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,you if they arewere - or arewere linkedassociated towith - the developer who iswas responsible for that historical safety defect. (theThis definitionis ofknown ‘buildingas owner’the can‘developer betest’ found- insee Whatfurther are my building owner’s legal obligations?detail)..

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

4. IfIt your landlord meets the contribution condition (outlined below), it is illegal for themyour landlord to pass historical safety remediation costs on to you if you are a qualifying leaseholder,leaseholder orand ifyour youlandlord livemeets inthe acontribution propertycondition which(outlined below), or your property does not meet athe certainset value threshold (also outlined below).

5. If you are a qualifying leaseholder, you are also protected from allmeeting any of the legal costs associated with your building owner pursuing remediation costscosts, for example, 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,force whereon the28 chargesJune would now be prohibited.2022.

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. YourYou buildingare ownerprotected isin responsiblelaw forfrom paying forto remediate a historical building safety remediationdefect costsif, ifon they14 areFebruary 2022, your building owner was - or arewas associated with - the developer whodeveloper. is responsible for that safety defect. For guidance on what an associated company is, and definition of ‘building owner’, see What are my building owner’s legal obligations?

9. YouThe arefollowing fullycriteria protectedmust inalso lawbe frommet:

  payinga. towards the remediationdefect ofis botha claddingrelevant systemdefect, and

  non-claddingb. defectsthe ifbuilding your landlord is -a orrelevant isbuilding

10. associatedThis withprovision -applies theregardless developerof whowhether isor responsiblenot foryou thathave safetya defect.

10.qualifying Inlease. suchThis instancesmeans wherethat yournon-qualifying buildingleases owner,can isbenefit -from or is associated with - the developercosts responsibleof forremediating a cladding systemsystems or non-cladding relevant defectdefects which was created either during the construction of the building or later (for example, during refurbishment of the building),building theyand have an obligation to pay for all the remediation costs and associated interim measures (for(such example,as waking watch).watch) Thiswhere istheir regardlessbuilding ofowner whetherwas you- haveor awas qualifyingassociated orwith non-qualifying- lease.the developer.

11. ThisIf meansyour thatcurrent yourbuilding owner is a new building owner haswith anno obligationlinks to paythe fordeveloper, allbut the costsbuilding associatedowner withon remediating14 theFebruary safety2022 defectwas whenlinked allto the belowdeveloper, criteriayour arenew met:

 building a.owner will take on the defectliabilities isof athe relevantprevious defect

 landlord. b.This themeans that your new building isowner awill relevantbe building

 responsible c.for remediating the buildingdefect ownerand isthey -cannot orpass ison linkedany costs to -you thevia developeryour whoservice ischarge. responsibleYour forlandlord must set this out in the relevantlandlord defectcertificate.

12. It is not always the case that the building owner whothat is classed as responsible for the defects must ultimately pay to fix them. Your building owner may wishbe able to pursue the contractor or other professional whomthat theis 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 is not associated with the developer, but they or their associated 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 thehistorical safety 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 leaseholderleaseholder, theyand

  d. 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 under the lease on 14 February 2022 and any person(s) or company associated with the relevant landlord,landlord. including parent companies. In this context, aassociated relevantmeans landlorda isperson onewhose ofinterest thewas following:

 held a.on anytrust landlordor underwas thebeneficiary leaseto ona 14trust Februaryor 2022

  b. any Superiorperson Landlordwho –was a landlordpartner who owns the interest in thea propertypartnership whichat givesany themtime thebetween right28 ofJune possession2017 atand the29 endJune of the landlord’s lease2022.

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- definitionthat is a landlord who owns the interest in paragraphthe 15bproperty which gives them the right of thispossession section)at the end of the landlord’s lease

  b. a private registered provider of social housing

  c. a local authorityauthority, or

  d. a prescribed person in accordance with Regulation 8 of 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:In Asummary, landlordif groupyou ofhold sixa separatequalifying companieslease ownsand 10your relevantlandlord’s buildings,group 5has ofa whichnet requireworth remediation.of Tomore meetthan the£2 contributionmillion conditionper andrelevant bebuilding responsibleowned, foryou allcannot historicalbe safetycharged remediationfor costs, the groupcost asof afixing wholehistorical mustsafety havedefects, aunless netthey worthare inlisted excessat ofparagraph £20 million (£2 million x 10 buildings).16.

