The Building Safety Act 2022

The Building Safety Act 2022 (“the Act”) came into force in 2022 as a result of the Grenfell Fire tragedy and its purpose was to address unsafe buildings. It set out measures in respect of new buildings, established a regulator and made changes to the Building Act 1984, as well as extended limitation periods under the Defective Premises Act 1972. It also introduced measures in respect existing buildings. The objective was to impose responsibility upon the developers of buildings for unsafe conditions.

The Act imposes obligations upon building owners or managers in respect of all buildings. The taller the building, the greater the obligations that exist and the Act specifically caters for “high-risk buildings” which are defined as a building which is at least 18 metres high and has at least 7 storeys. For high-risk buildings the accountable person (which could be a right to manage company) must prepare a residents engagement strategy and consult with leaseholders regarding building safety decisions.

Remediation of Relevant Defects in Existing Buildings

A key part of the Act is to remedy relevant defects in existing relevant buildings. There are many new landlords who own buildings and leaseholders who own flats within buildings which suffer from a defect and require remedial works. Sections 116 to 125 and schedule 8 of the Act make provision regarding the remediation of relevant defects in relevant buildings.

• A “Relevant building” means a self-contained building that contains at least 2 dwellings and is at least 11 metres high (measured from ground level to the finished surface of the floor of the top storey of the building) or has at least 5 storeys.

• A “Relevant defect” means a defect in the construction of the building or which causes a building safety risk (which relates to a risk arising from the spread of fire or the collapse of the building).

The Act protects certain leaseholders from all costs associated with the remediation works, but the protection afforded depends upon whether, as at 14 February 2022:

1. The relevant landlord (a landlord who has responsibility to maintain and repair the building) was responsible for the relevant defect (meaning it undertook or commissioned works relating to the defect), or it was associated with the person responsible for a relevant defect; and

2. The leaseholder holds a qualifying lease. A qualifying leaseholder is

1. a leaseholder who held a long lease (of more than 21 years) of a single dwelling in a relevant building under which the leaseholder was liable to pay a service charge, and, 

2. the dwelling was either (a) the leaseholder’s only or principal home, or (b) the leaseholder owned no more than a total of 3 dwellings in the UK.

In other words, a leaseholder who owned 4 or more dwellings in the UK on 14 February 2022 would only hold a qualifying lease of the flat in which the leaseholder lived (if any) on 14 February 2022. On the other hand, a leaseholder who only owned 3 dwellings in the UK on 14 February 2022 would hold qualifying leases in respect of all 3 dwellings.

1. If the relevant landlord was responsible for the relevant defect (see above – such as the original developer) then, no service charge is payable under a lease in respect of a relevant measure to remedy, prevent or reduce the severity of any incident resulting from a relevant defect. In other words, all leaseholders are covered in respect of the relevant cost of the remedial work.

2. If the relevant landlord was not responsible for the relevant defect (for instance if the landlord was not the developer but had acquired the building later on), then it depends upon:

1. Whether the leaseholder holds a qualifying lease, since leaseholders who do not hold a qualifying lease are outside the scope of the protection.

2. The nature of the works since no service charge is payable under a qualifying lease in respect of cladding remediation or in respect of legal or other professional services relating to the potential liability of a person as a result of a relevant defect.

3. The relevant landlord’s group net worth on 14 February 2022. If the net worth was more than £2 million per building it owned then no service charge is payable under a qualifying lease. If, for instance, the relevant landlord owned 5 buildings with a combined value of £10.1 million then the financial condition would be met but, if the combined value was £9.9 million then the financial condition would not be met

4. The value of the qualifying lease on 14 February 2022. If the value of the qualifying lease was less than £325,000 in Greater London or £175,000 elsewhere then no service charge is payable under a relevant measure to remedy the relevant defect.

5. In all other cases (in respect of qualifying leases) there is a limit on the amount that a relevant landlord can recover as service charge for a relevant defect (including costs already incurred in the 5 year period prior to the relevant defect being remedied or, if shorter, the period during which the leaseholder has held the qualifying lease). The limit depends on the location and value of the dwelling:

1. If the dwelling had a value of between £325,000 (or £175,000 outside Greater London) up to £1 million then the limit is £10,000 if the dwelling is outside Central London or £15,000 if the dwelling is in Greater London

2. If the dwelling had a value of more than £1 million but less than £2 million then the permitted maximum is £50,000.

3. If the dwelling had a value of more than £2 million then the permitted maximum is £100,000.

Where the service charge cap applies, the annual amount payable (for all service charges during the year) is limited to one tenth of the capped amount.

The above provisions only apply in respect of a “relevant building.” There are no restrictions or limitations on service charge recovery for buildings that are not relevant buildings.  Similarly, they only apply to “relevant defects” and there are no restrictions or limitations on service charge recovery for defects that do not fall within the definition. There are also anti-avoidance provisions which prevent relevant landlords from say increasing the service charges of leaseholders of non-qualifying leases or recovering the cost from any reserve fund.

