The Building Safety Act 2022 ("the Act") came as a direct response to the 2017 Grenfell Tower tragedy in which 72 people lost their lives as a result of unsafe building practices.
Following the Grenfell disaster, it was recognised that allocating responsibility for remedial works to make buildings safe needed legislation leading to the Building Safety Act 2022. The Act defines who should foot the bill to remediate both historical cladding defects and historical non-cladding defects of higher risk buildings.
Damien Todd, Partner, and Head of the Residential Conveyancing team at Sweeney Miller Law’s Sunderland office, discusses the implications of the Act on the conveyancing sector.
The Act at a glance
Following recommendations from Dame Judith Hackett’s review of the building industry after Grenfell, the Building Safety Act 2022 introduces a new, stricter, regulatory regime for design, construction, and maintenance of buildings.
The Act covers properties considered to be ‘high risk’ which includes standing at least 11 metres or five storeys high; however, if the enfranchisement process has occurred resulting in the building effectively being owned by the tenants, the Act does not apply.
In essence, under the Act, if on 14th February 2022, a 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 UK (in addition to the property, so three in total) then the landlord must cover the cost of any historical cladding remedial works. It is important to note that this cannot be recovered by way of billed service charge to the owner and the lease is referred to as a ‘qualifying lease’.
If the lease is a ‘non-qualifying lease’, namely the owner of the property owns more than three dwellings in the UK on 14th February 2022, then the 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.
The reason for this, as stated in the official guidance, is that “the Act eradicates the idea that leaseholders should be the first port of call to pay for historical safety defects”.
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’.
Responsibilities for ‘qualifying lease’ owners
As of 14th February, qualifying lease owners must obtain the value of the subject property if historical remedial works are non-cladding – for those with a value of under £175,000 (or £325,000 in Greater London) the qualifying lease owner is not liable for non-cladding remediation costs.
If the value is equal to or over that value, the ‘qualifying lease’ owner may be liable for a portion of the costs depending on a number of factors:
Whether the landlord is or has a connection with the entity that caused the defect.
Whether the landlord has a group net worth of more than £2m per relevant building.
If the ‘qualifying lease’ is liable for costs, they must be capped and spread over 10 years, with any costs paid since 28th June 2017 contributing towards the cap amount.
Deeds of Certificate (DOCs)
If you own a flat within a building that falls within the remit of the Act, you need to serve a ‘Leaseholders Deed of Certificate’ (“Leaseholder DOC”) on your landlord. A Leaseholder DOC is designed to determine whether the lease is a ‘qualifying lease’ or not and ascertaining this distinction is critical.
Within four weeks of receipt of the Leaseholders DOC, the landlord must serve the ‘Landlords Deed of Certificate’ (“Landlords DOC”) which should establish the following:
If there are any remediation works due on the building.
If the landlord has a connection with the entity that caused the defects.
Whether the landlord has a group net worth of more than £2m per relevant building.
Many landlords have already begun the process of determining liability by sending flat owners the Leaseholders DOC that must be completed and returned within a pre-determined timescale of a minimum of 8 weeks. If you receive a DOC and do not return it in time, the lease may be treated as a ‘non-qualifying lease’ and you will therefore not be afforded the protections offered by the Act.
Solicitors acting on behalf of those purchasing a flat that falls under the parameters of the Act will most likely ask to see both the Leaseholder’s and Landlord’s DOCs to ascertain the level of costs associated with any historical remedial works and confirm who is responsible to cover them.
What this means for the conveyancing industry
Commenting on the implications of the Act on the conveyancing sector, Damien Todd, said: “We are already seeing delays caused by the Act having an impact on conveyancing transactions. We would advise flat owners who fall within the Act’s parameters to complete and serve a completed Leasehold DOC to their landlord to begin the process as soon as possible and reduce any potential delays. It is worth speaking to a specialist solicitor to understand lender requirements, leaseholder and landlord DOCs, and to understand your rights and responsibilities under the Act.”