Low value lease

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

  a. you are a qualifying leaseholderleaseholder, and

  b. the value of your lease on 14 February 2022 was

    i. less than £325,000, if the property is in Greater London or

  the  valueii. 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 athe formula set out in Schedule 2 of the Building Safety (Leaseholder Protections) (England) Regulations 2022. This is based on the price at which ityour property was last sold,sold on the open market before 14 February 2022, updated in accordance with the national House Price Index, produced by the Office for National Statistics,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-costsCheck 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. This also applies to those with non-qualifying leases in buildings still owned by, or associated with, the original developer.

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. They may also be eligible for government funding.

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?

DeveloperReserve testFunds

23. If,Any onmoney 14already Februarycollected 2022,by yourthe buildinglandlord owner,before orthe Superiorqualifying Landlorddate was(14 theFebruary developer,2022) theyand cannotstill passavailable, onfor anyexample costsin ofa fixingreserve thefund, buildingcan safetybe defectused iffor theremediation defectand wasinterim createdmeasures, duringbut constructionought ornot refurbishmentto ofbe thespent building.

24.unless Ifthe yourwork buildingis ownerurgent was(such associatedas withwaking thewatch developerto whoprevent isa responsiblebuilding forbeing thatemptied). safetyThis defectdoes (fornot example,prevent theyleaseholders werefrom orseeking are a subsidiaryRemediation ofContribution theOrder developer),to theyrecover aresuch responsiblefunds forfrom remediating the defect.building Theyowner.

How cannotwill passthis onaffect anyyou, coststhe toleaseholder?

Qualifying you via your service charge.

Leaseholders

25.24. IfCosts yourthat currentcannot buildingbe ownerpassed ison:

• Any ahistorical newsafety buildingremediation ownercosts withwhere nothe linksdeveloper towho thebuilt developer,or butrefurbished the building owneris on- 14or Februaryis 2022associated waswith linked- to the developer, your new building owner
• Any willhistorical takesafety onremediation allcosts liabilitieswhere of the previouslandlord landlord.has Thisa meansnet thatworth yourof newmore buildingthan owner£2 willmillion beper responsiblerelevant forbuilding
• Any remediatinghistorical thesafety defectremediation and they cannot pass on any costs towhere youthe viaproperty youris servicevalued charge.

  26.at Ifbelow your£325,000 buildingin ownerGreater wasLondon theor building£175,000 ownerelsewhere onin 14England

• Unsafe Februarycladding 2022remediation andcosts
• Cost isof notlegal or associated withprofessional theservices developerrelating whoto isliability responsible for thatrelevant safetydefects

25. defect,Costs theythat may still be responsibleable forto thebe fullpassed coston ofup remediationto ifa theycapped meetamount:

• Waking thewatch contributioncosts
• Remediation testof describednon-cladding below.

  Contributiondefects, condition

  27.for Ifexample:

  • replacement youof hold a qualifyingfire leasedoor andthat yourhas landlordprematurely ordegraded landlordand groupis hasno alonger netsafe
  • installation worth of moremissing thanfire £2compartmentation
  • inadequate millionstructural perfire relevantprotections buildingpresenting owned,an youunacceptable cannotrisk beof chargedearly forcollapse thein costfire ofscenarios
  • inadequate fixingstructural thedesign buildingpresenting safetyan defect.

    Lowunacceptable valuerisk lease

    28.of Incollapse Greater(for London,example ifbalcony youdesign arewhich apresents qualifyingan leaseholderunacceptable withrisk aof propertyvertical whichfire wasspread)

• professional calculatedservices asin beingrelation belowto £325,000,relevant youworks will(for notexample besurveys chargedto fordetermine therelevant costworks)

26. ofLeaseholders fixingshould anyseek historicallegal safetyadvice defect.

29.to Outsidemake Greatersure London,explicitly ifin youtheir holdagreements athat qualifyingtheir leaseholderprotections withare aextended propertyas whichpart wasof calculatedtheir aslease. beingIt belowwas £175,000,intended youto willwork notlike bethis chargedand forfreeholders theshould costmake ofsure fixingthat thelease historicalextensions safetyreflect defect.this position.

Non-qualifying leaseholders

30.27. IfNon-qualifying youleaseholders 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.lease - but the costs passed on to you cannot be increased to replace money that qualifying leaseholders are protected from paying.

28. Costs that cannot be passed on:

Any historical safety remediation costs where the developer who built or refurbished the building is - or is associated with - the building owner.