If a building is at least 11 metres or 5 storeys high, the building falls within the remit of the Act.
If the enfranchisement process has occurred resulting in the building effectively being owned by the tenants, the Act does not apply.
Application of the Act can be complex and differs slightly depending on if the historical remedial works are cladding or non-cladding and whether the lease is a ‘qualifying lease’ or a ‘non-qualifying lease’.
Put simply, if on 14th February 2022, the property was occupied as the owner’s only or principal residence and on that date the owner owned no more than two dwellings in the United Kingdom, in addition to the property, three in total, the landlord must cover the cost of any historical cladding remedial works. This cannot be recovered by way of billed service charge to the owner. In such circumstances, the lease is a ‘qualifying lease’.
If the lease is a ‘non-qualifying lease’ due to the owner of the property owning more than three dwellings in the United Kingdom on 14th February 2022, required cladding remedial work costs can usually be recovered through service charge. However, the exception to this is where the building is still owned by the original developer or an associated company, in which case the costs should be paid at the expense of the building owner.
As stated in the official guidance, “the Act eradicates the idea that leaseholders should be the first port of call to pay for historical safety defects” (The Building Safety Act – GOV.UK (www.gov.uk)).
If the historical remedial works are non-cladding, then ‘qualifying lease’ owners must obtain the value of the subject property as of 14th February 2022. If the value was less than £175,000.00, or £325,000.00 in Greater London, a ‘qualifying lease’ owner is not liable for any non-cladding remediation costs. If the value is equal to or over these respective figures, the ‘qualifying lease’ owner may be liable for a portion of the costs depending on the whether the landlord is or has a connection with the entity that caused the defect or whether the landlord has a group net worth of more £2m per relevant building. If the ‘qualifying lease’ is liable for costs, they must capped and spread over 10 years, with any costs paid since 28th June 2017 contributing towards the cap amount.
Given the complexity with application of the Act, there is an official ‘Leaseholder Protections Checker’ available, designed to help flat owners establish whether they are liable for any remediation costs.
Implications for conveyancing transactions.
At the time of writing the application of the act appears to be causing delays in many conveyancing transaction whilst the many parties digest how the Act applies. The writer has seen cases become abortive due to such delay.
Those who own a flat within a building falling with the remit of the Act need to serve a ‘Leaseholders Deed of Certificate’ (“Leaseholder DOC”) on their landlord . The same is designed to determine whether the lease is ‘qualifying lease’ or not. As above, establishing whether the lease is a ‘qualifying lease’ or a ‘non-qualifying lease’ is critical.
Many landlords have begun the process to determine liability by sending flat owners the Leaseholders DOC. In such circumstances, an accompanying notice must be given by the landlord indicating when the Leaseholders DOC must be returned by. At least 8 weeks from the date the flat owner receives the notice and Leaseholders DOC is the minimum period that must be allowed. If the Leaseholders DOC is not returned within the stipulated period, the lease may be treated as a ‘non-qualifying lease’ and thus not be afforded the protections offered by the Act.
Within four weeks of receipt of the Leaseholders DOC, the landlord must serve the ‘Landlords Deed of Certificate’ (“Landlords DOC”). The Landlords DOC should establish whether there are any remediation works due on the building, whether the landlord has a connection with the entity that caused the defects, and whether the landlord has a group net worth of more than £2m per relevant building.
Any Buyer’s solicitor of a flat that falls within the Act will most likely request sight of both the ‘Leaseholders DOC’ and the ‘Landlords DOC’ to try to ascertain the level of costs associated with any historical remedial works and who is liable for the same.
One may feel it would be prudent on flat owners covered by the Act to complete and serve their landlord with a completed Leaseholder DOC if they have not already done so as to begin the process as soon as possible, reducing any potential delay in a conveyancing transaction.
As of January 2023, the standard ‘Leasehold Property Enquiries’ (“LPE1”) and Leasehold Information Form (“TA7”) were updated to take into account the above. Question 4.14 of the LPE1 relates to the ‘Leaseholders DOC’ and 4.15 relates to the ‘Landlords DOC’. Section 11 of the TA7 deals.
The UK Finance Mortgage Lenders Handbook has also included provision regarding the above, section 5.14.17 dealing with the same. Most lenders appearing to requiring that the following be obtained from the Seller’s solicitor:
• “Confirmation as to whether the building has been or will be remediated under the Building Safety Act 2022.
• Copies of any Landlord’s Certificates, signed by the Landlord in the form set out in the Building Safety (Leaseholder Protections) (England) Regulations 2022.
• Copies of any executed Leaseholder Deed of Certificate (in the form set out in the Building Safety (Leaseholder Protections) (England) Regulations 2022) and confirmation that they have been submitted by the relevant leaseholder to the landlord.”
An important note is that the Act does not negate the need for an EWS1 in relation fire safety. Even if an EWS1 considers there to be no fire safety remediation required, this building still may have historical defects of which the costs may be covered by the Act.
At Sweeney Miller Law we have experience in dealing with all types of conveyancing transactions and would be delighted to provide a quote for conveyancing matter, whether the Act is involved or not.
Should you wish to obtain further information regarding the above or obtain a quote, please contact Damien Todd by e-mail (Damien@sweeneymiller.co.uk) or telephone 0191 568 2050.
This article is a general overview and should not be in place of legal advice specific to your circumstances.
