of unsafe aluminium composite material (ACM) type cladding on private sector residential blocks.
This fund has been made available due to the obvious urgency in dealing with unsafe ACM cladding and the delay by some private sector owners in taking steps and the practice by some, of passing these costs on to leaseholders via the service charge.
The fund will be available for the benefit of leaseholders in residential buildings of over 18 metres in height, where leaseholders would otherwise have had to pay the costs associated with the removal and replacement of unsafe ACM cladding systems.
Unsafe ACM cladding means those systems that have been identified as containing combustible materials and which failed the series of tests organised by the government over the summer of 2017. There should be evidence that the cladding on your building is of a type that failed these tests, or that the local authority has notified the government that unsafe ACM cladding has been confirmed.
What is not covered by the fund?
The fund excludes:-
Works which are not directly related to dealing with the unsafe ACM cladding systems and other necessary fire safety works which are not related to an unsafe ACM cladding system.
Non residential buildings, although mixed use residential and commercial will be eligible.
Buildings, where a warranty claim for the full cost of dealing with the unsafe cladding has been accepted.
Full details of eligibility and the exclusions are contained in the Full fund application guidance.
Applying for funding
An application for funding must be made by whoever has legal responsibility for the repair, condition and safety of the building, and which has a legal right to recover the cost through the service charge. This will usually be the freeholder, but could also include a head landlord, or a management company.
Applications for funding are now open and will remain open until the end of December 2019. Applicants can register now with the Ministry of Housing, Communities & Local Government (MHCLG) casework team.
The applicant for the funding is expected to inform all leaseholders and residents that they will be applying for funding. They should also keep them regularly informed of the progress of the application and of the works themselves.
State Aid declaration form – Leaseholders’ obligation
This declaration form is required to be completed by all leaseholders in the building. If there are joint leaseholders on the lease, each should complete a separate declaration.
There is a limit of €200,000 euros on the amount of state aid that can be given in any period of three years to someone operating an “undertaking “from their flat (i.e. any person/company engaged in an economic activity). This would include leaseholders who let out their flat or use it for the purposes of a business. Even though the restriction on state aid only applies to leaseholders operating an “undertaking”, all leaseholders must complete the declaration.
Before funding can be granted, the MHCLG requires that all declarations regarding state aid are completed. It is important, therefore, that leaseholders complete and sign these forms without delay, to ensure funding may be granted to the applicant.
The applicant for funding is responsible for distributing these forms to and collecting these forms from leaseholders and submitting them on their behalf.
Assessment by MHCLG
The full fund guide sets out the two stages of the process.
Stage 1 – MHCLG “will quickly verify” that the building, its leaseholders and the applicant are within the scope of the fund.
Stage 2 – will commence once an “in-principle agreement” to proceed is in place. This stage will evaluate the proposed solution and costs, undertake due diligence and check that all State Aid declarations are in place.
Payment of the funding
The fund monies are paid to the applicant for the benefit of the leaseholders, who would otherwise be paying for works via the service charge.
Payment of monies will be in stages and be monitored by MHCLG to ensure correct use of public funds.
Applications for funding can still be made where works have commenced or have already been completed and paid for by leaseholders. The freeholder or other responsible person would then be obliged to reimburse the leaseholders if they have already paid for the work covered by the fund.
Please contact LEASE for any further queries you may have on the ACM cladding remediation fund.