The Building Safety Bill has now been passed, but what does it actually mean for landlords and leaseholders?
12th May 2022
12th May 2022
14 June 2022 will mark the fifth anniversary of the Grenfell fire disaster that claimed 72 lives and has quite properly resulted in huge changes to the residential property sector.
The fifth anniversary of Grenfell was a key date for the Government who had wished to see that that date did not pass without the promised changes to legislation designed to prevent such an occurrence in the future. In that target the Government have succeeded (well, sort of) with the passing on 26 April 2022 of the Building Safety Bill and it receiving Royal Assent just two days later on 28 April 2022.
Given that the newly passed Building Safety Act 2022 (“the Act”) is said to be so significantly altered from the original proposals, what does it actually mean for landlords and leaseholders?
The answer to that question would easily (and does) fill whole day technical seminars but we set out here some of the more salient points that affect block and estate management.
From when does it apply
As with any new legislation, not much of its content is yet law. There will be a raft of secondary legislation over the next 2 - 18 months (the Government’s timetable can be seen here), but potentially longer, which will bring in, piecemeal, different parts of the Act.
‘Higher Risk Buildings’
The Act applies to “higher-risk buildings” that is buildings over 18 metres or 7 storeys containing at least 2 residential units. There are also provisions affecting buildings over 11 meters and 5 storeys with at least 2 residential flats.
The ‘Accountable Person’
This is the person or body that under the Act has overall responsibility for building safety of a “higher risk building”. The Accountable Person will be the person who owns or is responsible for the repair of the common parts of the building. This is therefore going to be, in most cases, the owner of the freehold (or an intermediate leaseholder) of the building as a whole or RTM Company.
Costs covered by Service Charges
Possibly the most contentious part of the Bill as it ran its course through Parliament was to what extent, if any, should long leaseholders (owners of leases granted for a term of more than 7 years) bear the costs of works that will be required as a result of the provisions of the Act. That debate, which saw huge changes to the final legislation, resulted in landlords of higher-risk buildings retaining the ability to pass on to leaseholder though the service charge certain costs. These include building safety measures such as:-
The cost of registering higher-risk buildings with the regulator;
The risk assessment costs relating to building safety;
Document management and circulation relating to compliance with the Act;
Where the lease permits (and not all will) the costs of works needed to meet the safety requirements resulting from the above - Note also the points below on the limitations to some of those costs.
Remedy of existing fire safety issues at a development
An area of significant political debate in this whole process has been what to do about the costs involved in remedying those issues that result from the manner of the construction of the building. Issues that we have advised on frequently over the past 4 years have included combustible cladding removal, balcony floor replacement and flat front door upgrades to suitable fire resistant material with the big questions being who is responsible to get the work done and who pays.
The Government have made clear that they wish to see those who constructed the building bear the brunt of those costs and have introduced “remediation orders” and “remediation contribution orders” which can be made to compel developers and landlords to carry out remediation work required, and the time period in which it must be completed. That, on its own though, would not prevent the cost of those works being passed down to the home owning leaseholders via the service charge provisions in any lease and so the Act provides protection for some, but not all, leaseholders.
Long leaseholders in buildings over 11 metres or 5 storeys, and which contain at least two dwellings will avoid all liability for remediation works where the landlord is, or is associated with, the original developer of the building, or the landlord group's net worth is at least £2 million per affected building that they own.
Where the above does not apply though the service charge contribution of a leaseholder for a remediation cost will be limited to £10,000 (or £15,000 in Greater London) irrespective of the actual total cost with leaseholders of ‘lower value’ flats not being required to contribute at all.
Presently, the protections referred to above do not apply to blocks held as commonhold (which are few and far between) or, more relevant, to leaseholders who have in the past acquired the freehold of their building by collective enfranchisement or following the exercise of the right of first refusal.
Limitation changes - The Defective Premises Act 1972
The Act amends the above to include a new section 2A and, specifically, the time period in which claims can be brought under the Defective Premises Act 1972 for latent defects that at the time of completion of the building made the property unfit for habitation.
The change is to extend the usual limitation period (the time after which a valid claim cannot be made) from 6 years to 15 years for claims that accrue after the Act takes effect, and to 30 years retrospectively for claims that accrued before the Act takes effect.
This change is significant both for future claims but, also, for claims that up until the Act would have been caught and prevented by the former 6 year limitation. It is anticipated that, following the implementation of this provision (which the Government timetable suggests will be within the next two months), there is likely to be a number of high value claims raised against developers. Watch this space!
Whilst the above is very much a whistle stop summary of just some parts of the Act, this is a key piece of legislation that affects all that you do an a daily basis in the management of your development(s). It is going to be very important to be aware of what is coming in, when that is going to take effect and what you need to do to ensure that you are compliant for yourself/your clients.
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