Fire Safety Law – High Rise Residential Buildings – Critical Update for Building Owners and Leaseholders – June 2023

Fire Safety Law: A Practical Guide for Leaseholders, Building-Owners and Conveyancers

Rolling Update detailing changes to Fire Safety Law as regards high-rise residential buildings – Updated to June 2023 

Bruce&Holly

This rolling update has been further updated to include later provisions of the Building Safety Act 2022 brought into force on 6 April, 2023 as result of the Building Society Act 2022 (Commencement No.4 and Transitional Provisions) Regulations.  But first, we recap on Leaseholder Deeds of Certificate and Landlord Certificates.

The Leaseholder Deed of Certificate

The Landlord Certificate

These two legal documents are now key to the protections which Schedule 8 of the Building Safety Act 2022 offers to high-rise residential leaseholders against the costs of remediating defective cladding and other non-cladding related safety-issues.  The two documents make critical reading for any high-rise residential leaseholder, building-owner, conveyancer or managing agent.

This rolling update is intended as a companion to Fire Safety Law: a Practical Guide for Leaseholders, Building-Owners and Conveyancers, which is published through Taylor and Francis and went on general release in September 2022.  That book is as up-to-date as it can be in terms of new fire-safety law which has evolved to implement recommendations flowing out of the Grenfell Inquiry.  That law is still a work-in-progress and it is intended that this rolling update will chart legal changes, going forward.  The book itself explains the structure of modern fire-safety law with particular reference to multi-occupied residential buildings.  This rolling update will keep you alerted to new Fire-Safety legislation going forward.

We start by offering you a 20% discount on the recommended retail price of the Fire Safety Law: a Practical Guide for Leaseholders, Building-owners and Conveyancers together with a link to the Routledge website. Typing in discount-code FLA22 will enable you to purchase the book directly from Routledge at the advertised discount.

https://www.routledge.com/Fire-Safety-Law-A-Practical-Guide-for-Leaseholders-Building-Owners-and/Ward/p/book/9781032271415: Fire Safety Law – High Rise Residential Buildings – Critical Update for Building Owners and Leaseholders – June 2023

In our October 2022 Update we focussed the protections which Schedule 8 of the Building Safety Act 2022 now offers to high-rise residential leaseholders against the costs of replacing defective cladding as well as other non-cladding fire-risks, where those defects arose either during the initial construction of the building within the previous 30 years or during a later refurbishment of the building. In this update we summarise the provisions which came into force this April just gone.

Disclaimer

This bulletin contains no more than our interpretation of some very-complex legislation and associated government guidance which is intended to protect qualifying residential-leaseholders against the future cost of remediation work to replace defective-cladding as well as associated non-cladding-remediation.  We cannot guarantee that a court or tribunal would see things in exactly the same way.  It is therefore important that every conveyancer takes the time to read the legislation and relies on their own professional judgment as to the advice which they need to give their leaseholder or prospective-leaseholder client.  Likewise, if you are a leaseholder or someone responsible for the management of a multi-occupied residential building, it is important that you take your own independent legal advice before acting on any of the information contained within this bulletin.

Schedule 8 of the Building Safety Act 2022 (remediation-costs under qualifying leases etc)

Warning. Existing Schedule 8 protections (see below) may be lost when a qualifying lease is later extended under the Leasehold Reform Housing and Urban Development Act 1993. This is because a statutory lease extension operates in law as a surrender and re-grant of the existing lease, which falls away. If the extended lease was not already in existence on the reference date of 14th February 2022, existing Schedule 8 protections will not be carried forward. The Government is aware of the issue and has promised to legislate.

Our starting point has to be Schedule 8 which sets out the framework of a new regime to protect certain residential leaseholders against the cost of removing and replacing defective cladding as well as in relation to any non-cladding fire-risk.  Sitting beneath Schedule 8 are the Building Safety (Leaseholder Protections)(England)Regulations 2022 and the Building Safety (Leaseholder Protections Information etc)(England)Regulations 2022, which, together, put in place the administrative processes needed to determine which residential leaseholders qualify for such protection and which leaseholders enjoy more limited protection.

Schedule 8 does not give blanket protection to all high-rise residential leaseholders against the cost of remedial work either as regards defective cladding or other non-cladding related fire-risk.  The protection Schedule 8 offers is selective between different leaseholders either as regards the level of protection which is offered, or whether they are protected at all.  The owner of a ‘qualifying lease’ will be fully protected against the costs of replacing of defective cladding if the defect arose either during initial construction the building or during a later refurbishment.  But it will not cover a fire-risk resulting from later wear-and tear which was not attributable to any defective installation. 

