Leaseholder Library

BUILDING SAFETY ACT 2022: Leaseholder Protection Provisions – Statement from The Property Institute

After a prolonged period of uncertainty and delay for many leaseholders, we are pleased that the amended Building Safety Bill received Royal Assent to become the Building Safety Act, earlier this year. Crucially, one of the amendments The Property Institute (TPI) has championed and supported – the ‘Polluter Pays’ principle – has been carried into the Act and is one of the earliest provisions to come into effect. The Leaseholder Protections provision (which came into force on 28^th June 2022) means for the first time, many leaseholders are protected under new laws from bearing the costs of certain remediation and related building safety work on your building, placing cost responsibility with the developers.

TPI has long held the clear principle that leaseholders purchased their homes in good faith and should not bear any costs to remediate bad buildings.  We continue to push policymakers to ensure that the funding and cost recovery process is fair and robust and delivers on the Government’s firm stance that no leaseholder should pay. We also remain committed to getting the clarity and assurance for you, the leaseholder, with regards to the degree and standard your affected buildings will be fixed, how the remediation works will be funded by the responsible parties, and, importantly, if and how you can reclaim any costs you have already paid for building safety measures, such as waking watch charges and increased insurance premiums.

We are still waiting for Government to issue guidance on the regulations yet to come from the Act. We can be clear, however, that the new laws do not protect every leaseholder from every cost for safety related matters. The law specifically confirms there are legitimate and necessary reasons for invoicing leaseholders on some building safety expenditure. The Act protects qualifying leaseholders so you are not responsible for paying any cladding replacement / remediation costs, but currently, it does mean some leaseholders will have to pay some costs (up to a cap) for non-cladding historic building safety defects. Due to the complex nature of the new provisions and because each building is unique, we advise you to seek your own independent advice to get clarity on your own circumstances.

As it stands, with greater detail forthcoming through the statutory instruments, the funding waterfall in place means that any cost contributions from you as a leaseholder becomes a last resort, in legal terms. This marks a significant shift from the start of the building safety crisis, as it seeks to place responsibility for costs with the responsible parties, rather than leaseholders. The waterfall will work as follows (after claiming against any building insurance policies or warranties):

• First resort: Developers and cladding/external wall system manufacturers;
• Second resort: Freeholders/building owners, subject to an affordability test (which will commence 20^th July 2022);
• Final resort: Qualifying leaseholders will pay a capped amount, towards non-cladding costs only. (Note, there are some exemptions and variables to this, including detailed leaseholder qualification criteria and varying cap limits based on building height, property value and location. Also, leaseholders will only have to pay if the landlord/freehold company is not and never has been associated with the original developer of the affected building. Please see the factsheet linked below for further details to see if you qualify).

More information on the Leaseholder Protections and cost caps under the Building Safety Bill can be found on the Government website here; you may also find this FAQ page useful to help answer any other queries you have.

Whilst the structured funding waterfall is a welcome provision, particularly for many leaseholders, at this early stage of the Act, we are aware of the ambiguity and complexities that remain for many leaseholders, especially for those living in unsafe buildings under 11m. TPI remains in dialogue with the Department to try and ensure that the Government’s intent to protect leaseholders from building safety costs goes as far as possible, and to ensure that building projects which have been stalled or halted can continue as swiftly as possible, with funding sources in place. Our primary objective throughout this crisis has been to ensure that the priority is to remedy all remaining unsafe buildings as soon as possible, without the threat of potentially life-changing bills landing on your doorstep and to allow you to enjoy your homes, in a building that is safe.

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The Building Safety Act is a new and a relatively complex piece of legislation, and we advise and encourage leaseholders to work with their resident directors or association (if you have one) and seek your own independent legal advice.