Consultation on Building Warrant Fees

Section 3: Detailed Proposals

Increasing building warrant and associated fees to achieve full cost recovery for the building standards system

In taking this fees review forward BSD established that the fees increase should deliver approximately £3.5 million in additional funding overall after making allowances for any significant uptake in certification activity. This represents an approximate 10% increase on the overall fee revenue for local authority Verification services in 2015/16. The increase is based on £2 million to support local authority service improvements and £1.5 million to cover the overall running costs of BSD.

To deliver the financial objectives set by BSD, a study was commissioned to consider the impact of increases to the 2016 building warrant fee levels (minimum fee and incremental step increases) and other associated fixed fees. The study also considered the impact of changes to the fee discounts given for submission of certificates of design and construction.

The dependence of authorities on fees from large projects (whose number can vary considerably from year to year and with the economic cycle) was also highlighted by the research. Almost half of income across Scotland comes from projects with a value of over £320,000 (about 5% of cases) and about 40% from projects with a value of over £1 million.

In relation to the main fee structure the study identified a series of options involving different combinations of minimum fee change and changes to fees for higher value work. The analysis indicated how these changes would impact on projected income to local authority building standards Verification services and considered other effects of the proposed changes.

It was further suggested that the incremental costs of warrants for projects with a value of over £100,000 should be considered after the impacts of changes in the fees for smaller projects have been analysed and set so as to generate no more than the desired income increase. Consequently the incremental steps in the fee scale bands for higher value work have been increased to meet overall financial objectives.

The preferred option sees proportionately higher fee increases for the smaller projects with percentage increases falling for those projects with a value of £50,000 or more. These increases are substantially mitigated if certificates of design and construction are submitted.

The proposal therefore meets the income generation required, better addresses the issue of cost reflection and eases the dependence on high value projects for income. This therefore improves the reliability of income for those local authority Verification services whose work profile is mainly small and domestic by its nature. Modelling of the proposed scale of fees undertaken suggests that all authorities regardless of scale or type will benefit to a similar degree to others.

Raising building warrant fees (minimum fee and step increments) and fixed fee applications

In the 2012 study of the relationship between fees and costs it was concluded that projects with an estimated value of work of £5,000 or less, which paid a baseline value fee of £100, rarely or never covered the costs of verification. Only when the fee reached £400 (value of work £19,001 to £20,000) could there be confidence that costs would be met.

There was also general agreement among authorities consulted that the fixed fee for demolition warrants (£100) and fees for low value amendments to warrants did not cover costs.

However, the 2012 study also concluded that there were strong arguments against a fully cost reflective fee structure (which might involve a tripling or more of the lowest fee). These arguments were mainly on the grounds that a sharp fee increase might discourage use of the building standards system and lead to an expansion of unauthorised building work not compliant with building regulations.

The current scale for building warrant fees was set in 2005 and has not been reviewed since then. While most fees are based on a scale which relates the fee to the value of the work done, there are fixed fees for a number of items (e.g. demolition) and for projects with a value of under £5,000. These fixed fees are, due to inflation, about 40% below their real value in 2005.

While it is accepted that there is and will be some cross-subsidisation of work on small projects by fees from larger projects, there is concern that the alignment of fees and costs is insufficient. This situation has a greater impact on those authorities with a work profile that is mainly of a small domestic nature with fewer high fee paying projects.

The proposal is therefore to increase these fees to better reflect the verification costs incurred by Verifiers. This includes:

• Application for building warrant with a minimum value of up to £5000.
  The proposal is to increase the minimum fee from £100 to £150.
• Application for building warrant with a value of £5,001 and up to £20,000.
  The proposal is to increase the incremental step increases by £4 (£15 to £19)

• Application for building warrant with a value of £20,001 or more.
  The proposal is to increase the incremental step increases by £3 (£60 to £63, £100 to £103, £175 to £178, £250 to £253).

• Application for amendment to building warrant (value of additional work up to £5,000)
  The proposal is to increase the minimum fee from £50 to £100.
• Application for amendment to building warrant for conversion or demolition only
  The proposal is to increase the fixed fee from £50 to £100.
• Application for a building warrant to demolish only.
  The proposal is to increase the fixed fee from £100 to £150.
• Application for a conversion only.
  The proposal is to increase the fixed fee from £100 to £150.
• Application to extend the validity of a building warrant (beyond 3 years)
  The proposal is to increase the fixed fee from £50 to £100.