For non-cladding fire-risk, whether a protected leaseholder enjoys either full or partial protection against the costs of remediation will depend on other factors, including whether the ground-landlord could in any way be regarded as responsible for the non-cladding defect or if the corporate-landlord is considered to have sufficient financial net-worth to shoulder the burden of such costs.  Even the owners of leases which are not qualifying leases may be exonerated from the liability to meet remediation costs in circumstances where responsibility for the original defect can properly be placed at the door of the ground landlord.

But even if the fire-risk remediation-costs cannot be placed at the door of the individual leaseholder, someone still has to pay for it.  And that someone will be the ground-landlord, if they are still around and are able to pay for it.  Even if that ground-landlord filed for insolvency, leaseholders can still look to any associated company which is still in existence, to take that liability.  But the ability to pass remediation liabilities back to a ground-landlord, may be of little help to those leaseholders who are collectively their own landlord through a freehold management company.  For those leaseholders, another source of funds to carry out the required remediation, will be a government grant.

The administrative complication for anyone collecting service charges in a high-rise residential building is to know which of the leases are ‘qualifying’ and which leases are not-qualifying, and to produce two sets of service charge demands for each class of leaseholder.  So who is a ‘qualifying leaseholder’ and how is the managing-agent to determine who qualifies for special-protection and who does not?  It is the Building Safety (Leaseholder Protections)(England) Regulations 2002 and the associated Information Regulations which now provide the documentary evidence to determine who is protected and who is not.

Who is a Qualifying leaseholder?

The reference date for determining which leases qualify for the fullest protection under Schedule 8 of the Building Safety Act 2022 is 14^th February 2022. If a lease was a qualifying lease on 14 February, 2022, it will forevermore remain a qualifying lease carrying the fullest statutory protections against remediation-costs under Schedule 8 of the Building Safety Act 2022.  If a lease was not a qualifying lease on 14 February, 2022, it will never become a qualifying lease.  It also follows that no lease granted after 14 February, 2022 can ever qualify for the fullest protection under Schedule 8.

To have qualified for Schedule 8 protection on 14 February, 2022, the flat must have been situated within a block of flats at least 11 metres high or with at least five storeys (a ‘relevant builing’).  On 14 February, 2022, that flat must either have been in owner-occupation or, if not in owner-occupation, be owned by someone who did not own more than three UK properties in total.  So it means that some small buy-to-let landlords, including possibly corporate landlords, will qualify for protection if, on 14 February, 2022, if they did not own more than three UK Properties in total.

How does the owner of a qualifying lease evidence its protected status?

The only way in which the owner of a flat can properly evidence the fact that their lease was qualifying on 14 February 2022 is by completing and delivering to the ground-landlord a ‘Leaseholder Deed of Certificate’ in the form set out in the schedule to the Building Safety (Leaseholder ProtectionsInformation etc) England Regulations 2022, which took effect 21 July, 2022. 

As its name suggests, this document has to be executed as a deed.  That is to say, it must be signed by the leaseholder in the presence of a witness, who must also sign the document and provide their own full name and address.  A Leaseholder Deed of Certificate maybe provided by the leaseholder at any time but must be provided at the landlord’s request, failing which the landlord will be entitled to assume that the lease is not-qualifying.  In other words, the leaseholder may lose their Schedule 8 protection if they fail to provide a Deed of Certificate when asked to do so.

Providing a Leaseholder Deed of Certificate is, for all practical purposes, a self-certification exercise in which the leaseholder answers a number questions enabling the landlord to assess whether the particular lease qualifies or not.  The questions include: whether the flat was owner/occupied on 14 February, 2022; if the flat was not owner/occupied, whether the leaseholder owned more than two other properties in the UK; the price at which the flat was last sold before 14th February 2022; whether it is a shared ownership lease and, if so, the total share owned by the leaseholder as at 14 February, 2022.  As well as answering the questions, the leaseholder must also provide documentary evidence supporting the answers provided in the document.

A consequence of failing to provide a Deed of Certificate when asked to do so is that the ground-landlord may thereafter assume that the lease is not protected, when carrying out its service-charge calculations.  In other words, the protected status of the lease could be lost.  Where the leaseholder completing a Deed of Certificate was not the owner of the flat on 14 February, 2022 and does not already have the required information, it is then incumbent on the current leaseholder to make enquiries of the former leaseholder to establish the qualifying status of the flat on 14 February 2022.

It is also incumbent on the leaseholder to make enquiries to establish the price at which the flat was last sold before 14th February 2022 and, where it is possible to do so, to evidence that price from Land Registry records.  A Deed of Certificate is also an important title document as it is needed to establish the qualifying status of a flat as at 14 February, 2022.  It is therefore critical that a leaseholder keeps a copy of the certificate provided and that the landlord’s receipt of that certificate is acknowledged, for the record.  Anyone acting on the purchase of a flat post 14th February 2022 will need to ask for a copy of the Deed of Certificate evidencing the protected status of the lease, or not, as the case may be.

