The Building Safety Act 2022 has had a number of consequences (some unintended) on the conveyancing of leasehold property since it was introduced in April 2023.
The Act is part of the building safety legislation that was introduced in the wake of the 2017 Grenfell Tower disaster. It is designed to improve the safety of buildings as well as giving residents and homeowners greater protection, including from the costs associated with correcting safety defects.
In recent years there has been a great deal of press surrounding residents unable to sell or re-mortgage their flats as a result of the substantial increases in service charges to cover the cost of cladding replacement, waking watches for insurance and other fire safety remediation.
The government has said it is committed to protecting leaseholders from the burden of remediation costs. It has introduced developer- and government-funded schemes that have significantly reduced the costs for leaseholders.
Qualifying Leaseholder
The general principle of most leases is that the freeholder or management company is responsible for arranging the maintenance and repair of the building and the cost of this is met by the long leaseholders through the service charge. Accordingly, as a result of inspections post Grenfell many flat owners found themselves faced with crippling bills.
For properties affected by historic safety defects, the Act provides protections to limit the degree to which long leaseholders are liable to pay for fire safety remediation work.
Unlike typical long leasehold arrangements as mentioned above, under the Act leaseholders should not be called on first to pay for historic safety defects and defects discovered in the future. The aim is that the primary liability will fall on the developers, landlords and freeholders of the affected blocks, rather than long leaseholders.
Whether a leaseholder is eligible for these protections depends on factors such as the type of building, the leaseholder’s status as a “qualified leaseholder” and the type of remediation work needed.
The liabilities fall to different extents, on different parties for different types of work.
A Qualifying Leaseholder who may benefit is
- Somebody who owns property in a high-risk building (one that is above 11 metres or five storeys and contains at least two dwellings)
- Somebody who owns property as their main home or owns no more than three UK properties
- Somebody who owned their leasehold property on February 14th 2022
Relevant building
‘Relevant Buildings’ which falls within the remit of the Act are defined as those that are over 11 metres or more than 5 storeys high.
Solicitors are required to appraise whether the building falls within this definition, but it must also be borne in mind that we are not surveyors. Where a lender is involved, their surveyor will have considered this and provide instructions, but this is not always the case. Surveyors may need to be instructed particularly where the building in close to the height restriction. Many professionally managed buildings are now ensuring that the building has been measured and verified but this is a slow process and as a result many transactions are being delayed.
Conveyancing Issues
However well-intentioned, the complexity of the legislation has proved challenging for conveyancers. Not least because the potential requirements it places on solicitors are significant.
Already further legislation in the form of the Levelling Up and Regeneration Act 2023 has had to be introduced to remedy one of the defects identified in relation to lease extensions.
Earlier this year the Law Society published guidance covering such matters as properties over 18 metres, blocks under 11 metres, fire safety remediation costs, the landlord’s certificate, higher-risk buildings, and more. It is designed to enable solicitors to make informed decisions as to whether they can assist properties that come under the Act.
The Law Society has acknowledged that there will be further legislation to come and ongoing amendments to the existing legislation to make the requirements acceptable for conveyancers.
Lender requirements
One of the main concerns for conveyancers are the requirements laid down by Lenders in ‘’part 2 of the UK Finance handbook. They require solicitors to provide confirmation that the Act provisions have been complied with. Given that many of the requirements of the Act relate to surveying points and require confirmation of information conveyancers are incapable of checking, it is not surprising that some firms have simply refused to act.
At Gardner Leader we are endeavouring to assist clients but like many firms, the majority of properties affected by the Act are currently outside our remit. We have identified some local properties where appropriate procedures under the Act are already in place and where we are happy to assist with a sale or purchase.
If you need assistance with anything residential property related, Fiona Tighe and the team will be able to help here.