The Building Safety Act 2022 gained Royal Assent on 28th April 2022. The Act, in response to Grenfell, makes provision for the safety of people in or about buildings and the standard of buildings. Its intention is to give homeowners more rights, powers, and protections so homes across the country are safer. It also provides protection for certain leaseholders from the costs associated with remediating a building’s historic defects, such as cladding. There have been instances post Grenfell of landlords of buildings without minimum safety compliant cladding required to make changes seeking to pass the cost of such works onto leaseholders through service charges causing huge bills of thousands of pounds, so this part of the Act will be welcolmed by those relevant leaseholders.
The Act also creates three new bodies to provide effective oversight of the new regime:
- the Building Safety Regulator, (BSR) who will oversee the safety and performance of all buildings, as well as having a special focus on high-rise buildings.
- the National Regulator of Construction Products, (NRCP) who will oversee a more effective construction products regulatory regime and lead and co-ordinate market surveillance and enforcement across the UK. The NRCP has already started taking enforcement action under the scope of existing regulations. The new regulatory regime will start to apply once the necessary secondary legislation on the future regulatory regime has been approved by Parliament.
- the New Homes Ombudsman, who will allow relevant owners of new-build homes to escalate complaints to a New Homes Ombudsman. Developers of new-build homes will be required by secondary legislation to become and remain a member of the New Homes Ombudsman Scheme and secondary legislation will also set out the enforcement framework and sanctions for breaching requirements.
A further Developer’s code of practice is anticipated to set out the standards of conduct and qualiity of work expected from members of the New Home Ombudsman scheme.
The creation of a Developer’s members scheme, certainly for large development schemes, is positive and hopefully would safeguard against the risk of failed developments. It could act as a kitemark or sure tick for developers to give invovled parties and buyers peace of mind. Although, other than large development schemes, care would be needed to ensure any scheme would not be anti-competitive or act as an unreasonable barrier to entry for new developers.
Brief info on Building Safety Act:
The Act covers properties that are flats over 11 metres high or 5 storeys. Residential storeys are on average about 3 metres high so the Act will likely catch most leasehold blocks over a few storeys.
Notable points of the Act are as follows:
- Qualifying leaseholders* in buildings above 11m tall or with at least five storeys (those living in their own homes, or with up to three UK properties in total) will be protected from the costs associated with the remediation of unsafe cladding. They will also have protections from the costs associated with non-cladding defects, including interim measures like waking watches.
- It will be illegal for freeholders to pass on the cost of historical building repair works or the removal of cladding to any of their leaseholders, including non-qualifying leaseholders, if they are or are linked to the building’s developer.
- It will be illegal for freeholders to pass on any historical building safety costs to qualifying leaseholders if they pass the wealth test set out in law.
- Where a developer cannot be held responsible and the building owner is not required to meet the costs in full, leaseholders with non-cladding related issues will also be protected by a cap on how much they can pay for these costs. The cap will only apply to non-cladding-related work for those whose property is valued at more than £325,000 (London) and £175,000 outside London (owners of properties below this ceiling will pay nothing). Where leaseholders have bought through shared ownership, their cap will reflect their share of ownership in the property.
- Any costs that are not recoverable from leaseholders will need to be met by building owners and landlords.
- Buyers of new build homes will be able to hold their developer responsible for safety and quality issues under a new scheme from the New Homes Ombudsman.
*https://www.lease-advice.org/faq/what-is-a-qualifying-leaseholder-for-leaseholder-protections/
A necessary, and what will be welcomed, change
Post Grenfell the laws on materials that are allowed to be used in buildings of a certain height changed. But before, the standard required was different, therefore landlords of buildings who were at one time compliant and meeting their obligations became non-compliant over night. It was always going to be a challenge for Parliament to deal with the issue against now non-compliant buildings retrospectively. Initially, this resulted in the cost of remedial works being passed onto the innocent leaseholders. It was necessary for the matter to be addressed in Parliament.
The added protection to leaseholders on costs will be welcomed.
