d
c

Landlords and leaseholders are now subject to the requirements of Schedule 8 of the Building Safety Act 2022 (the “Act”), the Government’s response to avoid a repeat of the Grenfell Disaster.

The provisions of Schedule 8 provide certain protections for leaseholders against liabilities for the cost of remediation of certain defects in ‘relevant buildings’ (being buildings which are over 11metres or 5 storeys tall and house residential occupiers who have long leases).

Many relevant buildings are in need of remediation works due to defects which cause a building safety risk and have arisen because of works carried out in the last 30 years. The importance of the Act is that, subject to certain conditions, leaseholders are indemnified by landlords against having to pay service charge monies in relation to costs to be incurred to remediate any unsafe cladding.

Additionally, by these legislative provisions, the Government is seeking to apportion costs for remediation works in respect of other defects which cause a building safety risk on the basis of both “who is at fault” and “who is in a better position to pay”.

Of particular note for both landlords and leaseholders is the requirement for a certificate from landlords or leaseholders where there are required remediation works. These certificates are intended to determine whether:

  1. the leaseholder holds a ‘qualifying lease’ under the Act, and may therefore be either completely exempt from the costs of remedying defects in its building or have a much reduced responsibility as a result of maximum caps on relevant service charges. The caps are dependent on a property’s value and location, with most being in the range of £10,000-£50,000; and
  2. the landlord is responsible for the relevant defects (in which case the leaseholder qualifies for full relief from any remediation whether or not it is a qualifying leaseholder) or, if not, whether the landlord meets the ‘contribution condition’ in which case qualifying leaseholders again qualify for full relief. To avoid meeting the contribution condition a landlord must show that not only it, but also all other associated parties within its ‘landlord group’, have a total net worth of less than £2,000,000 per relevant building If the landlord group has a total net worth of greater than £2,000,000 per relevant building, the landlord must not pass on any of the costs for the remediation of historic defects to qualifying leaseholders.

Trigger points for the provision of these certificates are generally as follows:

  1. Landlord’s Certificate:
  • when a landlord makes a demand to a leaseholder for payment of service charge covering the remediation cost;
  • within four (4) weeks of receipt of notification from a leaseholder that its leasehold interest is to be sold;
  • within four (4) weeks of becoming aware (either itself or by notification from another person) of a relevant defect not covered by a previous landlord’s certificate; or
  • within four (4) weeks of being requested to do so by a leaseholder.

 

  1. Leaseholder’s Certificate:
  • when a landlord requests a certificate from a leaseholder;
  • when a leaseholder sells its leasehold interest; or
  • whenever a leaseholder wishes to provide one.

Regulations made pursuant to the Act stipulate both the content and supporting documentation which is to accompany a certificate as follows:

  1. Landlord’s Certificate:
  • whether as of 14 February 2022 the landlord met the contribution condition (if it did, the leaseholder protections will be fixed and liability will pass to any new freeholder);
  • whether the landlord as of 14 February 2022 was responsible for any relevant defects; and
  • evidence for (a) and (b), for instance, financial accounts for the landlord group.

 

  1. Leaseholder’s Certificate:
  • details of the ownership of the lease and the leaseholder’s other property ownership within the United Kingdom as of 14 February 2022;
  • the last purchase price of the property as of 14 February 2022;
  • response to questions about shared ownership leases; and
  • evidence as those matters contained within (a)-(c).

The legislation is also clear that landlords cannot charge leaseholders for provision of landlord certificates.

Clearly the certificates have significant financial consequences for each party. Should you require advice in relation to either Landlord or Leaseholder Certificates, contact Edwin Coe’s Cladding Team.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

Edwin Coe LLP is a Limited Liability Partnership, registered in England & Wales (No.OC326366). The Firm is authorised and regulated by the Solicitors Regulation Authority. A list of members of the LLP is available for inspection at our registered office address: 2 Stone Buildings, Lincoln’s Inn, London, WC2A 3TH. “Partner” denotes a member of the LLP or an employee or consultant with the equivalent standing.

Please also see a copy of our terms of use here in respect of our website which apply also to all of our blogs.

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