Leasehold Properties and the Building Safety Act
Jack Waterfield, Trainee Solicitor | 7th October 2024
After the Grenfell Tower fire on 14 June 2017, new proposals were introduced in Parliament. These aimed to ensure the safety of residents in high-rise buildings. The government planned to legislate for multi-storey, multi-occupancy buildings to follow stricter safety rules. This applied to buildings 11 meters or five storeys tall. The new regulations focused on fire risks and structural defects. The goal was for occupants to feel safe in their homes.
The Building Safety Act 2022
In order to achieve those aims, the government introduced the Building Safety Act 2022. Coming into force on the 1st of April 2023, the Act was intended to bring risks to occupants’ health to the forefront of building developers’ minds. It requires property developers to consider the provisions of the Act during the construction stage of high-rise buildings. The intention is to require those buildings to conform to standards designed to ensure their safety.
However, the Act does not just require measures in place to ensure the safety of their buildings during construction. The provisions of the Act continue to apply even after construction has finished. This requires any subsequent, relevant defects in high-rise buildings already constructed to be remediated. For existing buildings, the Building Safety Act is associated with cladding and the removal of combustible materials on those high-rise buildings.
Financial Implications of Remediation
Consequently, many already constructed buildings require significant building work to bring them up to the standard enforced by the Act. Of course, these building works would involve potentially significant costs, and so the government considered the question of who should be responsible to cover these.
The government believes leaseholders should not bear the costs for building defects they didn’t cause. In many cases, the original property developer is responsible for these defects. The new legal reforms aim to protect innocent leaseholders from paying for necessary remedial works. These changes are designed to make their homes safe without unfair financial burdens on leaseholders.
Eligibility For Protections Under the Act
Unfortunately, the legislation does not mean that all leaseholders/flat owners can benefit from the protections of the Building Safety Act – this very much depends on the structure of the freehold ownership. In order to determine whether a flat or apartment can benefit from the remedies of the Building Safety Act where remediation work is required, the freehold ownership needs to be confirmed. It must then be established whether the leaseholder/flat owner is a qualifying tenant or not. This is not a straightforward process.
When buying a flat in a high-rise building, it is vitally important that you understand the risks associated with it – you will of course need to know that the flat you intend to buy is a safe place to live, but there are other matters to consider.
Future Selling Implications
You will need to know the costs involved in making your building safe to live in. It’s also important to understand how easy it will be to sell your property in the future. If you are selling a flat in a building covered by the Building Safety Act, you must consider its provisions. Buyers will likely ask questions about whether relevant procedures were followed. They will also want to know their potential liability for building works. Understanding the Building Safety Act is crucial for your leasehold property transaction, whether selling or buying.
When Does the Building Safety Act Apply?
One of the most important elements of the Building Safety Act is that it offers financial protections to leaseholders in high-rise buildings. This covers the cost of works required to remedy defects and make those buildings safe for its occupants.
However, the protections do not always apply. The first part of the process is to establish if the following criteria is met:
- The building in question must be a “relevant building”; and,
- The defect in the building must be considered a “relevant defect”.
These definitions are considered in further detail below.
A “relevant building”
For your building to be considered a “relevant building” under the Act, it must comply with all of the following requirements:
- It must be at least 11 metres in height, or at least 5 storeys tall (whichever is reached first);
- It must contain at least two dwellings (which is to say spaces which people occupy, such as flats); and,
- The freehold must not be a leaseholder-owned building. One key point is if the freehold is leaseholder-owned, the Building Safety Act provisions do not apply. This means the leaseholders, who collectively own the freehold, are essentially their own landlord. Therefore, they do not benefit from the protections under the Act.
There are a number of unique rules that apply to measuring the height of the building – it is not just a case of measuring the distance from ground level to the top of the building. In many cases, it will be apparent whether your building is sufficiently tall to be considered relevant under the Act. However, if there is any doubt, it may be necessary to instruct a RICS-qualified surveyor to determine the height of the building for you.
If your building is deemed a relevant building, provided that you meet the definition of a “qualifying leaseholder”, you would benefit from the protections under the Act. However, this does not mean categorically that you will not be expected to cover the costs of any defects in the building – this is because the protections only take effect to cover the costs associated with a “relevant defect”. It is therefore necessary to investigate whether a defect in your building is considered relevant. This will establish whether you will be liable to cover the costs of the necessary remedial works. The definition of a “relevant defect” is considered below.
