The Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023 ("the RAS Regulations") to establish the Responsible Actors Scheme ("RAS") for residential developers has become law as of 3 July 2023 .
This is secondary legislation pursuant to powers enacted under Sections 126-129 of the Building Safety Act 2022.
The RAS Regulations sit alongside the "developer remediation contract" (referred to in the RAS Regulations as the "Self Remediation Contract") which earlier in the year, the Government urged large developers to sign up to.
To date 51 developers have signed up to this legally binding "pledge" to fix life-critical fire safety defects in residential buildings.
To what buildings does the RAS apply?
The RAS seeks to secure the safety of people in or about buildings and improve the standard of buildings by securing that the building industry remedy defects in relevant buildings relating to fire safety and contribute to remedial costs. The terms "relevant building" include a building which:
- is a residential building (i.e. a self contained building or self contained part of a building that includes one or more residential commonhold or leasehold properties under a lease exceeding 21 years or a building owned by a registered provider);
- is at least 11 metres high and located in England; and
- has been developed or refurbished during the period starting on 5 April 1992 and ending on 4 April 2022. This period is referred to as the "relevant period".
Invitations to join the RAS
Developers will be asked to join the RAS if:
- their principal business is residential property development;
- they developed or refurbished 11m+ residential buildings in England in the last thirty years (other than solely as a contractor) and their average annual operating profit over a 3-year period was £10 million or higher; or
- they are a developer who developed or refurbished (other than solely as a contractor) at least one 11m+ residential building that qualifies for remediation under the terms set out in the developer remediation contract.
Developers can also volunteer to join the RAS if they have been responsible for the development or refurbishment of one or more relevant buildings in the relevant period and at least one of the buildings would require remediation under the "Self Remediation Contract" if the developer was subject to those terms.
Prohibitions List and Members List
The RAS Regulations require the Secretary of State to publish two lists: 1) a list of the persons who are members of the scheme and 2) a list of those persons who, though eligible, are not members of the scheme, and the persons whom they control.
The DLUHC keeps a public list of who has signed the "pledge" which is the developer remediation contract envisaged by the RAS. Not having signed the "pledge" will also have the added issued of making business more difficult for developers who should have signed but have not. The DLUHC has indicated it will review its own relationships if any with such developers.
Ban on development?
The RAS Regulations introduce the mechanism by which a developer can be blocked from carrying out major developments and also from receiving building control approval by being designated as an "applicable person" which will be the case if those persons:
- are treated as eligible or have been determined to be eligible to be members of the scheme but who have not become members;
- were members of the scheme but who, at the date of being included on the prohibitions list, are no longer members of the scheme following revocation of membership;
- are controlled by any eligible non-member.
Whilst the RAS Regulations talk about eligibility of those who may join the RAS, this is somewhat of a misnomer as in effect, those who are "eligible" must join the RAS if they wish to continue in "major development" of land in England.
The concept of "major development" is defined by reference to Article 2 of the Town and Country Planning (Development Management Procedure) (England) Order 2015(7) and includes;
- the winning and working of minerals or the use of land for mineral-working deposits
- waste development
- the provision of dwelling-houses (where the number of dwelling-houses to be provided is 10 or more or the development is to be carried out on a site having an area of 0.5 hectares or more),
- the provision of a building or buildings where the floor space to be created by the development is 1,000 square metres; or
- more development carried out on a site having an area of 1 hectare or more.
It is important to note therefore that "major development" is wider than just residential development and businesses will not be able to pivot to a different asset sector if they have been designated as a prohibited "applicable person"
The RAS Regulations will also prevent a prohibited person from gaining building control approval for any building work that requires such approval. In accordance with the RAS Regulations, prohibited developers may be unable to gain building control approval to start work, including through initial notices, as well as completion or final certificates for completed work. In some cases, this may result in a notice to terminate or suspend the work.
The RAS Regulations make provision for company groups. For example, when dealing with a company group, the Secretary of State expects to nominate one entity to join the Scheme on behalf of others in the group.
The RAS Regulations also contain provisions to seek to make sure group companies cannot avoid liability by winding up entities that would have been liable to join the Scheme by making sure that the liability passes to another group entity as directed by the Secretary of State.
Wedlake Bell comment
The RAS will initially focus on major housebuilders, and other large developers who have developed or refurbished multiple residential buildings that are known to have life-critical fire safety defects by having been assessed as eligible for a relevant government cladding remediation scheme. The government has however also indicated that the RAS will over time be expanded. It is critical for developers in involved in residential property development to be aware of the potential implications of the RAS given the significant impact that they could potentially have on their business operations.