How does the Building Safety Act affect you?
The Building Safety Act 2022 (Act) was brought in to try and tackle some of the fundamental safety issues brought to the fore by the Grenfell disaster, by allocating responsibility to deal with remedial works to make buildings safe (predominately, but not exclusively, in respect of cladding).
Broadly, it widens the duties on landlords of residential buildings considered higher-risk (that is, at least 11 metres high or 5 storeys) to remediate building defects, to ensure that the requisite safety standards required by the Act are met.
The Act also regulates the costs that a landlord can recoup from tenants in relation to any remediation works that are needed to those buildings. The application of the Act is complicated, but in essence, if on 14 February 2022 the property was occupied as the owner’s only or principal home and on that date they owned no more than two dwellings in the UK in addition to the property, the landlord will be obligated to cover the cost of most remedial works, and this cannot be recovered through the service charge. Where these criteria are not met, any required remedial works can usually be recovered through the service charge (ie at the expense of non-qualifying leaseholders). The exception to this is where the building requiring remediation is owned by the original developer or an associated company: in this instance the liability for remedial costs falls on the building owner (we told you it was complicated!).
The Act does not apply to buildings that have been enfranchised and are now effectively owned by the tenants.
What does this mean for property transactions?
Those clients that are intending to sell a flat within a residential building caught by the act will need to serve a “Leaseholders Deed of Certificate” on their landlord.
The Leaseholders Deed of Certificate determines whether the lease of the flat is a “qualifying lease” for the purpose of the Act. If it is, then the tenant has additional protections against costs for any remediation works that are required to be carried out by the landlord. Establishing whether or not the lease is a “qualifying” one is therefore critical, and understanding the circumstances of the leaseholder as at 14 February 2022 is key to this.
A landlord must then serve a “Landlord’s Certificate” within four weeks of receipt of the Leaseholder’s Certificate. The Landlord’s Certificate will set out if any remediation works are due to the building.
Potential buyers will want to know whether these certificates have been sent and received so that they can try and ascertain the level of costs that will be payable in respect of any remediation works relating to the building. They will also want to know whether these can be recouped by the landlord via the service charge. Given the potentially hefty cost of remediation works, buyers will be particularly interested in this. These requirements have now been incorporated into the usual Form LPE1 and Leasehold Information Form (standard forms provided by sellers to their buyer in the majority of residential property transactions).
From a practical transactional standpoint, for buildings that fall within the Act, the requirements for the service of a Leaseholder Deed of Certificate and, in return, a Landlord’s Certificate have the potential to cause delays when it comes to the sale of a flat if they have not been dealt with in advance, so these should be put in hand at the point of going to market.
It is also worth noting that the Act does not negate the requirement for an EWS1 Form. Even if the EWS1 Form does not specify that any fire safety remediation works are required, it does not necessarily mean that works will not be required under the Act.
Implications for buyers with mortgages
Following the enactment of the Act, the UK Finance Mortgage Lenders Handbook now includes additional confirmations that conveyancers are required to give in order to be able to provide sign off to banks that a property is acceptable as security: essentially whether remediation works are required and whether the requisite Leaseholder and Landlord’s Certificates have been received.
Thinking ahead to minimise delays
From a practical standpoint we would advise:
- Prospective sellers to plan ahead and serve the Leaseholder’s Deed of Certificate on their landlord as soon as possible to avoid delays once a buyer has been found and ensure speedy leasehold sales can continue.
- Landlords to arrange for the relevant inspections and surveys of qualifying buildings to take place as soon as possible to determine whether remedial works are required under the Act.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, February 2023