As part of the agreement, the firm has also withdrawn its buildings from the Building Safety Fund and ACM (aluminium composite material) Funds.
It said it expected the incremental cost to remediate buildings taller than 11 metres to be in the range of £350m to £400m. This will be accounted for in its annualised operating costs, which will be expensed as incurred through administrative expenses. This figure will increase by £10m to £20m a year on it’s financial records, starting 1 July 2022, the beginning of Barratt’s financial year.
Barratt said this decision reflected four years of “constructive engagement” with the government to address these issues, as it aligned with its belief that leaseholders should not have to pay for works caused by the design, construction or refurbishment of buildings.
Its statement said: “Government policy has evolved and been updated frequently in the intervening period while surveyors, lenders and insurers have also made changes to their policies and procedures for dealing with multi-storey, multi-occupancy buildings against this uncertain and changing backdrop.
“Investigations by freeholders and developers of buildings added further complexity and uncertainty. Regrettably, leaseholders have been, and continue to be, adversely impacted; often facing significant charges for remediation, interim safety measures and increased insurance premiums.”
“All of our buildings, including the cladding and external wall systems used, were signed off by approved inspectors as compliant with the relevant Building Regulations in place when they were built,” it added.
Barratt said it would include the remediation costs in its half-year results. It also plans to “seek recoveries” from other parties involved in the development of affected properties who may have a responsibility in sharing the costs.
However, it said “this recovery is uncertain and therefore has not been included in our expected incremental costs”.
Moving forward, the firm will cough up around £400m over the next 10 years through the Residential Property Developer Tax to help fund remediation of buildings built or refurbished by other organisations.
David Thomas, chief executive of Barratt Developments, said: “We have always been clear that we do not believe leaseholders should pay for remediation of their homes and are committed to helping affected leaseholders living in the buildings we developed.
“Through constructive engagement between industry and government, a proportionate and sensible approach has been found and we look forward to completing the remediation process as quickly as possible.”
He added: “As government continues to work through policy developments in this area, it is vital that it considers the burden of this taxation on UK housebuilders and how it might impact the ongoing construction of homes that the UK needs.”
Yesterday, Crest Nicholson, Persimmon, Berkeley Homes and Taylor Wimpey signed up to the pledge.
