The Building Safety Bill received Royal Assent and became an Act of Parliament on 28 April 2022. This is a big deal but has it gone far enough? A few bills were rushed through the House of Lords last week owing to the government having to force through its remaining bills before Thursday 28 April – which is when parliamentary session ends. If not rushed through, bills can face them being thrown out.

Back to the Building Safety Act, although many bills and acts dovetail, please don’t confuse this with the Fire Safety Act which received Royal Assent and became an Act (rather than a proposal) on 29 April 2021.  A little background on that law: in March 2020 the Home Office introduced a bill to Parliament to improve fire safety in buildings in England and Wales in response to the Grenfell Tower fire. It amended the Fire Safety Order 2005 to clarify that the responsible person or duty-holder for multi-occupied, residential buildings must manage and reduce the risk of fire for:

• The structure and external walls of the building, including cladding, balconies and windows.
• Entrance doors to individual flats that open into common parts.

WHY WAS THE BUILDING SAFETY BILL PROPOSED?

The Building Safety Bill 2019-20 was announced in the Queen’s Speech on 19 December 2019 following the awful tragedy that we all know about, the Grenfell Tower fire, which happened on 14 June 2017.  The Government, the regulators, committees and residents’ panels and a whole plethora of people have been involved in the Bill, so it’s very complex and dealt with many issues, whether the perspective of the resident leaseholder, collective enfranchises, developers, managing agents, MPs, lawyers, landlords – you get the gist.

Its purpose was to put in place new and enhanced regulatory regimes for building safety and construction products, and to ensure residents have a stronger voice in the system.

The new Building Safety Regulator (“BSR”) will enforce a new, more stringent regulatory regime for high-rise residential and other in-scope buildings (of at least 18 metres or 7 storeys) and oversee the safety and performance of all buildings. The Act also strengthens protections for residents in high-rise residential buildings.

So, with BSR, here is a reminder of how they will regulate:

• High-rise buildings (with 7 or more storeys or that are 18 metres or higher), and either:
  • have at least 2 residential units
  • are hospitals or care homes (during design and construction)

Did this Act give residents what they wanted? What if you’re a developer? Who pays for the Cladding? What if you live in a low-rise block of flats? So many issues are still unresolved, but the Act has brought this issue into a safe place of debate for future amendments.

WHAT IS THE BUILDING SAFETY ACT?

A legal Bill was put forward to amend the Architects Act 1997, pushing for the safety of people in or about buildings and the standard of buildings. It also came about to change the way complaints are made to the housing ombudsman, so not just the obvious fallout from the trauma and horror of the fire at Grenfell Towers, but behind the scenes’ safety and communication.

Leaseholders begging to be heard, feel safe and not pay for remedial building defects that had nothing to do with them causing these issues was paramount. We know that Leases can be complicated but they are there to ensure legalities are in place for leaseholders and landlords however when a person buys a leasehold property, the lease usually specifies that they are legally liable for a share of all the costs of maintenance or repairs to their property or building, normally through service charges.

There have been historic debates surrounding service charges, what’s fair and not, which is why having a lease drafted by a property law specialist is so important; however overnight post Grenfell Tower fire, leaseholders were hit with exorbitant costs, some over £100,000 each in some cases,  to fix safety defects which pose a significant fire risk in their building. The bills are costs to replace flammable cladding on the outside walls of their building; or internal issues such as a lack of fire doors or alarm systems. It’s been such an horrific time for so many in leasehold residential living.

What protections have the Building Safety Act put in place?

LEASEHOLDERS WHO QUALIFY FOR PROTECTION AGAINST PAYING OUT FOR COSTS

It was quite clear that Parliament wants to look after leaseholders, as often it’s a flat we begin our property ladder journey, and therefore to be hit with bills that simply aren’t affordable when it comes to fixing problems they didn’t cause, e.g., building defects, is not fair.

So, leaseholders in buildings above 11 metres or five storeys in England, where the property is their principal home, or is the only property they own, even if they do not live there, which includes owners who have moved out or sublet are now protected!

The government’s Building Safety Fund is available to fund all cladding remediation above 18 metres.

In addition, owners of a total of up to three properties in the United Kingdom will qualify for the protections. For example, if you own your own home plus two additional flats, those flats will qualify for the protection.

Even if a leaseholder owns a total of more than three properties, their principal home always qualifies for the protections. This was debated at first, but there was a huge anger amongst people who became “accidental landlords”. These are leaseholders who have been forced to move out of their homes due to family or employment reasons and then rent somewhere else while sub-letting their flat to cover their housing costs. The reason they rent elsewhere is because their cladding-hit properties are unsellable.

So, to sum up, if a leasehold property is valued at less than £175,000 (£325,000 in London), the leaseholder will pay nothing, and, if the leaseholder has already contributed up to the cap, they will pay nothing.

The government is clear that developers have to fix their own buildings.

“Where a building’s landlord is – or has links to – the developer, they will be unable to pass costs on to any leaseholder. This includes non-qualifying leaseholders such as those with more than three properties, and commercial leaseholders.”

(Gov Website)

WHAT IF YOU ARE A LEASEHOLDER WHO HAS ALREADY PAID FUNDS TOWARDS THE REMEDIATION WORKS?

