Ian Quayle delves into the Building Safety Act 2022, addressing its challenges in reception due to drafting issues and conveying the Law Society’s guidance on critical aspects like funding remediation, solicitor criteria, and safeguarding leaseholders, with an emphasis on the guidance’s valuable role in aiding firms navigating Building Safety Act matters.
The Building Safety Act 2022 became law on the 28th of June 2022 with the aim of preventing any repetition of the Grenfell disaster and or releasing leaseholders from the potential or actual burden of service charge for remediation work relating to fire risk or the risk of collapse.
The six parts of the Act, five sets of regulations and counting, and over 400 pages of Government Guidance have not been particularly well received for a number of reasons due to combinations of bad drafting, confusing terminology, and lack of clarity. The result has been unfortunate with over fifty percent of conveyancers being unwilling to act in conveyancing transactions which could be affected by the Building Safety Act.
It is against this background that the Law Society Guidance on the Act has been long awaited. On the 15th of February, the Guidance was launched and although it will take a while to properly digest there are some important takeaway points that are worthy of examination.
The Guidance is conveniently divided into a number of sections and in this article, I would like to focus on those sections of the Guidance that deal with:
- Who pays to remediate tall buildings affected by fire safety issues?
The Guidance emphasises that the major developers have agreed to voluntarily rectify historic safety defects or have or will enter into developer remediation contracts and perhaps optimistically predicts that the number of properties within the scope of the BSA will decrease although there is an admission that historic safety defects may occur in the future.
The important takeaway from this is when acting for a seller or a buyer in connection with a property in a relevant building to establish the status of any remediation contract. This can be done by checking information in the LPE1 and the TA7 to see what has been volunteered or by raising additional enquiries.
The Guidance emphasises the need to draw a distinction between cladding and non-cladding remediation with the former benefiting from the Cladding Safety Scheme and Building Safety Fund and leaseholders with qualifying leases within relevant buildings being protected from cladding remediation costs.
On the other hand, leaseholders with qualifying leases in relevant buildings are afforded additional protection by Schedule 8 of the BSA 2022 in connection with non-cladding remediation costs.
Remember if a building is a relevant building where remediation work is required for building safety work undertaken by the landlord/developer or an associate of the landlord/developer, then the remediation costs cannot be transmitted to leaseholders whether or not they hold qualifying leases.
- The criteria for solicitors working on BSA 2022 matters
Unfortunately, the Guidance does not provide a road map or a checklist to enable practitioners to navigate sales or purchases of BSA related leasehold properties in safety.
Instead, it confirms what practitioners have been encouraged to do including:
a) Develop policies and establishing criteria for accepting instructions in these matters if they are not already in place.
b) Revising the retainer, information to clients and reports on title.
c) Ensuring experienced staff have conduct of BSA related matters and that files are subject to additional risk assessment and supervision.
d) Referring clients to government consumer-facing material which the Guide highlights.
e) Reserving the right to cease to act in circumstances where you cannot comply with lender requirements.
f) Limiting the scope of the retainer. It might be useful to explain to clients the risks or exposure they face as a result of the retainer being limited as the Guidance states explain clearly to your clients why you cannot advise and what this means for them.
- Assessing whether buildings are in scope
The Guidance highlights that leaseholders holding qualifying leases within relevant buildings are protected by Schedule 8.
It distinguishes higher risk buildings and recommends that practitioners search the register for higher risk buildings which is now accessible. The Guidance also touches on the role of accountable persons and principal accountable persons in providing building information.
- Advising the parties to a residential conveyancing transaction
When acting for buyers qualifying leaseholders are described as benefiting from caps on leaseholder contributions for service charge costs relating to remediation costs for relevant defect. Non-qualifying leaseholders on the other hand have far less protection as we have seen.
The Guidance explains that buyers need to be aware that building works create the possibility of larger future service charges.
Leaseholders should be directed to government guidance.
Leaseholder qualification is explained as is the need for the seller to produce a leaseholder deed of certificate and the landlord is required to produce a landlord certificate.
A leaseholder deed of certificate must be produced where a landlord demands it, and a landlord certificate is required when a leaseholder notifies the landlord of their intention to sell or requests the production of a certificate. The Guidance highlights that it is important to identify when a seller has been asked to provide a leaseholder deed of certificate or whether the seller volunteered it.
A landlord certificate is described in the Guidance as being used to pass on historical safety remediation costs and confirms whether the landlord met the contribution condition as at the 14.02.22 and information about remediation costs the landlord has incurred.
A reminder is provided as to when a landlord certificate is required to be produced along with clarification that the landlord cannot recover historical remediation costs where a landlord certificate is required but has not been produced within four weeks.
A landlord can in the future produce a new certificate and serve it on leaseholders where there is a need for the recovery of remediation costs within service charge for remediation of relevant defects.
- Leaseholder own blocks
The Guidance provides some assistance in highlighting that some leaseholders may be excluded from protection from cladding remediation costs, for example:
- those in leaseholder-owned blocks
- those in affected buildings under 11 metres in height
Be aware that a building that is not currently a relevant building could be subject to airspace development and could become a relevant building and or a higher risk building, so a client buying a property in such a building should be warned of the fact the building could later fall within the scope of the Act. Any development of the building should mean that compliance with current building regulations and the supervision of the Building Safety Regulator with regard to potential higher risk buildings should mean future remediation work is unlikely, but where a building becomes a higher risk building any existing lease may become subject to implied terms and additional service charge costs applicable to higher risk buildings.
Helpfully the Guidance does include building safety scenarios and answers to frequently asked questions.
In summary, the Guidance is useful and provides direction for those firms already undertaking this work and may encourage other firms to act when in the past they have been reluctant to do so. I would encourage everyone to read it as well as keeping an eye out for decisions of the FTT and UT on BSA related matters and being aware of the possibility of further Regulations.
I will be delivering a webinar in conjunction with Today’s Conveyancer on the new Guidance titled ‘Building Safety Act: A review of the Law Society Guidance’ on 04 March 2024, 11 am – 12 pm. If you would like to attend, please use the booking link here. I hope to see you there.
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