13th July 2022
While much of the detail of the new regime is yet to be set out in regulations, some significant leaseholder protection and redress provisions came into force on 28 June 2022. These include details of who will meet remediation costs for historical cladding and non-cladding defects, and extensions to the time periods for bringing certain claims. We can expect to see these and other leaseholder protections starting to be tested in the courts and it remains to be seen how some of them, at least, will work in practice.
The Act is a complex piece of legislation, with more to come. Contact Paul or Sue for specialist advice if you think you may be eligible for any of the protections below, or are unsure about whether they apply to you.
Read on to find out more.
The Act provides that no service charge is payable in respect of a lease of any premises in a ‘relevant building’ (i.e. not restricted to residential use) in respect of a ‘relevant measure’ relating to a ‘relevant defect’ if a ‘relevant landlord’: (a) is responsible for the relevant defect; or (b) is ‘associated’ with a person responsible for a relevant defect.
Clearly, there are a number of definitions that need to be satisfied. They will need to be considered carefully in your particular circumstances:
In addition, ‘qualifying leaseholders’ are now protected from paying any costs for the removal of dangerous cladding, and the amount they can be asked to contribute in respect of other historical building safety defects will be capped at £10,000 (£15,000 in Greater London) and spread over 10 years. The cap may be higher or zero, depending on the value of the property on 14 February 2022 .
A ‘qualifying leaseholder’ is a leaseholder with a long lease of a property in a relevant building and, on 14 February 2022, the property was their main home or they owned no more than three UK residential properties in total. Where the leaseholder had to move out and sublet, the property will be covered if these criteria are met. The protections automatically transfer to any future buyers.
[Updated February 2023] Further, the relevant landlord (in this case defined as the landlord under the lease on 14 February 2022) cannot pass on remediation costs to qualifying leaseholders if, on 14 February 2022, the net worth of the ‘landlord group’ was more than £2 million multiplied by the number of relevant buildings in respect of which a member of the group was, on that date, a landlord under a lease of that relevant building or any part of it . The Act defines ‘landlord group’ as the landlord and any person associated with them. Regulations which came into force on 20 July 2022 narrowed the definition of ‘associated’ persons in relation to this contribution condition. Inadvertently, this meant that sister and parent companies were excluded. This has now been rectified with an amendment to the earlier regulations. The result is that, with effect from 9 February 2023, a landlord which is a body corporate will be associated with another body corporate if, on 14 February 2022, one of them controlled the other or a third body corporate controlled both of them. Net worth is calculated according to a formula set out in the original regulations.
In practice, all of this means that it is now illegal to pass on to qualifying leaseholders any costs to remove unsafe cladding or any non-cladding costs above the cap. Outstanding invoices are therefore void. Landlords will need to fulfil a series of transparency and financial reporting requirements set out in the supporting regulations and provide a formal certificate before they can charge. Qualifying leaseholders will be able to confirm their new legal rights through a short certificate which will become available on the gov.uk website. We suspect this may be how freeholders check the status of qualifying leaseholders so it will be important to make sure you register if you qualify. Guidance will be issued by the government soon.
The former Secretary of State for Levelling Up, Housing and Communities recently wrote to freeholders, building landlords and managing agents reminding them of their new legal responsibilities and the consequences of non-compliance.
Leaseholders not covered by these protections should check whether the building’s developer has signed the Building Safety Pledge. As at 8 July 2022, 48 developers had signed this pledge committing to remediate life critical fire safety works in buildings over 11 metres that they have played a role in developing or refurbishing over the last 30 years in England.
In relation to fixing unsafe cladding, the next phase of the Building Safety Fund is due to open shortly. Under this scheme, the building owner can apply where the building is over 18 metres tall. There will also be a new scheme for buildings 11 to 18 metres tall. This will be funded by developers through a new Building Safety Levy. Guidance is expected from the government on this in the coming months. Details of the levy are yet to be set out in regulations. Among other things, the levy is expected to be imposed when developers make applications for building control approval in relation to a building in England of any height that contains one or more dwellings, or other accommodation such as hospitals and hotels.
Leaseholders, among others, will be able to apply to a tribunal for a ‘remediation order’, requiring a landlord to remedy a relevant defect in a relevant building by a specified time. The tribunal may also make a ‘remediation contribution order’ requiring a body corporate or partnership to make payments to a person specified in the order for the purpose of meeting costs incurred or to be incurred in remedying relevant defects. The body corporate or partnership could be the landlord, a person who was the landlord on 14 February 2022, a developer, or a person associated with a person in any of these categories. The Act also contains provisions concerning meeting the remediation costs of an insolvent landlord.
In a significant move, the Act extends the limitation period for claims brought under section 1 of the Defective Premises Act 1972 (DPA) from 6 to 30 years (for work already completed) and from 6 to 15 years (for work completed in the future). Claims could be made against anyone involved in the work, including landlords, developers, contractors, architects and surveyors .
The Act also expands the DPA to include refurbishment and other work to an existing dwelling (limitation period 15 years) and brings section 38 of the Building Act 1984 (BA) into force, allowing claims for compensation to be brought for physical damage (injury or damage to property) caused by a breach of building regulations (limitation period 15 years).
‘Building liability orders’ allow the High Court to extend the liabilities of a body corporate, incurred under the DPA or section 38 of the BA or as a result of a building safety risk, to any of its ‘associates’ (sister or parent entities), making them jointly and severally liable. Such an order may be made in respect of a body corporate that has been dissolved, and continues to have effect even if the body corporate is dissolved after the making of the order. The High Court can also order a body corporate to provide information and documents relating to an associate to enable the applicant and others to make, or consider whether to make, an application for a building liability order.
It has not been possible in this briefing to set out every conceivable element of leaseholder protection provided for in the Act, but other key measures include:
 No service charge is payable if the value of the qualifying lease was less than £175,000 (£325,000 in Greater London).
 There is a discrepancy between the wording of the Act on this point and the government’s FAQ document on leaseholder protections, which says that if the building owner or their wider company group have net wealth of more than £2 million per building they own (emphasis added), they cannot pass on the costs. The explanatory memorandum to the amended regulations also refers among others to a “£2 million per relevant building threshold”. This would seem to be suggesting that the £2 million figure is linked somehow to the value of each relevant building. However, this is not what the Act says. Care needs to be taken to make sure that all calculations are made in according with the wording of the Act itself and its supporting regulations.
 In Rendlesham Estates Plc and others v Barr Limited  EWHC 3968 (TCC), one of Walker Morris’ cases, the court gave guidance on the interpretation of certain DPA provisions, including the meaning of ‘dwelling’ and ‘fit for habitation’. For a dwelling to be fit for habitation it must, on completion, be capable of occupation for a reasonable time without risk to the health or safety of the occupants and without undue inconvenience or discomfort to the occupants. A dwelling may be unfit for habitation even though the defect which makes it so is not evident at the time of completion. What is a reasonable time will depend on the nature of the defect.