Landlord Certificates

Where a landlord makes a demand to a leaseholder for the payment of service charges relating to the remediation costs of relevant defects, it must provide leaseholders with a Landlord Certificate containing information regarding the expenditure incurred to enable leaseholders to assess whether they would be obliged to contribute towards the costs of remedial works. Landlords must also provide certificates within 4 weeks of receipt of notification from the leaseholder that the interest is to be sold, or becoming aware of a relevant defect not covered by a previous Landlord Certificate, or within 4 weeks of receipt of a leaseholder request.

The Landlord Certificate must be in the prescribed form and it must also be accompanied by details of the corporate structure of the landlord’s group, financial information and evidence of the works carried out.

If a Landlord Certificate is not provided in the prescribed form then the leaseholder is entitled to assume that the relevant landlord was responsible for any relevant defect and no service charge is payable. Therefore, landlords must provide Landlord Certificates within the prescribed timescales.

Leaseholder Deed of Certificate

Clearly, in order to arrange remedial works, landlords and their managing agents need to know whether a leaseholder holds a qualifying lease. When the landlord becomes aware that there is a relevant defect in the building or that the leaseholder intends to sell their lease, it must, before the fifth day thereafter, serve notice upon the leaseholder requiring the leaseholder to provide a leaseholder deed of certificate containing factual information relating to the leaseholder. The Deed of Certificate requires information and supporting evidence to be provided as to ownership of the property, the value of the property, the occupation of the property, and the number of dwellings which the leaseholder owned as at 14 February 2022. Failure to disclose accurate information can be a criminal offence under the Fraud Act 2006 and so it is important for leaseholders to provide accurate information.

The landlord must give the leaseholder not less than 8 weeks from the date the leaseholder receives the notice to return the completed Deed of Certificate. If the landlord has not received the Deed of Certificate at least 14 days before the reply date then the landlord must give the leaseholder a further notice stating that no reply has been received and that the leaseholder may apply for a further period of 4 weeks from the reply date to comply with the requirements.

If the leaseholder does not provide a Deed of Certificate either by the reply day or the extended date then the landlord is entitled to assume that the lease is a non-qualifying lease. Therefore, it is vital that leaseholders provide accurate Deeds of Certificate within the timeframe.

Developer Remediation Contracts

Whilst the Act does give protection to leaseholders and landlords, there may be situations where leaseholder would still have a liability, or landlords would not be able to meet their obligations, through no fault of their own. The Act does establish the Building Safety Fund and other schemes to provide assistance and the Government has procured the cooperation of some of the major residential property developers.

On 31 March 2022 the Government wrote to the major residential property developers inviting them to sign a pledge setting out the principle that leaseholders should not have to pay the costs associated with life critical, fire safety, remediation works arising from the design, construction or refurbishment of buildings of more than 11 metres. The objective was to get the major developers to commit to remedying relevant defects in existing buildings and some of the main household names signed up to the pledge. On 4 July 2023 The Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023 came into force. The regulations effectively block developers (who have average adjusted operating profits of over £10 million for the years 2017 to 2019) from commencing developments if they have not made good previous buildings.

The standard form Developer Remediation Contract imposes an obligation upon the developer to cover all costs relating to the repair of relevant defects (whether this be its own costs or costs that it might incur instructing others), including the costs of moving residents out of the building where necessary, and seeking professional advice on the works that are required. Essentially, the developer is obliged to pay any costs that the Building Safety Act 2022 would otherwise prevent the relevant landlord from recovering from leaseholders through the service charge provisions of the leases. The Developer Remediation Contract only requires the Developer to carry out certain works and there are exclusions. For instance, the developer is not obliged to carry out works that amount to relevant defects if the works are as a result of alterations made by the landlord or leaseholder (liability for which would be with the landlord or leaseholders). The developer is not required to carry out betterment works, i.e. to make the building better than it would have been but for a relevant defect, unless those works are unavoidable. Also excluded from the contract are works where, since 14 June 2017, the developer had entered into a settlement of its liability with the Responsible Entity (i.e. the entity responsible for arranging repairs, such as right to manage companies).

The Developer Remediation Contract requires the developer to use all reasonable endeavours to enter into a contract with the Responsible Entity of the building in question and it sets out what the contract must contain. Requirements include the provision of a dispute resolution procedure, the granting by the Responsible Entity of access to the building to enable the works to be undertaken, insuring the works, imposing upon the developer liability for defects, shrinkage or other fault with the works and there are post completion obligations.

Key Contacts

CBG Law acts for landlords, Right to Manage companies and leaseholders in relation to matters relating to the Building Safety Act 2022 including advising on and negotiating Works Remediation Contracts with developers, advising on Landlord Certificates, giving notice to leaseholders and requesting leaseholder Deeds of Certificate and advising leaseholders on their position.

For more information about how we can help you in relation to Building Safety Act matters please contact John Turner on 020 7462 6029 or Mark Brassey on 020 7462 6027.