Following the loss of 72 lives in Grenfell Tower in 2017, the UK parliament introduced the Building Safety Act 2022. So what are the changes introduced under this Act and who do they apply to?
The Building Safety Act (“The Act”) came into force on 1st April 2023. It is intended to address building safety risks and offers financial protection in favour of leaseholders against remediation costs in respect of building defects.
However, the Act does not apply to all leaseholders, landlords or buildings. Thus, the Leaseholder Deed of Certificate (“Leaseholder Certificate”) and the Landlord Certificate were introduced to obtain more information about the relevant leaseholders, landlords and buildings and use this information to determine whether the Act applies.
Understanding who the changes apply to – and the exceptions
When a mortgage lender is involved in residential leasehold conveyancing, it is now a mandatory requirement for them to obtain information on (i) any Leaseholder Certificate and/or Landlord Certificate; and (ii) whether the building has been or will be remediated under the Act.
As a response, many conveyancers started incorporating the above into their standard enquiries without further consideration. But sometimes this is not necessary – and raising needless enquiries will only prolong the transaction, potentially jeopardising it altogether.
For example, a buyer’s solicitor requests a copy of the Landlord Certificate and the managing agent advises that the certificate has not been served; the buyer’s solicitor advises his client not to proceed without it; the managing agent took some time to complete the certificate; as a result, the buyer is unable to exchange as planned and has incurred costs. The above could have been avoided if the buyer had been advised that the absence of a Landlord Certificate would not adversely affect his or the lender’s position.
Therefore, it’s imperative that conveyancers are thoroughly familiar with the Act, assess each situation to their best ability on a case-by-case basis and raise only specific and relevant enquiries requesting information about the Act.
What is the Building Safety Act?
In the simplest terms, every conveyancer should consider the following:
(a) Is it a relevant building?
Yes – if it is at least 11 metres in height or five storeys high (excluding basement and plant room); it contains at least 2 dwellings; and it is not owned by leaseholders (i.e. collective enfranchisement, share of freehold or any arrangements).
(b) Is there a qualifying lease?
Yes – if it is a long lease (i.e. over 21 years) of a single dwelling within a relevant building granted before 14th February 2022; the leaseholder is liable to pay service charge; and on 14th February 2022 either (i) the property is leaseholder’s main home; or (ii) the leaseholder did not own more than 3 dwellings in total in the United Kingdom.
(c) Are there any relevant defects?
Yes – if there are defects that gave rise to building safety risk in relation to works carried out between 28th June 1992 to 27 June 2022 (including the initial construction of the building).
In every situation where the answer is “Yes”, more information about the Act should be obtained by the solicitor.
Understanding the relevant period
The relevant time for completing the certificates is 14th February 2022, meaning that the leaseholder and the landlord as of 14th February 2022 should complete the certificates. This has created an issue whereby the property has been transferred since 14th February 2022, and the certificates were not obtained or provided by the relevant person at the time.
Both certificates state that:
“If you were not the landlord/owner of the property on 14th February 2022 it is still you who are responsible for completing, signing and returning this certificate, but you may need to seek the answers to the questions from someone else e.g. the person who was the landlord/owner on that date.”
How to obtain the required information
So, how far exactly do you have to go in obtaining the required information? What happens if the other person is unresponsive, unreachable or no longer exists?
For the Landlord Certificate, the landlord is required to produce the Landlord Certificate (a) within 4 weeks of receipt of notification from the leaseholder that the leasehold interest is to be sold; or (b) within 4 weeks of being requested to do so by the leaseholder. Failure to produce this means that there is an assumption that the landlord has met the developer test and cannot recover any remediation costs in relation to relevant defects from the leaseholders.
If the current landlord is not the relevant landlord (i.e. the landlord as of 14th February 2022), the current landlord could apply to the relevant landlord for the information required who must provide the information within three weeks of such request.
However, the same does not apply to the Leaseholder Certificate. Under the Act, the relevant leaseholder (i.e. the leaseholder as of 14th February 2022) is not required to entertain the leaseholder’s request for information.
Furthermore, there is an assumption allowing the landlord to recover the full remediation costs of relevant defects from the leaseholder. The Leaseholder Certificate states that:
“Failure to return a completed, signed deed of certificate to your landlord will result in the lease to which the deed of certificate relates being treated as if it were not a qualifying lease under the Building Safety Act 2022.”
On a positive note, the landlord is required to follow up with the leaseholder in relation to the completion of the Leasehold Certificate. So the assumption would only apply once the landlord has complied with all of the required steps under the Act.
Our recommendation
We note that the leaseholder will not have statutory means to request the information from the relevant leaseholder in relation to the certificate. Therefore, it is highly recommended to reach out to the relevant owner before it is too late and obtaining the necessary information to complete the certificate. Please note that the leaseholder can voluntarily submit the completed Leaseholder Certificate to the landlord at any time.
Our comments
The current version of the LPE1 (fourth edition; updated in January 2023) contains questions about the certificates which form part of all management packs. However, there are still some managing agents still using the previous version and we have found that the most efficient way to resolve the issue is to attach a copy of the current version of the LPE1 when requesting the management pack.
Conclusion
The Act introduced new concepts to leasehold conveyancing and many conveyancers are not ready to advise on this relatively new legislation. There are many valid and proper reasons as to why. Regardless, the Act is not going anywhere and the only option available to conveyancers is to embrace the new way of leasehold conveyancing. To ensure that your transactions proceed as smoothly as possible and without the burden of any unnecessary paperwork, please contact our award-winning Real Estate team.