What protections does Qualifying Status offer?

1. A qualifying leaseholder is protected completely against the costs of remediating flammable cladding.
2. Both qualifying and non-qualifying leaseholders are protected against the costs of remediating both cladding and non-cladding related fire-risk, in circumstances where the ground-landlord was also the developer of the building or carried out a later refurbishment or was responsible for commissioning that work within the previous 30 years.
3. A qualifying leaseholder has complete protection against the costs of remediating both cladding and a non-cladding fire-risk in circumstances where on 14 February, 2022 the ground-landlord had a net-worth of more than two million pounds per relevant building.
4. A qualifying leaseholder has limited protection against the cost of remediating non-cladding safety-defects in circumstances where the ground-landlord’s net-worth per relevant building on 14 February, 2022 was less than two million pounds.  In those circumstances, each qualifying residential leaseholder can be required to contribute a capped amount of £15,000 in Greater London and £10,000 elsewhere.  That cap is set at Zero for properties worth less than £325,000 in London or £175,000 elsewhere.  For properties worth more than one million pounds, the cap is £50,000.  If the property is worth over two million pounds, the cap is £100,000.  There are also special rules for apportioning liabilities in shared ownership properties. In all cases payment of the capped costs can be spread over 10 years.

The Landlord Certificate

If it is the leaseholder’s Deed of Certificate which evidences whether a lease is a qualifying lease for the purposes of Schedule 8 of the Building Safety Act 2022, it is the Landlord Certificate which contains the information needed to calculate how much the landlord is entitled to charge for building-safety works.  The ground-landlord must provide the leaseholder with a Landlord Certificate in any of the following circumstances:

1. When they want to pass on any remediation-costs on to a leaseholder through the service-charge.
2. Within four weeks from receiving notification from a leaseholder that their interest is to be sold.
3. Within four weeks of the landlord becoming aware of a relevant defect which was not covered by a previous Landlord Certificate.
4. Within four weeks of the leaseholder requesting a Landlord Certificate.

Information to be contained in the Landlord Certificate includes: the name and address of the relevant landlord on 14 February, 2022; the name and address of the current landlord; names and addresses of any superior relevant landlords; information requiring the net-worth of the landlord on 14 February, 2022; questions as to whether the landlord was in any way responsible for the relevant defect or the commissioning of that work; works previously taken to remedy relevant defects and amounts paid for that work.  The Landlord Certificate has to be set out in the pro forma attached to the Building Safety (Leaseholder Protection)(England)Regulations 2022.

Dealing with Default

Building-owners are under an obligation to make their buildings safe, including fixing historical building safety-defects.  The way for leaseholders to enforce that obligation is by applying to a First Tier Tribunal for a remediation order or a remediation contribution order.  Failure on the part of the ground-landlord to comply with either is enforceable through the county court.

Where the Building Safety Act protections do not apply

1. To buildings of a height which is less than 11 metres or five storeys.
2. Where the defect was not a result of the initial construction of a building or later adaption or refurbishment.
3. To disrepair which is not related to building-safety (which is defined a either as a fire-risk or something affecting the stability of the building).
4. Warning. Existing Schedule 8 protections may be lost when a qualifying lease is later extended under the Leasehold Reform Housing and Urban Development Act 1993. This is because a statutory lease extension operates in law as a surrender and re-grant of the existing lease, which falls away. If the extended lease was not already in existence on the reference date of 14th February 2022, existing Schedule 8 protections will not be carried forward. The Government are aware of the issues and have promised to legislate.

Provisions of the Building Safety Act 2022 which came into force on 6 April, 2023

The registration scheme for higher-risk buildings opened in April 2023 and the Building Safety Registration of Higher-Risk Buildings and Review of Decisions (England) Regulations 2023 also came into force on 6 April, 2023 and state the information which must be contained in registration applications.

Provisions coming into force in April 2023 relating to higher-rise buildings include the following definitions:

• A higher-risk building is ‘occupied’ if there are residents of more than one residential unit and the building.
• An ‘accountable person’ is someone who is the legal owner of any of the common-parts of the building or has a repair obligation in relation to those common-parts.  There may be more than one accountable person for a particular building.
• The ‘principal accountable person’ is the legal owner of the structure or exterior of the building or is the person who has a repair obligation in relation to those parts of the building.  Where there is a dispute as to whom is the accountable person or principal accountable person in relation to part or parts of a higher-risk building, an interested person can apply under section 75 of the Act, to a tribunal to determine who are the accountable persons or principal accountable person and for which areas they are responsible.  The definition of an interested person includes the building safety regulator; the legal owner of the common-parts or someone who has a repairing obligation to repair the common-parts.