A “relevant defect”
A defect in the structure of your building will not necessarily be considered a “relevant defect” under the Act. For the defect to qualify for leaseholder protections, it must meet all of the following criteria:
- It must put people’s safety at risk, either from the risk of fire or from structural collapse;
- It must have arisen from work done to the building (which includes work carried out when it was originally constructed, and any subsequent work carried out after that, such as extensions or alterations);
- It must have occurred sometime between 28 June 1992 and 27 June 2022; and,
- It must relate to something that happened either when the building was constructed, when it was converted from a non-residential building to a residential building (if applicable), or when any works were carried out by the building owner or management company (if any) following construction.
EWS1
In order to establish if works are required under the Building Safety Act (or in other words, to identify a relevant defect) the landlord should instruct an External Wall System survey – this is called an EWS1. This will confirm if there is:
- No combustible material in the make-up of the building;
- Combustible material of a minor nature not requiring remediation; or,
- Combustible material that does need remediation as soon as possible.
Who Pays for Remedying Defects in the Building?
If the building has a relevant defect, we must determine if the landlord is responsible for remediation costs. We also need to check if the leaseholder or flat owner is a qualifying tenant. If the landlord is liable under the legislation and the tenant qualifies, the landlord should cover the remediation costs.
The landlord will be expected to issue a Landlord’s Certificate – this will advise the leaseholder/flat owner if they are liable for the remedial costs of a relevant defect. The leaseholder/flat owner also needs to complete a Leaseholder Deed of Certificate, which confirms if they are a qualifying tenant. The criteria for both the Landlord’s Certificate and Leaseholder Deed of Certificate are complex, and if the landlord is not liable and/or the leaseholder/flat owner is not a qualifying tenant, the costs of any remediation work would fall to the leaseholder/flat owner.
Protection Under the Act
If your lease qualifies for protection, your building is a relevant building, and the defect in the building is a relevant defect within the definition above, you will benefit from the protections of the Act – responsibility for covering the costs for the necessary remedial works will therefore not fall to you. In that situation, in many cases it is the original property developer who will cover the costs of the works. Many large property developers have already agreed with the government that they will remediate life-threatening fire safety defects in buildings which they played a role in developing. In the event that the property developer does not pay for these works, as a backup plan, the government has created a £5.1 billion public funding surplus designed to fund remedial works to high-rise buildings.
In the event that any of these elements are not met (such as where the building or defect in question are not considered “relevant” under the Act) the leaseholder protections do not apply. This means that responsibility for covering the costs for works does not pass to the developer. Public funding cannot be used for this purpose – ultimately, responsibility for the costs may fall to you as leaseholder. However, this is dependent on the terms of your lease. It is therefore essential to assess whether the leaseholder protections apply, so that you understand whether you will be liable for the costs.
For those buildings that have leaseholder/flat owners that are not protected by the provisions of the Act, there are various funds that can be applied for by the landlord, but these are of course subject to certain criteria and are therefore not guaranteed.
Summary
The Building Safety Act is a complex area of law. It incorporates vital reforms to promote the safety of high-rise buildings in the UK. It is crucial to follow all relevant procedures and assess risks to you as a leaseholder or flat owner. These risks include both physical and financial factors. We strongly recommend seeking expert legal advice if you believe your property falls under the Building Safety Act.
We understand how important it is that your property transactions proceed as smoothly as possible, and that it can be daunting to navigate complex areas of law alone. At Bright Solicitors, we are able to assist with your sale and purchase transaction of both leasehold and freehold property. Our experienced Residential Property Team is on hand to provide you with expert legal advice.
If you need legal advice or assistance, please contact our Residential Property Team. You can reach us at 01752 388883 or email us at info@brightllp.co.uk.
The government has issued guidance via the attached link. You should read this before proceeding with your sale or purchase as this may answer some of your queries: https://www.gov.uk/guidance/building-safety-leaseholder-protections-guidance-for-leaseholders#full-publication-update-history
Disclaimer
This article is intended to provide general advice as it is a simplification of a complex area of law. This article must not be relied upon as a substitute for substantive, specific legal advice. Before you take any action, please do contact our Residential Property Team. We will be able to advise what is appropriate for your particular circumstances.