The contract also requires developers to reimburse taxpayers where public money has been used to fix unsafe buildings.
The government has set a six-week deadline for developers to sign the legal agreements and is warning that companies that fail to sign and comply with the terms of the contract will face significant consequences.
Legislation will be brought forward in the spring giving the Secretary of State powers to prevent developers from operating freely in the housing market if they fail to sign and comply with the remediation contract.
The contract, which has been drawn up by the Department for Levelling Up, Housing and Communities, will protect thousands of leaseholders living in hundreds of buildings across England. These innocent households would otherwise face costly repairs for serious safety defects including non-cladding-related issues.
Under the contract, developers will commit an estimated £2 billion or more for repairs to buildings they developed or refurbished over the past 30 years. This means that together with the Building Safety Levy, industry is directly paying an estimated £5 billion to make their buildings safe.
This follows Secretary of State for Levelling Up, Housing and Communities, Michael Gove, demanding developers are held to account, which led to public pledges from 49 of the country’s leading developers that they would take responsibility to fix their own buildings, which will now be turned into legally binding commitments.
Under legislation to be brought forward this spring, a Responsible Actors Scheme (RAS) will be created, allowing the Secretary of State to block developers that have not signed the contract or failed to comply with its terms from carrying out development and from receiving building control approval. This will prevent them from operating as normal in the housing market for as long as they do not resolve the problems of the past.
The Levelling Up Secretary will also take action to ban managing agents and freeholders from taking commissions when they take out building insurance. This is in response to a report from the Financial Conduct Authority that suggested commissions make up almost a third of premiums.
Government will also bring in further measures to make service charges more transparent and empower leaseholders who want to challenge their bills.
This follows confirmation from six major lenders that, from earlier this month, they will once again consider mortgage applications on properties that are covered by the leaseholder protections in the Building Safety Act or where the building is eligible for a government or developer remediation scheme.
Once the contract is signed by developers, leaseholders will benefit from a common framework of rights and responsibilities that will get their buildings fixed without them having to pay and will require developers to inform residents in affected buildings how they will be meeting these commitments.