Residents in high-rise buildings will also have more say in how their building is kept safe and will be able to raise building safety concerns directly to the owners and managers of their buildings known as accountable persons and responsible for repairing the common parts of a higher-risk building, as defined in section 72 of the Act. The accountable person(s) will have a duty to listen to them.
If residents feel their concerns are being ignored, they can raise them with the Building Safety Regulator.
Homeowners will also be given more time to claim compensation for sub-standard construction work, increasing from 6 to 15 years.
The Uncertainty caused by the Building Act 2022 and need for further guidance
The UK Government states that “The Act will create a clear, proportionate framework for the design, construction, and management of safer, high-quality homes in the years to come.”
Whilst the Act gives new protections to certain classes of leaseholder and takes strides to ensure higher standings for new builds, it has created uncertainty over who is to be accountable for ensuring such compliance and raises concerns for conveyancers in particular. Conveyancers and law firms doing conveyancing must be aware of the Act and the changes that are being introduced. There are calls for further clarity and guidance on who is accountable for ensuring compliance with the Act. Without further guidance, conveyancers must be aware of the latest UK Finance Lender’s Handbook when acting on a purchase of a leasehold property with the help of a mortgage and proceed with caution. Even when acting for a cash buyer, consideration must still be given to the Act, as it could impact the future saleability of the property.
The initial impact of the Act is likely to be an increase in conveyancing fees, and based on the onerous requirements being placed on Conveyancers by lenders, as outlined in the UK Finance Lender’s Handbook, this is with good reason on the conveyancer’s part.
As example, at the date of writing, the Part 2 requirements for Nationwide at 5.14.17(a) and (b) requires conveyancers to:
5.14.17a Does the lender want any documentation sent to them?;
• An Executed Leaseholder Deed of Certificate and Landlord Certificate*
*(Where a Landlord Certificate can’t be provided, confirmation will be provided that the Responsible/Accountable Person has complied with current legislative requirements and that there are no Fire Safety Issues).5.14.17b Does the lender have any specific instructions about building safety?
Where we have identified a relevant security, we will provide to you, along with the Offer, all the documentation that we have collected through the application process which may include the following;
• An Executed Leaseholder Deed of Certificate and Landlord Certificate*
• Confirmation of any costs and amounts not covered by the Building Safety Fund or other Scheme (i.e. capped/non-capped charges)
• Confirmation that interim fire safety measures are satisfactory
• One of the following:
o Confirmation from the ‘scheme provider’ that the building will be remediated under a Developer/Government/Freeholder Scheme, or
o A Fire Risk Assessment of External Walls report (FRAEW) with executive summary including an indicative rating, or
o An EWS1 form, or
o A letter stating why none of these are available*(Where a Landlord Certificate can’t be provided, confirmation will be provided that the Responsible/Accountable Person has complied with current legislative requirements and that there are no Fire Safety Issues).
Not only are these additional requirements onerous, but they will be difficult to comply with at all. Further, the Part 2 requirements go further by requiring the conveyancer to verify the accuracy of information provided by the landlord and the Seller when acting for a buyer. Left without the much needed guidance, the apparent result is that conveyancers are being asked to take the risk of verifying something that they have no professional ability or qualification to do.
In this firm’s experience, seller’s conveyancing firms are becoming more and more reluctant to provide replies to enquiries that can be relied upon for fear of being sued at a later date, leaving an unsatisfactory position that sees the buyer’s conveyancing firm having to inform their clients that when buying the property the principle of caveat emptor– buyer beware – applies, but despite raising enquiries it has not been possible to obtain confirmation on certain points therefore the buyer must take a view, insure out, and likely be asked to sign a waiver of liability of the buyer’s conveyancing firm. This issue was happening before the Building Safety Act but now arguably will have to happen more, and where acting for a lender it may not even be possible for a conveyancing firm to provide such replies, meaning a lender may not lend.
There needs to be more guidance on the requirements placed on buyer’s conveyancing firms or suitable insurance products available because the current position leaves alot to be desired.
Following the Building Safety Act 2022 (in response to Grenfell) there have been recent amendments to the UK Finance Lender’s Handbook and a new LPE1 form has been launched.
