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Desmond Kilcoyne discusses the Building Safety Act 2022: Parts now in force since 28 June 2022

Desmond Kilcoyne discusses the Building Safety Act 2022: Parts now in force since 28 June 2022

Introduction
The Building Safety Act received Royal Assent on 28 April 2022. In response to the Grenfell Tower fire, and the recommendations made by Dame Judith Hackett in 2018, the Act introducesa variety of new initiatives aimed at improving building control for higher risk buildings, as well as a range of ancillary provisions providing stronger rights for consumers and property owners.

Much of the new law is yet to come into force. Indeed, much of the detail is yet to be formulated and will be introduced through secondary legislation in the coming year.

However, some of the Act came into force last week; on 28 June 2022. This article summarises those areas of the Act which now law under 2 broad headings (and reference should be made to the full wording of the relevant provisions for the exact effect of the new law).

For landlord and tenant lawyers
The Act contains less comfort (perhaps) for those landlords and leaseholders where the relevant building contained defects but they have now been remedied and paid for. By contrast, there is much to consider in relation to buildings where the defect has not yet been rectified and/or paid for. Additionally, there are new rules to protect leaseholders in relation to building defects which arise in the future.

From 28 June 2022, sections 122 to 125 and Schedule 8 come into law. In overview, these provisions introduce:

(i) a series of new statutory limitations on the amount of service charge recoverable (s.122 and Sch.8);

(ii) a new procedure for an order that the landlord must remedy a relevant building defect (s.123);

(iii) a new procedure for an order requiring a company or partnership to pay for, or contribute to, the cost pf work to remedy a relevant building defect (s.124); and, 

(iv) an order, obtainable by an insolvency practitioner during the winding up of a company, to require an associated company or partnership to make a contribution to the company’s assets or make a payment which relates to the cost of work to remedy a relevant building defect (s.125).

Notably, these rules only apply in relation to buildings which contain at least two dwellings and which are at least 11 metres high, or have at least 5 storeys. Further, the rules do not apply where the freehold is owned by the leaseholders.

The new service charge rules: There are 6 new rules enacted by s.122 and set out in detail in Sch.8.:

(a) No service charge is payable in respect of work to rectify a cladding defect (Sch.8, para.8);

(b) No service charge is payable in respect of legal or other professional services relating to the liability (or potential liability) of any person incurred as a result of a building defect
(Sch.8, para. 9);

(c) No service charge is payable under the lease in a relevant building in respect of works to remedy a building defect if the relevant landlord, or an associated person, is responsible
for the relevant defect (Sch.8, para. 2);

(d) No service charge is payable in respect of works to remedy a building defect if, on 14 February 2022, the landlord under the lease part of a group having a high-value portfolio
of properties (Sch.8, para. 3);

(e) No service charge is payable in respect of works to remedy a building defect in relation to a low-value lease (£325K in London and, £175K elsewhere; see Sch.8, para. 4); and,

(f) Service charge payable in respect of works to remedy a building defect shall not exceed a prescribed maximum amount (£15K in London and £10K elsewhere; or, £50K where
the value of the premises is between £1m and £2m; and, £100K where the value of the premises exceeds £2m). This rule applies in such a way that: (i) all service charge paid in
relation to the relevant defect in the 5 years preceding the commencement of the Act is also to be taken into account; and, (ii) recoupment is limited to one tenth of the prescribed maximum per year.

Note also that these rules only apply to ‘qualifying leases’, that is leases which the relevant leaseholder occupied as his or her only or principal home or which are owned by buy-to-let
landlords with no more than 3 properties. For the precise wording and meaning of the new rules, see generally ss.116-125, Sch.8 of the Act.

Remediation Orders: Under s.123, on the application of a leaseholder (or others), the First-Tier Tribunal can make an order requiring the relevant landlord to remedy specified defects by a specified time. Oddly, no legal test is provided for the FTT when considering such an application (compare s.124, see below). A decision by the FTT (or the Upper Tribunal, following
an appeal) made under or in connection with s.123 is enforceable with the permission of the county court in the same way as an order of that court.

So, where the contributions of the leaseholders (and any other willing contributors, eg. the landlord) will meet the cost of the necessary remedial work, use of this order is likely to be
uncontroversial. However, where the contributions of the leaseholders (and/or others) to the total cost of the work ordered will fall substantially short, a range of problems may arise if the landlord cannot meet the balance of the cost. Indeed, while the Act is aimed at getting developers (primarily), and then landlords (secondarily), to foot the bill for relevant building
defects (leaseholders being the last port of call), it remains to be seen how effective these orders will be in practice. For the precise wording and meaning of the new rule, see generally s.123 of the Act.

