Awaab’s Law and development agreements: mind the liability gap

The phased introduction of Awaab’s Law will commence on 27 October this year, bringing new requirements for registered providers and their handling of residents’ defect claims, including those relating to new-build rented properties.

Registered providers will need to consider the effect of Awaab’s Law on defects procedures in both new and existing development agreements and JCT contracts, in particular the timescales in which defects need to be responded to. The new timetable, reporting methods and remedial action are onerous, and registered providers will need to consider to what extent the obligations can or should be passed on to developers or contractors.

Upon receiving a report of a hazard (which could be via email, telephone call or perhaps social media post), registered providers must assess, in light of the resident’s circumstances, if it qualifies as a potential ‘significant’ or ‘emergency’ hazard.

If deemed an emergency hazard, the registered provider must investigate within 24 hours, and then works to make the property safe need to be carried out within 24 hours. If this cannot occur, suitable alternative accommodation must be offered. A written summary of the investigation must be provided within three working days of the inspection.

“Typically, development agreements for the acquisition of new affordable homes require the developer to stay on hand for a period of 12 or 24 months to repair defects that might arise after practical completion”

If the hazard is deemed to be ‘significant’, the registered provider must investigate within 10 working days and a written summary provided within three working days of inspection. Any required works must begin within five working days of the investigation concluding. If steps cannot be taken to begin work in five working days, this must be done as soon as possible, and within 12 weeks. Works must be completed within a reasonable time.

Typically, development agreements for the acquisition of new affordable homes require the developer to stay on hand for a period of 12 or 24 months to repair defects that might arise after practical completion. These procedures often require urgent repairs to be completed quickly, usually within 24 hours, but they won’t align with the new requirements registered providers face under Awaab’s Law, leaving a gap that registered providers need to consider how to deal with.

Registered providers may not yet have considered defects liability procedures in light of Awaab’s Law, and there is a question mark over whether developers or contractors will, or should, be relied on to fulfil the new statutory obligations in respect of defects, which will ultimately fall on the registered provider as landlord. Registered providers may prefer to take control of responding to defect claims and carrying out repairs while recovering costs from the developer.

The wording of new development agreements, JCT contracts and defects procedures will have to be reviewed and modified. For example, registered providers may wish to undertake initial assessments and emergency work themselves, while the developers implement the defects work required to remedy significant hazards.

Whatever is agreed will need to be reflected in contractual documentation between the registered provider and developer/contractor, with each party clear about their responsibilities. No doubt, when registered providers are choosing a contractor, they will need to look carefully and test bidders’ ability to minimise, manage and rectify defects. Responsibility for additional and consequential costs, should the resident need to be decanted, will also need to be agreed.

“Registered providers may wish to undertake initial assessments and emergency work themselves, while the developers implement the defects work required to remedy significant hazards”

On 27 October, registered providers will have schemes that have not yet reached practical completion, which the new legislation applies to, but which are governed by existing defects provisions. The scope of the Governance and Financial Viability Standard is broad and includes obligations for boards to ensure the organisation complies with all relevant law and regulatory requirements, including having effective risk management and internal controls assurance frameworks in place.

This means registered providers should consider whether they need to undertake an audit of such schemes to establish risk and likely additional cost. It should be considered whether risks identified should be included in the registered provider’s risk register. New schemes will also need to be appraised for the additional cost required to deal with the new legislation. 

In a recent report, the Housing Ombudsman highlighted the need for registered providers to have good communication with tenants, and much of the new regulation enforces prompt and thorough tenant communication. Handling this incorrectly could affect a registered provider’s tenant satisfaction measures (TSM) data.

For example, delays in handling defect claims, or confusion about who is responsible for repairs are likely to generate negative tenant feedback. If regulatory standards are breached, this could trigger defaults and funding issues in the future.

There is much to consider between now and October, before Awaab’s Law takes effect. It is certain, however, that registered providers’ development teams need to be considering and acting on these issues now.

Taking action now and addressing the liability gap that applies to new and existing agreements could mitigate risk and avoid unforeseen costs and issues arising.

Lucy Worrall, partner, Anthony Collins Solicitors