Increasing discounts to fees to encourage the uptake of Certification of Design and Construction

The 2003 Act introduced the option of certification for work requiring a building warrant. Certification is based on the principle that suitably qualified and experienced building professionals and tradesmen can be responsible for ensuring that specified works comply with the building regulations without the need for detailed scrutiny or inspections by local authority Verifiers.

The main overall aim is for building owners to understand the benefits that using an approved certifier gives them. It provides reassurance of compliance with building regulations, saves time and it is cost effective. For the approved certifier, the aim is that their input into compliance is fully recognised across all the work they do.

Previous research concluded that certification should be viewed and promoted as the best route to compliance, and the appropriate incentives must be in place. These were cited as:

• Reduced building warrant fees
• Speed of processing by the local authority
• Certainty that the certified work has been done by a competent person properly, and with regard to the wider building standards

It has been viewed that the system of discounts for certification has resulted in an income "loss" to the Verifier. The discount is almost always less than the cost of the extra work involved in additional checking of work for which no certificate was provided. It was also found that the discounts provided little or no incentive to applicants to use certification - particularly on the lower value projects (though there were other benefits to applicants from certification).

Subsequent work, specifically a workshop held by BSD in October 2014 and attended by a wide range of interested parties including certification bodies, has reinforced those conclusions.

The current system provides for discounts of the building warrant fee. A 10% discount is applied to the fee when a certificate of design of a whole section (Section 1 Structure; or Section 6 Energy) is provided with the building warrant application. A discount of 1% is applied to the fee when the applicant confirms that they will provide a certificate of construction with the completion certificate for electrical installations, or drainage, heating and plumbing installations (note in 2009, the 1% refund at completion stage for construction certificates was changed to the current 1% discount applicable at application stage).

The proposal is therefore to increase discounts to better reflect the reduced verification costs incurred by Verifiers and recognise the additional benefits that certification brings to building owners. This includes:

• Certifiers of design
  Discount retained at 10%, with discounts for up to £100,000 value of work increased by introducing minimum fixed amounts.
• Certifiers of construction
  Discount increased from 1% to 3% with discounts for up to £100,000 value of work increased by introducing minimum fixed amounts.

Proposed Certification Discounts

Value of work bands	Design schemes		Construction schemes
	Building structures	Energy	Drainage, heating and plumbing	Electrical installations
£0 to £5,000	£30	£30	£15	£15
£5,001 to £10,000	£40	£40	£15	£15
£10,001 to £20,000	£65	£65	£25	£25
£20,001 to £100,000	£100	£100	£35	£35
£100,001 and more	10% of fee	10% of fee	3% of fee	3% of fee

Increase fees for those undertaking unauthorised work (i.e. started without a building warrant)

At present where a late application for building warrant is made, or a completion certificate is submitted and there was no warrant obtained when there should have been, the fee is increased by 25% to cover the increased difficulty the Verifier will have in establishing whether work that is already underway or completed complies with the plans, specifications and other information provided.

It has been recognised that the additional 25% above the normal building warrant fee does not fully reflect the additional work undertaken by a Verifier in assessing work that has not been subject to the building warrant process. In many occasions, Verifiers have to undertake multiple inspections and disruptive surveys may be necessary to determine compliance with building regulations.

It is therefore proposed to substantially increase the fee for those submitting late building warrants and completion certificates where no building warrant was obtained. This includes:

Application for 'late' building warrant, i.e. where work is already started -

a) application for a building warrant for the construction of a building or the provision of services, fittings and equipment in connection with a building (whether or not combined with an application for demolition)

Fee is increased from 125% to 200% of the normal building warrant fee

b) application for warrant for demolitions only

Fee is increased from £125 to £200

Submission of a completion certificate where no warrant was obtained for -

a) the construction of a building or the provision of services, fittings or equipment (whether or not combined with an application for conversion or for demolition)

Fee is increased from 125% to 300% of the normal building warrant fee

b) application for warrant for demolitions only or for conversion only -

Fee is increased from £125 to £300