The Building Safety Bill is here. There is a lot in it and I can’t claim to have mastered it in the few hours since it was published, but I wanted to get something down on paper as soon as possible.
This is, so we have been repeatedly told, the vehicle through which the government will save leaseholders from having to pay life-changing sums to remediate the fire safety defects which are so prevalent at blocks of flats across the country. The headline is that it does not do that (nor does it contain the details of the much delayed loan scheme). To the contrary, this Bill creates a bespoke process by which landlords of “higher-risk” buildings can recover their building safety costs even if their leases do not let them do so.
How does it do that? Well, you need to start with Part 4 of the Bill. This creates two important concepts.
(a) First, it creates the concept of the “higher-risk building”, i.e. one that is at least 18m in height or has at least 7 storeys and contains at least 2 residential units (cl.62).
(b) Secondly, it creates the concept of the “accountable person” – the person who holds a legal estate in possession of the common parts or who is under a relevant repairing obligation (cl.69). In substance, this is likely to be the freeholder or a management company under a lease (or RTM company), but where both exist then it appears to be the freeholder who will be the principal accountable person (PAP) (cl.70).
That is important because it is the PAP who has the duty to ensure that the building is properly registered with the new regulator (cl.72) and must apply for (and obtain) a building assessment certificate (cl.73 and following), which certifies compliance with a range of safety duties. The PAP must also appoint a building safety manager (cl.78). This looks to me like quite an onerous role (and one which will therefore be quite expensive, with the charges almost inevitably going though the service charge) because there is potential criminal liability on the PAP and a lot of safety duties.
The accountable person is deemed to covenant with the leaseholders that he will comply with his building safety duties (cl.120). And, in turn, the leaseholder covenants to pay a building safety charge (cl.120, inserting new s.30D, Landlord and Tenant Act 1985). The details are found in Sch.7 (inserting new Sch.2, LTA 1985) and is, in substance, a statutory scheme to impose payment duties akin to service charges on the leaseholders (a reasonableness test akin to s.19, LTA 1985; consultation akin to s.20, LTA 1985, etc). Payment can still be required in advance, in full, within 28 days (new Sch.2, para.2, LTA 1985).
Further, for all buildings, not just those over 18m/7 storeys, if the landlord is doing works which amount to “remediation works” (to be defined in regulations), landlords will be required to take reasonable steps to ascertain (and apply for) grant funding or seek third party funding (e.g. claim on insurance policies or warranties) (cl.124). Failure to do so gives rise for a tenant to argue that some or all of the service charge should be disallowed. I’m not sure this really takes us very much further than the existing law on claiming on warranties or giving credit for this party funding: Continental Property Ventures Inc v White (2006) 1 EGLR 85; Avon Ground Rents Ltd v Cowley (2019) EWCA Civ 1827.
Is there anything to like? Well, Clauses 125 and 126 create a new 15 year limitation period for certain Defective Premises Act 1972 claims and, importantly, will have retrospective effect, unless that would breach the human rights of the defendant (i.e. the developer). The real problem seems to me though that very few developers are still around. Everyone knows that most developers build through SPVs (special purpose vehicles) which they can then wind up after a few years. If anything, this bill will encourage that sort of behaviour.
Clause 126 seems to assume that s.38, Building Act 1984 will come into force. That is the power to sue directly for breach of the Building Regulations. The initial plan was to abolish s.38 entirely, so that’s quite an interesting change. The same problem exists with SPVs though.
In short, leaseholders can pay up. There is no cap on costs. There is nothing to force developers to pay, There is nothing to deal with the SPV problem. It’s as if the government is living in an entirely different world to the rest of us.
(Added by NL. Just to note, on the extension of limitation for s.1 Defective Premises Act 1972, this will be retrospective, creating a limitation period of 15 years from the point the Act comes into force (plus 90 days in effect). So, if the Act came into force in April 2022, limitation would go back to April 2007. This will be of use to some leaseholders, though I suspect primarily those with social landlords for whom the building was developed, for the reasons J has set out.
There is also a new s.2A to the DPA, which creates a similar obligation to section 1 in respect of any works to a building of one or more dwellings. This is not retrospective, but has the extended limitation period. It would intriguingly seem to allow for a claim against builders for defective repairs, as well a a claim against the landlord under lease repairing obligations.
The apparent indication that s.38 Building Act will be put into force is interesting, and that will have the extended limitation period. What it would add for leaseholders will remain to be seen.
The human rights defence to an extended limitation claim? Well, that is clearly going to the Court of Appeal, if not the Supreme Court. Is it a breach of the developer’s human rights simply that they would face a retrospectively extended limitation period, or would there need to be more of a reason? So that is a lot of claims on hold for three years or so while a test case works its way through the system.)