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The cost of building safety

Posted on 22 February 2023


The Building Safety Act 2022 was introduced in the wake of the Grenfell tragedy, imposing new obligations on Landlords to keep buildings safe.

Although the aim is to place obligations on all Landlords to manage building safety, the focus is on higher rise buildings, being those of at least 11 metres in height or with at least five storeys (whichever is reached first).

The Act also introduced protections for certain qualifying leaseholders from the costs of remedying historical building defects in such higher rise buildings which pose a risk to the safety of people arising from the spread of fire or the collapse of the building or part of it ("building safety risks").

Effect on sale and purchase of properties

The Law Society has recently introduced new versions of the conveyancing transaction forms.

For a seller, the new version of their form asks a seller to confirm: whether any remediation works on the building have been proposed or carried out, whether the lease of the property is a qualifying lease, whether there is a Leaseholder Deed of Certificate, whether the Landlord has been notified of the intention to sell and whether the seller has received a Landlord's Certificate.

The Landlord is now required to confirm if there is Leaseholder Deed of Certificate and a Landlord's Certificate.

These certificates are only relevant for buildings which meet the above height, contain at least two dwellings and are not a leaseholder-owned building (share of freehold). They will need to be produced during the sale process which could lead to delays.

Leaseholder Deed of Certificate

This is completed by the leaseholder and contains information to show that the leaseholder on 14 February 2022 was a "qualifying leaseholder" and therefore is eligible for the protections under the Act.

To be a qualifying leaseholder on 14 February 2022, the property must have been the leaseholder's main home or the leaseholder must have owned no more than three dwellings in the United Kingdom in total on that date.  All subsequent owners of the property will be qualifying leaseholders if the leaseholder on 14 February 2022 qualified.

The Leaseholder can choose to send the certificate to the Landlord at any time.  The Landlord may also request the certificate at any time. The Landlord does not have to acknowledge receipt.

We expect a purchaser's solicitor will require a seller to complete this certificate.

Landlord's certificate

To pass on part of the cost of remediating building safety risks through the service charge ("building safety costs") a Landlord must provide a Landlord's certificate. It must be supplied to the leaseholder within four weeks of being notified of a sale of the property or within four weeks of the Landlord being aware of a relevant defect which was not covered by a previous certificate.

The Landlord's certificate requires the Landlord to provide sufficient information to determine whether the Landlord is in a position to recover any of the costs associated with remedying building safety defects.  If the Landlord fails to provide the certificate it cannot pass on building safety costs to the leaseholder.

Given that the Landlord has four weeks to provide this from being notified of a sale being agreed, a seller looking for a quick sale would be advised to ask the Landlord to produce this as soon as possible, to prevent any delays to the transaction.

The certificate should be signed by the current Landlord and provides information on the position as on 14 February 2022.

If a Landlord was the original developer or connected to them, the Landlord will remain fully responsible for building safety costs. In addition, where the Landlord's net worth exceeds certain limits, building safety costs cannot be recovered from qualifying tenants.

If you are a Landlord, you would be well advised to consider your obligations under the Act and in particular whether remedial works are required to the building.

Buildings under the above height requirement

The above protections only apply to buildings that meet the height requirement. Leaseholders in buildings of under 11m/5 storeys will remain fully liable under the service charges, as has always been the case. So, a purchaser would be wise to enquire about any remediation issues for buildings under this height, given they could face the cost of these (although we might presume that the most costly works would apply to higher rise buildings).

Mortgage lender requirements

If you or your buyer are purchasing with the aid of a mortgage, the UK Finance Lenders Handbook has now introduced requirements on purchaser's solicitors to check whether the building will be remediated under the Act. The solicitor is also required to obtain the Landlord's Certificate and Leaseholder Deed of Certificate and confirmation it has been sent to the Landlord.

Final thoughts

Whilst these are welcome measures to protect leaseholders facing large bills for remediation works, the production of the certificates does have the potential to delay sale and purchase transactions. A Leaseholder looking to sell their flat would be well advised to consider whether their building meets the criteria, and if so, to deal with the requirements for the certificates as soon as possible.

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