Also published are the Higher-Risk Buildings Key Building Information etc  (England) Regulations 2023 requiring the principal accountable person to provide the building information to the building-safety regulator within 28 days of registration of an occupied higher-risk building.  Such key information to be provided to the regulator within 28 days must include:

* Whether the higher-risk building has any ancillary building and whether that ancillary building is also higher-risk;

* The principal use of the higher-risk building as well as any ancillary building; any outbuilding or any storey below ground level.  An ‘outbuilding’ means any permanent or temporary building, whether or not attached to the higher-risk building but not physically forming part of it and which is used for purposes incidental to the enjoyment of the higher-risk building.

* The ‘use’ of the building by reference to prescribed classifications, namely: residential; residential-institutional; residential-other; office; shop and commercial; assembly and recreation; industrial; or storage and other non-residential.  To interpret these categories, reference must be had to Table 0.1 Classification of purpose groups of Approved Document B (Fire-Safety) volume 1 Dwellings (2019 edition incorporating 2020 and 2022 amendments) that came into force on 1 December, 2022.

* The materials used in the construction of the external wall as well as associated insulation.  Also details of the main material used in the composition of any part of the roof that provides a waterproof covering and whether there is a separate layer of roof-insulation and whether the roof plane is pitched or flat or a combination of both.

* The main material used in the structure of the higher-risk building and the type of structural design the building has in order to comply with Part A (Structure) of Schedule 1 to the Building Regulations 2010.

* The number of storeys below ground level.  The number of staircases and how many of those staircases serve, as part of the same flight of stairs, the storey at ground-level and every storey about it.

* The type of energy supply to the higher-risk building and the type of energy storage system.

* A description of the type of evacuation strategy that is in place for the higher-risk building and a list of the fire and smoke control equipment within the building, save that provided by an individual resident for their own use, and where, within the building, that equipment is located.

As well as the limitations on service charges contained in Schedule 8 of the Act, other provisions of the Act make amendments to landlord and tenant legislation governing the payment of service charges by lessees of residential parts of buildings.  The 4th Commencement Order brought into force some of these provisions.  This includes a new provision implied into a residential lease of more than 7 years containing service charges, requiring the tenants to contribute towards the cost of building safety measures taken by the landlord, if they are the accountable person, or by the superior landlord, if they are the accountable person for the building.  Such building safety measures are defined and restricted to the following steps:

* applying for registration of a higher-risk building;

* applying for or displaying the building assessment certificate;

* assessing building safety risks;

* taking reasonable steps to prevent building safety risks but not the cost of carrying out works to do so;

* preparing and revising the safety case report;

* notifying the regulator of a safety case report;

* establishing and operating a mandatory occurrence reporting system for giving information to the accountable person to provide to the regulator;

* keeping information and documents as prescribed by secondary legislation about higher-risk buildings;

* complying with duties to prepare a residents’ engagement strategy and operating a system to investigate complaints; and

* serving notice to access a resident’s premises to determine whether they have breached any of the duties which they owe under the 2022 Act and serving a contravention notice in respect of any breach.

Building Safety Costs include associated legal and professional fees as well as fees payable to the building safety regulator and management costs.  Any lease-covenant which seeks to modify these implied terms has no effect because it is not possible to contract out of these provisions.  However recoverable building safety costs cannot include penalties, save where the tenants own or run the building as a result of collectively purchasing the freehold or accepting an offer of first refusal or where the tenants manage the building through a right-to-manage company. 

One provision which has yet to be brought into force, save for the making of regulations, is Section 133 of the Building Safety Act 2022, which applies to buildings containing at least two dwellings and which are at least 11 metres high or have at least five storeys, except where the building is collectively owned by the leaseholders.  When it is brought into force, section 133 will require landlords carrying out certain remediation work to do the following:

* take reasonable steps to ascertain whether any grant is payable in respect of the remediation works and if so, to obtain the grant;

* take reasonable steps to consider whether any contribution to remediation works is due from a third party and if so, to obtain the money from the third parties; and

* take prescribed steps relating to any other prescribed kind of funding.

Once section 133 is brought into force, such steps can be taken before or after the remediation works are carried out.  However if such steps are not taken, the leaseholder can make application that all or part of the remediation costs incurred by a landlord are not reasonable and not payable by the leaseholder through the service-charge.  A government consultation titled “Alternative Cost Recovery for Remediation Works: Consultation on Proposals to make Regulations and Statutory Guidance”, concerning the statutory guidance and policy proposals for the secondary legislation which would sit behind Section 133 closed on 31 March, 2023 and the government’s response to that consultation is awaited.

For more information visit the government’s Building and Fire-Safety Hub.

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