Matters that Conveyancers should consider:
There are new requirements that conveyacners need to comply with on leasehold purchases so please consider the below on any leasehold matters going forward (this is at the time of writing, as further information is coming through).
A non-exhaustive summary of some of the changes to the conveyancing process are:
Lender’s Handbook:
Clause 5.14.17 has recently been added to Part 1 of the handbook (https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/ ):
5.14.17This section applies only to leasehold property purchases in England. See Part 2s for our requirements on purchases and remortgages. Where the security will comprise a leasehold flat you must request the following information from the seller’s conveyancer about the safety of the building in which the flat is situated :
- Confirmation as to whether the building has been or will be remediated under the Building Safety Act 2022.
- Copies of any Landlord’s Certificates, signed by the Landlord in the form set out in the Building Safety (Leaseholder Protections) (England) Regulations 2022.
- Copies of any executed Leaseholder Deed of Certificate (in the form set out in the Building Safety (Leaseholder Protections) (England) Regulations 2022) and confirmation that they have been submitted by the relevant leaseholder to the landlord.
You may want to consider any guidance from your professional body and/or regulator about the information and advice you should provide to the home-buyer relating to building safety. You should also consider any implications for section 4.4 of the Handbook.
4.4We recommend that you should advise the borrower that there may be defects in the property which are not revealed by the inspection carried out by our valuer and there may be omissions or inaccuracies in the report which do not matter to us but which would matter to the borrower. We recommend that, if we send a copy of a valuation report that we have obtained, you should also advise the borrower that the borrower should not rely on the report in deciding whether to proceed with the purchase and that he obtains his own more detailed report on the condition and value of the property, based on a fuller inspection, to enable him to decide whether the property is suitable for his purposes.
Conveyancers must ensure that they are complying with the above on all purchases going forward where the property is 11m/5 storeys tall (this should be on purchases with a mortgage or cash). Where there is a mortgage conveyacners also need to check part 2 for the lender’s specific instructions.
See Part 2 for Nationwide’s requirements here: https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/nationwide-building-society/
See part 2 for Barclays requirements here : https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/barclays-bank-uk-plc/#C8777
Ultimately, the question of “how to comply” is not clear and it is important for conveyacners to proceed with caution.
Leaseholder Deed of Certificate:
The Leaseholder Deed of Certificate is completed to demonstrate someone is a qualifying leaseholder for the purpose of the protections and to calculate the remediation cap.
In order to comply with the Handbook conveyancers need to make sure on any purchases of leasehold flats over 11m/5 storeys that the Seller has completed the Deed of Certificate and served this on the Landlord. You need a copy of this as an incoming purchaser after 14 February 2022 will take over as a qualifying leaseholder if their Seller was a qualifying leaseholder on that date.
A copy of the Deed of Certificate is here:
Leaseholder_Deed_of_Certificate__Editable_Word_Version_ (1)
Updated LPE1 Form:
The LPE1 has been updated to add 4.14 & 4.15
4.14 Has a Leaseholder Deed of Certificate been served Yes No Certificate Served
on the Landlord in relation to the property or remedial
works required to the property? Not applicable
4.15 Has a Landlord’s Certificate been served? Yes No Certificate Served
Not applicable
Updated Leasehold Information Form:
The Protocol TA7 form has been updated to include a new section on building safety.
Fire Safety (England) Regulations 2022
The FSR have also come into force.
Please also see the government factsheet re: Fire Safety Regs: https://www.gov.uk/government/publications/fire-safety-england-regulations-2022/fact-sheet-overview
A helpful flowchart pdf provided by Property Law UK and IQ Legal Training (NB rights not our own and credit given to Property Law UK and IQ Legal Training):
Building Safety Act 2022 & Fire Safety Regs 2022 – Flowchart & Guidance
Useful links:
https://www.gov.uk/check-building-safety-costs – This is similar to the Stamp Duty calculator, fill in the information and it will confirm whether the client will need to pay to replace cladding and/or other building safety problems.
https://todaysconveyancer.co.uk/updated-lpe1-form-include-building-safety-act-2022-requirements/
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