The latest reform in property law catching the attention of all stakeholders is the introduction of The Building Safety Act 2022 (the Act).
The Act was brought in to try and tackle some of the fundamental safety issues brought to the fore by the Grenfell disaster, by allocating responsibility to deal with remedial works to make buildings safe. The Act will affect some, but not all, leasehold properties in England. It will give residents and homeowners more rights, powers, and protections.
There is a particular definition for remedial works covered by the Act – it is beyond the scope of this article to discuss in detail the full extent of this, however, to summarise it is works that put people’s safety at risk from the spread of fire, or structural collapse, as a result of building, or conversion works, under 30 years old, undertaken at the property.
The Act is designed to provide protections only in relation to ‘relevant buildings’; in summary this means a building where the height of the staircase leading to the top floor is more than 11m tall (approximately four to five storeys plus) and the freehold is owned by someone other than the leaseholders, whether directly or through a company.
Between April and October 2023, ‘high risk’ buildings, being those defined as 18m or more in height or have seven or more storeys and which have a residential element, must be registered with the Building Safety Regulator. Failure to register will be a criminal offence. The responsibility falls on the freeholder to register.
Where a flat is located within a relevant building, leaseholders must serve, on their landlords, a ‘Leaseholders Deed of Certificate’. This is to ascertain whether the flat is deemed to have a ‘qualifying lease’ as of 14th February 2022 (most owner-occupied residential leases granted before 14 February 2022 will be classed as a ‘qualifying lease’) and to request details from the freeholder of any known necessary remediation works. This only needs to be served once to demonstrate that it is a qualifying lease. The protections and cost caps are tied to the lease so will automatically transfer to any future buyers of the property. This means that all future owners of a leasehold property, which was eligible for the protections on the 14 February 2022, will be covered.
In response to the ‘Leaseholders Deed of Certificate’ and where there is a qualifying lease, the landlord must then serve on the leaseholder, a 'Landlord’s Certificate'. The first certificate must be provided within four weeks of receipt of the ‘Leaseholders Deed of Certificate’ however the landlord also has an ongoing obligation to ensure new certificates are served as and when further information about relevant defects comes to light. The Landlord’s Certificate contains the following information:
• Basic factual information about the building and lease.
• The net worth of the landlord including any person or company associated with it (this is a technical definition applied under the Act).
• Whether the landlord meets the criteria specified by the Act.
• A list of any relevant defects that the landlord is responsible for.
• A list of works already undertaken to remedy relevant defects including the date completed, the total cost of the works and this lease’s share of the cost.
• The total amount paid by this flat since the 28 June 2017 to remedy relevant defects.
• The maximum liability attributed to this flat in accordance with the terms of the Act.
The landlord may be required to provide evidence to accompany the certificate demonstrating the information they have supplied. Each time the landlord becomes aware of a relevant defect they must update and supply a new Landlord’s Certificate to each qualifying lease owner.
The Act imposes certain caps on what qualifying leaseholders are required to pay. This can be summarised as follows:
• Qualifying leaseholders are protected from all cladding system remediation costs.
• Those whose property is calculated as being worth less than £175,000, as at 14th February 2022 (unless the property is in Greater London where the cap is £325,000) are exempt from all historical safety remediation costs.
• Those whose landlord has a group net worth of more than £2m per relevant building, as at 14 February 2022, are exempt from all historical safety remediation costs.
• Those whose property is located outside of Greater London and worth between £175,000 and £1m, as at 14th February 2022, have a cap of £10,000 maximum contribution for non-cladding remediation over 10 years.
• Those whose property is located within Greater London and worth between £325,000 to £1m, as at 14th February 2022, have a cap of £15,000 maximum contribution for non-cladding remediation over 10 years.
• Any property worth between £1m and £2m, as at 14th February 2022, has a cap of £50,000 maximum contribution for non-cladding remediation over 10 years.
• Any property worth over £2m, as at 14th February 2022, has a cap of £100,000 maximum contribution for non-cladding remediation over 10 years.
• For shared ownership properties your cap is reduced in proportion to your equity in the property.
Where the costs of remediation exceed the amount the freeholder can recover from the various tenants within the building, it is the freeholder’s responsibility to cover the balance. The freeholder may be able to recover some of this from other sources for example the developer or contractor for the defective works.
Where a freeholder is not carrying out necessary works to remedy relevant defects, leaseholders are able to apply to court for a ‘Remediation Order’ requiring the freeholder to remedy the relevant defects.
Where a qualifying leaseholder has already contributed more than the caps mentioned above, they are able to apply for a court order to have the difference between what has been paid and the cap to be refunded to them. This is known as a ‘Remediation Contribution Order’ – they can also be used to require a developer or building owner, to make payments in connection with remedying relevant defects.
The protection and caps are tied to the lease so will automatically transfer to any future buyers of the property. This means that all new owners of a leasehold property, that was eligible for the protections on the 14 February 2022, will be covered. If part of the cap has already been used up, then this needs to be taken into account.
If you are in the process of or considering buying or selling a leasehold property, this Act is likely to affect your transaction in some way. Solicitors are now required by mortgage lenders to confirm whether or not each flat falls within the Act. You should expect that the conveyancing process for flats falling within the Act is likely to take more time given the additional investigation your conveyancer will need to carry out. Even for those not directly dealing with a relevant leasehold property, if there is one in your chain of transactions, delays are likely.
Prospective purchasers buying leasehold properties with a share of the freehold, will want to carefully consider the implications of this Act. Normally a share of the freehold is seen as a positive aspect as the tenants have greater control over the maintenance of the building and budgets, but purchasers will also want to consider now the extra potential liabilities in relation to building safety and the associated costs.
Our property team are experts in residential, commercial and rural property transactions, dispute resolution and landlord/tenant matters. Please telephone 01892 526344 or email enquiries@berryandlamberts.co.uk for more information.
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The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.
