Building Safety Act 2022 - Leaseholder Protections and Remediation Costs
26 September 2023
The Building Safety Act 2022 (Commencement No. 5 and Transitional Provisions) Regulations 2023 were made on 11 September 2023 and brought into force, as from 1 October 2023, various sections of the Building Safety Act 2022.
The provisions of the Act are complex and wide-ranging in effect, with perhaps its most significant impact relating to occupied higher-risk buildings. These are buildings of above 18 metres (or seven storeys) which contain at least two residential units. For landlords/owners of these buildings, the requirements of the extensive new duties which the Act introduces, in several instances accompanied by tight time-limits for compliance, are significant and include:
- Registration with Building Safety Regulator (“the Regulator”)
An application to register the building should have been submitted to the Building Safety Regulator and paid for by 30 September 2023 (the fee is £251 per building). The person responsible for fulfilling this duty (referred to as the principal accounting person the “PAP”) is usually the landlord, but it could be an RTM company or RMC) and they will have committed an offence if they failed to do this (unless they had a reasonable excuse).
The Government registration service is accessible at this link.
If you are, or may be, a PAP of an occupied higher-risk building and have not yet registered the building with the Regulator, we can assist; get in touch and we can advise on next steps to help you to ascertain whether you are a PAP (and, if not, to identify who is), to understand the scope of any duties to which you are now subject and to secure registration as soon as possible.
The “leaseholder protection” provisions of the Building Safety Act 2022 were introduced in light of this to reallocate the burden of the cost of any remediation works where the legislature felt that it is fair and reasonable to do so. These provisions apply to buildings that are at least 11 metres (five storeys) high and seek to deliver on two principal goals:
1. to ensure that developers/original building owners of defective buildings take responsibility for fixing them (even if they no longer own the building); and
2. to remove (or significantly restrict) any liability on the part of leaseholders to pay for the remediation of historical safety defects.
To address the first of these goals, the legislation aims to ensure that building owners pay remediation costs for buildings which they (or any of their associates) had a role in developing. No service charge is payable for a defect for which landlord, or an associate of the landlord, is responsible.
Service charge limitations
Reinforcing this (and tackling the second goal), the legislation introduces the following further protections for any leaseholder who holds under a “qualifying lease”:
- no service charge is payable for removal of unsafe cladding; qualifying leaseholders are protected from all cladding system remediation costs;
- no service charge is payable if the landlord meets the contribution condition (i.e. if the landlord group’s net worth as at 14 February 2022 was more than £2,000,000, per relevant building);
- no service charge is payable where the value of the lease was below £325,000 on 14 February 2022 (or £175,000 if the premises are outside Greater London); and
- a cap of £10,000* on any contribution towards non-cladding related defects, spread over ten years.
*Increased to £50,000 if the value of the lease was between £1,000,000 and £2,000,000 on 14 February 2022, and £100,000 if the value of the qualifying lease then exceeded £2,000,000.
To facilitate the operation of the leaseholder provisions, the legislation requires certain information to be provided by a leaseholder to its landlord and by a landlord to its leaseholder:
Leaseholder deeds of certificate
To demonstrate they have a qualifying lease (and so benefit from the leaseholder protections), a leaseholder should produce a leaseholder deed of certificate (and they must do so if the landlord requires). If the leaseholder does not provide a certificate when they should have done, they will be treated as not having a qualifying lease. The form of the certificate is set out in the legislation, as is the information that it must contain (relating to ownership of the premises on 14 February 2022 and value of the lease) and evidence that must be provided.
Given the far-reaching implications for a lease which is not considered to be a qualifying lease, a leaseholder would be well advised to prepare a leaseholder deed of certificate now, so it is readily available if requested by their landlord.
The current landlord must provide to its leaseholders a certificate in specified instances (including where the landlord makes a service charge demand for remediation costs, within four weeks of being notified by a leaseholder that its leasehold interest is to be sold and within four weeks of a leaseholder requesting it).
The information that the certificate must contain and the evidence that needs to be provided is extensive and is set out in the legislation. The landlord will, via the certificate, demonstrate:
- whether they were, or were associated with, the developer of the building on 14 February 2022; and
- whether they met the contribution condition on 14 February 2022.
The landlord must provide a copy of the landlord certificate and leaseholder deed of certificate to the RTM, RMC and any named manager within one week of completion or receipt. If it fails to do so, costs cannot be passed on to leaseholders.
Remediation orders and remediation contribution orders
As well as protection from being required by a landlord to contribute to remediation costs, the leaseholder will also want to ensure that those safety works to their building are carried out (and paid for).
This is addressed in the Act by provisions which entitle any leaseholder (as well as RTM company, RMC or named manager) to apply to the First-tier Tribunal for:
- a remediation order requiring a landlord to remedy defects in a building; or
- a remediation contribution order requiring a landlord, developer or an associate to contribute towards the cost of remediation works.
The legislation is broad in scope and many of its provisions complex. In some instances, the implications of its provisions are only becoming apparent as it comes into force and it has already been amended on several occasions by secondary legislation; more amendment is expected.
This publication provides general guidance only: expert advice should be sought in relation to particular circumstances. Please get in touch with Sara Hanrahan or Anthony Van Hoffen if you wish to discuss any of the points mentioned in this note or any other aspect of the building safety regime.
To find out about the landlord duties under the BSA, click here.