Remediation costs: what leaseholders do and do not have to pay

Summary

1. This section sets out further information about what you, the leaseholder, do and do not have to pay for remediating a building safety defect via your service charge.

2. 1. It is illegal for your building owner to pass historical safety remediation costs on to you, if they are - or are linked to - the developer who is responsible for that safety defect (the definition of ‘building owner’ can be found in What are my building owner’s legal obligations?).

3. If you are a qualifying leaseholder, you are protected from all cladding system costs.

4. If your landlord meets the contribution condition (outlined below), it is illegal for them to pass historical safety remediation costs on to you if you are a qualifying leaseholder, or if you live in a property which does not meet a certain value threshold (also outlined below).

5. If you are a qualifying leaseholder, you are also protected from all legal costs associated with your building owner pursuing remediation costs via legal action.

6. These protections apply retrospectively – your building owner cannot demand payment of invoices simply because they were issued before the protections came into force, where the charges would now be prohibited.

7. For information on what happens when qualifying leaseholders are liable to contribute towards non-cladding remediation works and interim measures, see Leaseholder contribution caps.

What the legislation means

Developer test

8. Your building owner is responsible for paying for historical safety remediation costs if they are - or are associated with - the developer who is responsible for that safety defect. For guidance on what an associated company is, see What are my building owner’s legal obligations?

9. You are fully protected in law from paying towards the remediation of both cladding system and non-cladding defects if your landlord is - or is associated with - the developer who is responsible for that safety defect.

10. In such instances where your building owner, is - or is associated with - the developer responsible for a cladding system or non-cladding relevant defect which was created either during the construction of the building or later (for example, during refurbishment of the building), they have an obligation to pay for all the remediation costs and associated interim measures (for example, waking watch). This is regardless of whether you have a qualifying or non-qualifying lease.

11. This means that your building owner has an obligation to pay for all the costs associated with remediating the safety defect when all the below criteria are met:

  a. the defect is a relevant defect

  b. the building is a relevant building

  c. the building owner is - or is linked to - the developer who is responsible for the relevant defect

12. It is not always the case that the building owner who is responsible for the defects must ultimately pay to fix them. Your building owner may wish to pursue the contractor or other professional whom the building owner considers to be directly responsible for carrying out the defective work or providing a defective product. However, they must not pass this cost on to you, and this should not delay work from commencing or work underway from continuing.

Contribution condition

13. If you are a qualifying leaseholder and your landlord or landlord group has a net worth of more than £2 million per relevant building, they have an obligation to pay for all costs associated with the remediation of non-cladding relevant defects and associated interim measures.

14. This means that your building owner has an obligation to pay for all the remediation costs when all of the below criteria are met:

  a. the defect is a relevant defect

  b. the building is a relevant building

  c. you are a qualifying leaseholder they (or the associated landlord group) have a net worth of at least £2 million per relevant building

15. The landlord group is the relevant landlord and any person(s) or company associated with the relevant landlord, including parent companies. In this context, a relevant landlord is one of the following:

  a. any landlord under the lease on 14 February 2022

  b. any Superior Landlord – a landlord who owns the interest in the property which gives them the right of possession at the end of the landlord’s lease

16. The contribution condition does not apply to the following landlords if, on 14 February 2022, they were any of the following:

  a. a superior landlord within the building (see definition in paragraph 15b of this section)

  b. a private registered provider of social housing

  c. a local authority

  d. a prescribed person in accordance with the Building Safety (Leaseholder Protections) (England) Regulations 2022 – that is, government departments and their associated arm’s-length bodies, the Crown and NHS Foundation trusts.

17. Example: A landlord group of six separate companies owns 10 relevant buildings, 5 of which require remediation. To meet the contribution condition and be responsible for all historical safety remediation costs, the group as a whole must have a net worth in excess of £20 million (£2 million x 10 buildings).

Low value lease

18. You are protected in law from paying to remediate a historical building safety defect if both of the following criteria are met:

  a. you are a qualifying leaseholder

  b. the value of your lease on 14 February 2022 was less than £325,000, if the property is in Greater London or the value of your lease on 14 February 2022 was less than £175,000, if the property is elsewhere in England

19. The value of the lease will be calculated using a formula based on the price at which it was last sold, updated in accordance with the national House Price Index, produced by the Office for National Statistics, as set out in the Building Safety (Leaseholder Protections) (England) Regulations 2022. For more information on this formula, see Leaseholder contribution caps. For help with applying the formula, visit https://www.gov.uk/check-building-safety-costs.

Cladding-system remediation costs

20. If you have a qualifying lease and live in a relevant building with an unsafe cladding system, this means your building owner will be responsible for covering all costs of the cladding remediation. You will not be charged for the cost of fixing or replacing any unsafe cladding systems.

21. Your building owner may wish to pursue the developer, contractor, or other professional who they consider to be directly responsible for carrying out the defective work.

Legal costs

22. If your building owner intends to pursue legal action to recover any remediation costs, you cannot be charged for any of the legal or professional services undertaken by your building owner. This includes legal costs related to settling disputes related to the remediation.

How will this affect you, the leaseholder?

Developer test

23. If, on 14 February 2022, your building owner, or Superior Landlord was the developer, they cannot pass on any costs of fixing the building safety defect if the defect was created during construction or refurbishment of the building.

24. If your building owner was associated with the developer who is responsible for that safety defect (for example, they were or are a subsidiary of the developer), they are responsible for remediating the defect. They cannot pass on any costs to you via your service charge.

25. If your current building owner is a new building owner with no links to the developer, but the building owner on 14 February 2022 was linked to the developer, your new building owner will take on all liabilities of the previous landlord. This means that your new building owner will be responsible for remediating the defect and they cannot pass on any costs to you via your service charge.

26. If your building owner was the building owner on 14 February 2022 and is not associated with the developer who is responsible for that safety defect, they may still be responsible for the full cost of remediation if they meet the contribution test described below.

Contribution condition

27. If you hold a qualifying lease and your landlord or landlord group has a net worth of more than £2 million per relevant building owned, you cannot be charged for the cost of fixing the building safety defect.

Low value lease

28. In Greater London, if you are a qualifying leaseholder with a property which was calculated as being below £325,000, you will not be charged for the cost of fixing any historical safety defect.

29. Outside Greater London, if you hold a qualifying leaseholder with a property which was calculated as being below £175,000, you will not be charged for the cost of fixing the historical safety defect.

Non-qualifying leaseholders

30. If you are a non-qualifying leaseholder, you will only be protected from the costs of historical safety remediation if your building owner is - or is associated with - the developer who is responsible for that safety defect. Where this is not the case, you will be liable for remediation costs as per the terms of your lease.