Remediation contribution orders: Under s.124, on the application of a leaseholder (or others), the FTT can make an order requiring a body corporate or partnership to make payments to a specified person for the purpose of meeting costs incurred or to be incurred in remedying particular building defects. The test for the FTT is whether it is ‘just and equitable’ to make the order. Broadly, a “body corporate or partnership” may be the subject of an order only if it is: (a) a landlord; (b) a developer; or (c) a person associated with the landlord and developer a person within any of paragraphs (a) to (c). Here, again (see also Sch.8, para. 2 above), the Act brings in the new concept of the ‘associated person’ in an attempt to broaden the category of persons who should foot the bill for a building defect. For the precise wording and meaning of the new rule, see generally ss.121 and 124 of the Act.

Winding-up cases: Under s.125, during the course of the winding up of a landlord company, an insolvency practitioner may apply for an order requiring an associated company or partnership to make a contribution to the company’s assets or make a payment which relates to the cost of work to remedy a relevant building defect. Here again, broadly, the test for the Court is whether it is ‘just and equitable’ to make the order. For the precise wording and meaning of the new rule, see generally s.125 of the Act.

In line with the aim of the Act, and remediation contribution orders in particular, section 133 will introduce a new s.20D of the Landlord and Tenant Act 1985 (but it is not yet in force).
Under the new s.20D, a landlord will be obliged to take reasonable steps:

(a) to ascertain whether any grant is payable in respect of the remediation works and, if so, to obtain the grant;

(b) to ascertain whether monies may be obtained from a third party in connection with the undertaking of the remediation works and, if so, to obtain monies from the third party;
and,

(c) as may be prescribed in relation to available funding

Where such funding is actually obtained by the landlord, the amount of the funding will then be deductible from the pool of recoverable service charge expenses. Further, where there is a failure to take such reasonable steps, a leaseholder will be able to make an application for an order that all or any of remediation costs are not to be regarded as relevant costs to be taken into account in determining service charge. This addresses issues raised in Avon Ground Rents v Cowley [2019] 1WLR 1337.

Also not yet in force are the provisions which will apply in the future: contractual terms about building safety to be implied into residential leases (s.112(2)); another statutory rule limiting the recovery of building safety costs as service charge (s.112(3)); and, new formal requirements in relation to (i) demands for ground rent, service charge and other sums and (ii) new mandatory notices which provide Building Safety Information (s.113).

For commercial/construction lawyers:

Finally, in line with the aim of the Act that recourse should first be sought from developers and construction product manufacturers to pay for relevant building defects, the Act seeks to extend the liability of such parties.

From 28 June 2022, ss.134-135, 146-155 and Schedule 11 come into law. In outline, the new law provides that:

(i) Where there is a potential claim under s.1 of the Defective Premises Act 1972 relating to the construction (as opposed to the refurbishment) of dwellings completed before the commencement of the Act, there will be a retrospective 30-year limitation period to bring claims (new s.4B(4) of the Limitation Act; s.135). Interestingly, given the retrospective nature of this new law, the Act also expressly provides for developers to raise any defence to which they are entitled under the Human Rights Act 1998 (s.135);

(ii) A new s.2A is introduced into the 1972 Act to impose liability in relation to the refurbishment of dwellings after 28 June 2022 (s.134);

(iii) The limitation period for claims brought under the 1972 Act (both ss.1 and 2A) is extended from 6 years to 15 years for claims that accrue after 28 June 2022 (new
s.4B(4) of the Limitation Act; s.135);

(iv) A person with a legal or equitable interest in a dwelling has a new right to take action against a construction product manufacturers where a construction product fails to meet a relevant standard. The limitation period for such claims are similar those for claims under the 1972 Act. Where the claim relates to cladding products, there will be a 30-year retrospective limitation period; and, for defective construction products used on dwellings after 28 June 2022, where the use leads to the dwelling being uninhabitable, the limitation period will be 15 years.

Note also that, to complement the new rules under the Act, it is intended to bring s.38 of the Building Act 1984 into force although it does not appear that this has yet happened. Section 38 provides a statutory right of action for breach of a duty imposed by the building regulations so far as it causes physical damage. Again, the limitation period for breaches of s 38 will be extended to 15 years (s.135).

Desmond Kilcoyne
(This is a synopsis of a talk given on 28 June 2022 in association with Judge & Priestley Solicitors)

Desmond Kilcoyne

Call 1990

Desmond Kilcoyne

05.07.2022


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