Author : Marry-Anne Bowring
Leading UK developers were issued a strong ultimatum last month to sign the Developer Remediation Contract (DRC) which applies in England, or else face severe consequences. More details have now emerged about this ultimatum. The government has released guidance defining the key features of a Responsible Actors Scheme (RAS). This scheme will effectively forbid eligible developers from initiating or completing projects in England unless they sign the Developer Remediation Contract and comply with its conditions and those of the Responsible Actors Scheme.
The aim is to incentivise developers and motivate them to promptly address life-threatening fire safety defects in residential buildings measuring 11 meters or higher. Another goal is to reimburse government schemes that have already undertaken remedial work at taxpayers' expense. The exact operational details of the scheme will only be known once the regulations are published, but the basic structure, eligibility criteria, and membership conditions have been disclosed.
The Responsible Actors Scheme is likely to come into effect in early summer 2023
The guidance affirms that the government will focus on targeting major house builders and large developers initially. But there are clear indicators that the scheme will eventually expand to include other developers who have built or refurbished defective buildings over 11 meters. However, no specific timeline has been mentioned.
To be required to comply with the Responsible Actors Scheme, developers must satisfy a profits condition, fulfilling an average annual operating profit of 10 million or more over three years. Alternatively, developers can voluntarily sign the Developer Remediation Contract and join the scheme. After the Secretary of State invites them, eligible developers will be given a reasonable time frame to join the scheme or submit evidence-based representations challenging their eligibility.
To join the Responsible Actors Scheme, developers must enter the Developer Remediation Contract with the DLUHC and commit to fulfilling all other membership conditions. The guidance stipulates that members must:
The guidance also highlights that additional membership conditions may be imposed through the regulations. It may include a fit and proper person test for directors and senior managers of scheme members. The lack of clarity regarding the scheme's applicability and future membership conditions is an area of concern.
Despite this, eligible developers will have little choice but to join the Responsible Actors Scheme. The consequences of not joining or being expelled for non-compliance are severe. Any developer choosing not to join or being expelled will be added to a prohibited persons list. Developers on such a list will be denied the chance to participate in any major development projects in England. They will also be unable to obtain building control approval for any ongoing or future construction work, which may result in the termination or suspension of ongoing projects.
As of March 24, 2023, only six developers had yet to sign the DRC.
The scheme's next phase could broaden membership eligibility.
The impact of the scheme and the obligations imposed by the Developer Remediation Contract have far-reaching implications for the entire industry. While major developers have been the primary focus so far, recovery actions will inevitably affect others too. Contractors, construction professionals, specialist suppliers, and their insurers should prepare for the inevitable recovery actions that will follow.
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