The Issue with Special Purpose Vehicles (SPVs)

Special Purpose Vehicles (SPVs) are commonly used in property development but have created significant obstacles for leaseholders seeking fire safety remediation. Once a development is completed, these entities are often closed, leaving leaseholders without a legally liable party to turn to for compensation.

Uncertainty in Compensation and Remediation Costs

New fire safety legislation has made it more difficult for leaseholders to apply for and receive compensation, as ownership structures complicate liability. Managing agents, who neither built the blocks nor control developer funds, are left handling issues beyond their scope.

Impact on Secured Lending and Leaseholders

The uncertainty surrounding fire safety liabilities has damaged confidence in secured lending for high-rise residential flats. Many lenders are unwilling to provide mortgages on affected properties, leading to higher insurance premiums and trapping leaseholders who cannot sell their homes.

The Need for a Targeted Solution, Not Blanket Taxes

While some developers followed fire safety regulations, others cut corners. A broad residential property developers tax may not effectively hold the right parties accountable. Instead, a functioning New Homes Ombudsman and an expanded Building Safety Fund could offer more targeted solutions.

Complications in Fire Safety Compliance

Conflicting government and private sector guidance on fire safety measures, such as External Wall System 1 (EWS1) forms and compartmentation inspections, has further muddied the process. Some leaseholders have had to pay for multiple EWS1 certificates due to regulatory confusion.

The Urgent Need for Legislative Change

To prevent future crises, legislative reform is essential to clarify financial responsibility for fire safety defects. This could include mandatory sinking funds to support remediation costs and clear accountability for those who failed to uphold fire safety standards.