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Recharging building safety costs to leaseholders

'This Act… delivers far-reaching protections for qualifying leaseholders from the costs associated with remediating historical building safety defects, and an ambitious toolkit of measures that will allow those responsible for building safety defects to be held to account.' - Department for levelling up, housing and communities, 25 July 2022

It has become apparent in the wake of the Grenfell tragedy that many buildings in both public and private ownership have historic safety defects that require remediation work. One question, where leasehold interests are present within a building, who should pay for the cost of those works. Buildings over a certain height are of particular concern, due to fire safety hazards.

As registered providers (RPs) will know, the law around charging leaseholders and tenants for the costs of services and works carried out at their properties through the service charge provisions in their occupancy agreements can be complex. The passing of the Building Safety Act 2022 (BSA 2022) in April 2022 introduced an entirely new layer of regulation around the charges that can be passed onto leaseholders in ‘relevant buildings’. In England, ‘relevant buildings’ are self-contained buildings that contain at least two dwellings and are at least 11 metres high, or have at least five storeys (the devolved nations will largely have their own arrangements).

Service charge recovery

In relation with service charges, there are therefore two broad areas in which the BSA 2022 significantly alters the landscape:

  • the ability to charge leaseholders for works in respect of historical safety defects, under provisions found within section 133 of part 5 and sections 116 to 125 of part 5 and schedule 8 to the BSA 2022; and
  • the scope to charge leaseholders for ongoing costs in relation to safety, under provisions found within sections 112 to 113 of part 4 of the BSA 2022.

Resources

We have developed a number of resources to enable RPs to get to grips with the effect of the BSA 2022 on the management of their relevant buildings, helping them to understand the complex provisions:

  • Advice Note on service charge recovery under the BSA 2022, covering in detail the key areas where the provisions of the BSA 2022 are now in force, and highlighting the future impact on housing management of the other relevant provisions that have not yet been brought into force.
  • Flowchart to complement the advice note. This is available as an add-on and sets out in clear summary form the process to determine if the costs of remediating historical safety defects in a particular relevant building can be recovered either at all or restricted to a limited amount.
  • Summary of the procedure and timescales involved in providing the landlord’s certificate and obtaining leaseholder certificates, as part of the process of recovering the costs of remedying historical safety defects. This is also available as an add-on to the advice note.

In addition, we can offer tailored advice in relation to specific schemes involving one or more relevant buildings.

Fixed fees

These resources are available at a fixed fee. The fixed fee package for the advice note includes:

  1. First draft of the advice note
  2. Video or telephone conference to:
    • explain the relevant definitions used in the BSA 2022Confirm the effect of the BSA 2022 on service charge recovery;
    • confirm the effect of the BSA 2022 on service charge recovery; or
    • consider in broad terms how your relevant buildings are managed and came to be built or converted and how that may impact the application of parts of the BSA 2022.
  3. Final form of the advice note for your use

Your requirements

We can offer specific, tailored advice for any aspect of service charge recovery at ‘relevant buildings’. In most cases, we can do this for a fixed fee.

Areas where you may welcome this advice include:

  • Establishing whether you or your associate were responsible for the particular historical safety defects and whether you can proceed to charge leaseholders for any of the costs.
  • Specific circumstances where you may be required to supply a landlord’s certificate.
  • Checking leaseholder certificates when received and dealing with any problems or anomalies.

If you would like further information including details of the fixed fees, please contact Emma Hardman or Joanne Wright.