29th February 2024
Insight
Second stairwell rule highlights benefits of earlier due diligence for developments

This article was originally published in Housing Today in February 2024
By Phil Smith, Director at Rund 

The second staircase requirement for new build residential buildings above 18 metres has pushed developers to make some hard decisions during the transitional period on whether to proceed with original plans or revise designs and go through the subsequent planning and re-procurement process, causing project delays and raising budget concerns. Many viewed the rule as a major roadblock that can have a knock-on effect on meeting targets to offset the UK’s housing shortage. While it undoubtedly brings new challenges, it also heralds opportunities for transformation. 

At Rund, we believe that a mindset change is needed, one that proactively addresses the new requirement and prepares for all eventualities through more in-depth analysis to ensure safe, high-quality buildings. A trend has already been underway for some time whereby due diligence is shifting to earlier in the development process – before contracts are signed – across the residential market to mitigate risk, build resilience and keep up much-needed momentum. Developers and investors have grown more cautious in the last year or two, seeking ways to future-proof assets on the back of market factors including inflation, interest rates, higher energy and construction costs, construction firm insolvencies, labour and supply chain issues, the cost of borrowing, cashflow constraints and more. 

Michael Gove’s announcements reiterated that projects that already have planning permission to go ahead with a single staircase will not need to change as long as rigorous safety standards were considered during the application and that buildings are well constructed and maintained. In our experience of working with Build to Rent (BTR) operators and institutional investors, upfront due diligence is enabling them to pre-empt legislation to bolster confidence, accommodate design changes, de-risk developments and, ultimately, safeguard value. The consequences of introducing a second stair may include a change of unit mix, architectural layouts and therefore M&E plans, not to mention the time and cost implications. It also means accounting for the potential squeeze on gross internal floor areas, which may impact end value or even deter some investment decisions, so the right preparation, checks and balances are critical. 

Looking at both existing stabilised assets and projects where clients act on a forward fund or forward commit basis, we have seen that stabilised assets tend to need a more thorough assessment as there are more constraints when incorporating two sets of staircases within the confines of an existing structure, such as finding ways to reroute services from the top to ground floor or fitting evacuation firefighting lifts into the two stair cores. It pays to look deeper at the fire strategy, the quality of the building and how it’s maintained in a holistic way to give a comprehensive view of the overall risks of investing in that asset.

The advantages of conducting due diligence upfront include being able to identify potential issues at the very outset and have a better chance of finding workable solutions in a more agile way rather than scrambling to fix problems months down the line. The fire safety aspect has been at the top of the agenda since Grenfell and is the first element we look at. Once risks are identified it’s frequently the case that mitigation measures are possible, rather than being halted by insurmountable difficulties that make projects unviable before they even begin. The earlier you start the more scope there is for the developer, contractor, design and fire engineering teams to work collaboratively to find a compliant way forward. As an example of this approach and de-risking from the start, our team was recently appointed by a Canadian investor as Clerk of Works on two significant UK BTR schemes to provide quality, fire and M&E inspections. The result is being able to bring forward the delivery of many new high-quality rental homes in key locations at a time when demand continues to outweigh supply. 

While focusing on early risk identification, mitigation and management strategies, at its heart this process is about good design and the quality of the build. It is crucial to remember the context of the second stairwell rule, by focusing on the objectives of, and positive changes brought about by, the Building Safety Act and its three gateways. In reality, the option of a single staircase should be reviewed holistically in the context of wider fire safety measures and embed multiple robust fire safety measures early. Second staircases are just one part of the equation, so we need to look at the bigger picture. 

We’re currently undertaking technical due diligence on behalf of a large BTR operator for an existing stabilised asset, a high-rise building featuring a single staircase. Here, we advised the potential purchaser that they can proceed with the transaction provided that a host of other measures are in place, followed by Clerk of Works services to ensure that firestopping and passive fire measures are incorporated into the build in the right way; this comprises everything from fire doors, sprinkler systems, non-combustible walls and the evacuation policy to the general quality of the build and how it’s managed. We cannot look at the proposed design in isolation – what happens onsite and how the building is operated is a vital component of effective due diligence.

Looking ahead, the new building safety regime will fundamentally change the process of design, procurement and development for BTR projects and the wider residential sector. Single stage competitive tendering is likely to give way to more two-stage or negotiated tenders, along with early contractor engagement and supply chain involvement. All to make sure that, by the time projects reach Gateway 2 (prior to start onsite), designs have been fully considered and will not be watered down post-contract through value engineering. As understanding grows, these newest changes can be a catalyst for a better way of delivering homes, and earlier due diligence will support decision-making, helping developers and investors gain the assurance they need to take on promising opportunities while retaining value. 


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