If you have already paid out in the last five years (including interim measures such as waking watches), those funds will count towards the cap. The Government believes that many leaseholders will pay less than the fixed caps, and some will pay nothing at all.  There are Remediation Contribution Orders which will be available to order developers, partnerships and landlords to pay for remediation, stopping them from hiding their liability behind complex company structures. These orders will also be able to require developers of defective buildings to reimburse leaseholders for costs they have already paid out.

The remediation orders are designed to ensure that where required work is conducted quickly, they will set out the remediation work required, and the time period in which it must be completed by the landlord of a building.

These changes mean that leaseholders should now pay nothing for any remediation works and, of those remaining, none will pay more than £10,000 (£15,000 in London) for those remediation works across their lifetime.

WHAT ABOUT LEASEHOLDERS WHO SUB-LET THEIR PROPERTY AS A BUSINESS, SUCH AS AIRBNB?

Holiday sub-lets such as Airbnb usage come with a whole range of complexities but in this case, they are seen as a “business” rather than a second home sub-let.

Your holiday sub-let will need to be registered for business rates if your flat is available for letting for at least 140 days in a year.

I’M A LEASEHOLDER WHO HAS ENFRANCHISED – WHAT ABOUT ME?

This is a hard pill to swallow unfortunately. If you are a collective of flat owners in your building who have enfranchised or bought your freehold, then unfortunately you are not protected by the Act. Leaseholders who have enfranchised would still have to pay, but in their capacity as owners of the freehold rather than as leaseholders.  Where we can see grievances happening, is where some leaseholders have enfranchised and others have not (same building), and those enfranchised leaseholders now have to pay for remediation of the whole building in their capacity as owners of the freehold. It’s a painful punch to bear. The costs also include the share of remediation costs that would otherwise have been recoverable from those leaseholders who have not enfranchised, once they have paid up to the cap, so these enfranchised residents are effectively paying for their neighbours who haven’t been part of the collective enfranchisement.

At the time of writing, many Lords have argued that they would like a speedy consultation on the matter of leaseholders who have bought their freehold through Enfranchisement. If you’d like to read Hansard’s dialogue, you can find it here (scroll to column 207 were Lord Blencathra speaks).

DEFINITION OF “RELEVANT BUILDING” WHEN IT COMES TO THE BUILDING SAFETY ACT?

Buildings of all heights containing two or more dwellings, but not buildings under 11 metres.

Lord Stephen Greenhalgh, Minister for Building Safety, said in the Lords,

“As I have said repeatedly, there is no systemic risk of fire for buildings below 11 metres. Such buildings are extremely unlikely to need costly remediation to make them safe. Despite research and lobbying from a number of areas, the department has been made aware of only a handful of low-rise buildings where freeholders have been commissioning such work.”

He continued on this specific matter of leaseholders who own properties in buildings of below 11 metres,

My right honourable friend the Minister for Housing was clear that leaseholders in buildings below 11 metres should write to my department should they find that their freeholder or landlord is commissioning costly remediation works.

If you’d like more details of building that are protected, please read more in our article entitled, BUILDING SAFETY AND PROTECTION OF LEASEHOLDERS.

CONSTRUCTION AND DEVELOPERS

The construction industry has agreed to pay £5bn to fix the problem of unsafe cladding in tall buildings in England.

Thirty-five of the UK’s leading housebuilders have agreed to pay for the remediation of cladding on any building over 11 metres tall that they have developed over the past 30 years. However, the government began talks surrounding a new scheme in January this year regarding making industry pay to fix buildings where those responsible cannot be identified or forced to in law. So far, the developers who have signed up to pay remedial cost are LISTED HERE.

When it comes to how the RICS views the Act, it says its members that work on high-risk buildings will have to demonstrate a higher level of competence, with 3rd party oversight of any new accreditation.

What does that mean? When it comes to building controls especially, new pathways will have oversight of all professionals and firms but not local authorities (where the new Building Safety Regulator (within the HSE) is required).

PII is something that the Bill didn’t mention and is therefore not part of the Act, but resolving the PII issue for building safety professionals, will help keep the construction sector moving. One to watch!

Peter Baker, Chief Inspector of Buildings at the Health and Safety Executive, said of the Act however:

“The Building Safety Act introduces tough new measures for the safety and quality of buildings which will be enforced by the new independent regulator being established in the HSE.

“I call on everyone involved in the design, construction and management of buildings in England to now step up, get ready for the changes, and work together to drive the necessary culture change to protect people and deliver safe and good quality buildings.”

If you’d like to see the transitional timeline for deadlines post the Royal Assent given to the Act, here’s a PDF giving expected dates published by the Government and include when new duties on the accountable person to manage building safety risks will be (12-18 months); and mandatory registration of Building Inspectors, Building Control Approvers, Occurrence Reporting and registration of occupied high-rise residential buildings (12-18 months).

SUMMING UP THE BUILDING SAFETY ACT 2022

To conclude, the Building Safety Act 2022 is likely to be seen by many as a progressive and fundamental reform for regulation of the construction and residential property sphere.  Without doubt the new Act will have a huge impact on commercial contracts, together with more stringent regulatory systems in place with better enforcement to protect the people who actually live and own their homes in blocks of flats.

Ultimately the Building Safety Act will change how properties are designed, built and managed in the future too, however, as there are many clauses within the Act, clarification of topics not yet agreed will probably go through secondary legislation.

There will no doubt be more considerations and amendments to this Act in future, which we will keep you up to date with!

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Laura