On Tuesday 28 June 2022, the leaseholder protections in the Building Safety Act 2022 ("the Act") came into force. This is a significant change.
Qualifying leaseholders will not be required to pay anything to remove dangerous cladding from their buildings and there is now a cap on the amount that they can be asked to pay towards fixing other historical building safety defects.
In order to be able to recover some or all of these costs from leaseholders, landlords must provide a formal legal certificate, or otherwise show that the costs they are seeking from leaseholders do not relate to works covered by the Act.
The Government is also introducing a scheme which will protect non-qualifying leaseholders from remediation costs if remediation is required.
What is a qualifying leaseholder?
A leaseholder is a qualifying leaseholder if:
- the property is a building above 11 meters or 5 storeys;
- the property is the leaseholder's main home (as at 14 February 2022);
- the leaseholder owned no more than 3 UK residential properties in total on 14 February 2022.
A leaseholder is also a qualifying leaseholder if they have purchased their property since 14 February 2022 but the criteria outlined above was true for the flat on that date.
These provisions means that qualifying leaseholders' liability to fix historical building safety defects is no longer uncapped. Qualifying leaseholders will not have to pay anything to remove dangerous cladding.
What should qualifying leaseholders do next?
The Government press release on 28 June 2022 states that existing invoices are no longer valid and any landlord or agent who seeks to enforce them could be committing a criminal offence.
When the new regulations become law in July, qualifying leaseholders will be able to confirm their new legal rights through a short certificate which will be available on GOV.UK. We understand that new guidance will be available in July.
There are new transparency and financial reporting requirements which landlords will need to comply with before they can charge leaseholders for historical non-cladding costs. If landlords fail to comply, the Act will require them to pay all building safety costs in full. Therefore, it is imperative that landlords are aware of the new requirements so that they are able to not only comply with their obligations, but also recover any money that they are entitled to from leaseholders.
Qualifying leaseholders should not pay for any historical cladding or non-cladding costs before they receive a formal legal certificate from their landlord, or alternatively the landlord can demonstrate that the costs do not relate to works covered by the Act.
The Government will be producing guidance in the next few weeks and we recommend that both leaseholders and landlords review this so that they are fully aware of their rights and obligations.
What can non-qualifying leaseholders do?
Many developers have now signed the Building Safety Pledge and non-qualifying leaseholders should see if the developer of their building has signed this pledge. The developers who have signed the pledge will be paying to fix all life-critical fire-safety risks. These include non-cladding defects. Where a developer or associated company still owns the building, they will be completely liable for the repair work.
Building Safety Fund and Building Safety Levy
The next phase of the Building Safety Fund is due to open shortly and is available to landlords or freeholders of buildings over 18 metres tall with dangerous cladding.
There will also be a new scheme for buildings over 11 metres tall with dangerous cladding. This will be funded by developers through the Building Safety Levy.
Burges Salmon comment
Every building is different and how the repairs are paid for will depend upon both the type of fire safety defect and how the building is owned. Nevertheless, these provisions place a legal obligation on building owners to ensure that the building is safe. Failure to comply with the legislation could result in the landlord committing a criminal offence.
Landlords should ensure that they comply with they new legislation and qualifying leaseholders should ensure that they confirm their legal rights on GOV.UK once the new regulations become law.
Qualifying leaseholders will pay nothing to remove dangerous cladding, and the amount they can be asked to contribute to fixing other historical building safety defects is firmly capped.