On 12 June 2023 the government published draft regulations which will amend the two sets of regulations already in place. As at the date of this article (16 June 2023), those amending regulations are not yet in force and so this article does not take them into account. The aim of the new regulations is to clarify various issues that have already arisen in practice.
Part 5 of the Building Safety Act 2022 came into force on 28 June 2022 and introduced various protections for leaseholders from the financial burden of removing unsafe cladding and remediating historical safety defects, in buildings of five storeys or more than 11 metres high.
Where a relevant landlord (that being the landlord on 14February 2022) was responsible for, or is associated with the person who was responsible for the defect, then the landlord is responsible for all costs of the remediation of unsafe cladding and historical safety defects, regardless of whether the leaseholder is a qualifying leaseholder or not. This is referred to as ‘the Developer Test’.
Where the relevant landlord was not responsible for the defect, then some leaseholders, known as ‘qualifying leaseholders’, are protected from the costs of remediation.
What is a ‘qualifying leaseholder’?
To be a qualifying leaseholder, the following criteria must be met:
- The lease must be a long lease of more than 21 years, granted before 14 February 2022, in a relevant building; and
- as at the 14 February 2022, the property was the leaseholder’s only or principal home, or
- the leaseholder did not own more than three homes in total in the UK.
To demonstrate that a leaseholder benefits from the protections, they must complete a leaseholder deed of certificate. Please see below for further details on the certificate.
What are the leaseholder protections?
The protections can be split into two categories:
- Cladding remediation – the removal or replacement of unsafe cladding; and
- Relevant defects – anything done or used that causes a risk to the safety of people from the spread of fire or the collapse of the building.
A qualifying leaseholder does not have to pay toward any cost for cladding remediation. This cost is payable by the relevant landlord.
When it comes to the cost of remedying relevant defects, this will depend on whether the landlord meets the contribution condition. The contribution condition is whether, on 14 February 2022, the landlord’s group net worth was more than N x £2,000,000.00 (where N is the number of relevant buildings). If the relevant landlord meets the contribution condition, then they will be responsible for the costs of remedying the relevant defects.
Where the landlord does not meet the contribution condition, then the qualifying leaseholder will be responsible for the cost of the relevant defects. However, the costs are capped and can be spread over a number of years (the maximum annual charge is 1/10th of the cap). If the property value is below £325,000.00 in London, or below £175,000.00 outside of London, then no contribution is payable by the qualifying leaseholder. Further contribution caps then apply which are set out in the table below.
In order to assess whether the leaseholder is a qualifying leaseholder, and their level of protection, the Building Safety (Leaseholder Protections) (England) Regulations 2022 (SI 2022/711) came into force on 21 July 2022, and introduced a leaseholder deed of certificate and a landlord deed of certificate.
|Rest of England|
|Rest of England|
|Less that £175k||£0||Less than £325,000||£0|
Leaseholder’s deed of certificate
A leaseholder’s deed of certificate is a certificate that is completed by the current leaseholder, with details of their status as at 14February 2022. It will enable a landlord to determine the leaseholder’s qualifying status and to calculate any contribution caps.
A leaseholder can send a certificate to their landlord at any time, however, a landlord must request a leaseholder’s deed of certificate, upon any of the following ‘triggers’:
- within five days of finding out that a leaseholder intends to sell their property; or
- within five days of finding out there is a relevant defect
If the landlord sends the request for a certificate, the leaseholder has up to 12 weeks to respond. If the leaseholder fails to respond within the timeframe, the leaseholder will be presumed to be a non-qualifying leaseholder.
A crucial point for a landlord is that if a landlord does not request the certificate from the leaseholder within the five day period, the leaseholder will be deemed to be a qualifying leaseholder regardless, and this can give a non-qualifying leaseholder qualifying status.
In addition, a landlord must follow a prescribed procedure for the landlord’s request to the leaseholder. A failure to adhere to the procedure can result in a non-qualifying leaseholder being deemed as a qualifying leaseholder. Therefore, if a building does need remedial work, and the relevant landlord was not responsible for the defect, it is important that a landlord follows the procedure to prevent them paying further costs that they may not be responsible for.
The landlord’s certificate demonstrates whether the relevant landlord is associated with the person responsible for the defects, or whether the relevant landlord meets the contribution condition. It must be provided:
- when a landlord wants to pass on any remediation costs under the Act to the leaseholder;
- within four weeks of receiving notification from a leaseholder that their leasehold interest is being sold;
- within four weeks of becoming aware of a relevant defect; or
- within four weeks of a leaseholder requesting it.
If a landlord fails to provide the certificate within the four week period, then the landlord will be deemed to be responsible for the defect, and this applies to all leaseholders (regardless of qualifying status).
Practical steps landlords can take now?
- Ascertain which buildings within a portfolio are relevant buildings.
- Carry out building surveys to ascertain whether any buildings have any relevant defects.
- Gather the information needed for the landlord certificate to ensure that the landlord can comply with any certificate requests quickly and within four weeks period following a request.
- Write to leaseholders in relevant buildings inviting them to complete and return a leaseholder deed of certificate, and have a system in place to record and chase.
- Have an internal procedure and train all staff, as to what steps to take when a leaseholder requests a landlord’s certificate, or the leaseholder informs the landlord that they are selling (and have a record keeping system to monitor all requests).
- The leaseholder protection elements of the Building Safety Act 2022 came into force on 28 June 2022.
- They apply to all residential buildings of at least five storeys or 11 metres in height.
- Leaseholders have certain protections against the cost of remediating unsafe cladding and historical safety defects.
- Landlords are obliged to follow a prescribed procedure and a failure to follow the prescribed procedure can result in the landlord being responsible for costs associated with any unsafe cladding and historical defect remediation that it would not otherwise have been.