How the Building Safety Act Affects Leaseholders in Flats and Apartments
Sinead Campbell from London Flats Insurance provides an in depth look at how the Act affects leaseholders, outlining key rights and responsibilities, the impact on property values and compliance timelines.
The Building Safety Act 2022 is a landmark piece of legislation. Introduced in the UK to improve high rise building safety in the wake of the Grenfell Tower tragedy, the act had far reaching implications for leaseholders, building managers and freeholders.
Overview of the Building Safety Act
The Building Safety Act was introduced in response to long standing issues in the construction and management of multi-occupied residential buildings. It applies to buildings that are at least 18 metres or seven storeys high and that contain at least 2 residential units – known as “higher-risk buildings.”
Introduced to parliament in July 2021, the Act received Royal Assent in April 2022 and came into force in October 2023. It includes many new leaseholder protections, including the abolishment of cladding remediation costs being passed to leaseholders. It also protects leaseholders from costs associated with non-cladding related defects.
Rights Laid Out for Leaseholders
The Act introduces significant protections for leaseholders, especially regarding costs associated with fixing historical building safety defects. The “Leaseholder Protections” section of the Act caps the costs that qualifying leaseholders can be required to pay for non-cladding remediation:
- A ban on passing remediation costs for historical defects to leaseholders who own properties worth less than £325,000 in London or £175,000 elsewhere in England.
- A cap on costs for others, limiting charges to £10,000 over ten years (£15,000 in London).
Leaseholders now also have the right to detailed safety information about their building, empowering them to make informed decisions.
Responsibilities for Leaseholders
While leaseholders face reduced financial burdens, they are still responsible for ensuring that their properties meet the standards required under the Act. Their responsibilities include:
- Collaboration with the newly appointed Building Safety Managers who oversee safety measures in high-rise buildings.
- Leaseholders remain obligated to contribute to ongoing maintenance costs under their service charges, including compliance with fire safety and building safety regulations.
Impact on Property Values
The Building Safety Act has had a duel edged effect on property values. For some, the new safety requirements have increased desirability. Potential buyers feel reassured by the stringent safety measures now in place, which has increased demand and pushed values up.
Buildings that achieve compliance quickly and transparently may see renewed interest, and the Act places a premium on properties with clear safety documentation, making them more competitive in the market.
However, the service charge increases and the need for compliance has caused a dip in demand for some. Leaseholders in buildings with unresolved cladding or safety issues may also struggle to sell their properties at market value. Mortgage lenders are more cautious about lending for properties in buildings that fail to meet safety standards too.
Addressing Safety Standards and Cladding Issues
One of the most pressing issues for leaseholders has been the remediation of unsafe cladding. After the Grenfell disaster, thousands of buildings were found to be wrapped in dangerous cladding materials, creating a financial and emotional burden for leaseholders.
The Act clarifies the responsibilities for resolving these issues. Under the “polluter pays” principle, developers or original constructors of faulty buildings are required to fund remediation efforts and a dedicated fund has also been established for addressing cladding related defects in buildings over 18 metres high.
Conclusion
The Building Safety Act represents a transformative shift in the regulation of high-rise buildings. For leaseholders, the Act provides the much needed clarity and protection while also imposing new responsibilities and challenges. While safety requirements have undoubtedly improved, the financial implications and uncertainty in the market are tough to ignore.
Leaseholders should stay informed, actively engage with property managers and ensure that their buildings meet the new standards. By navigating these changes effectively, leaseholders can safeguard their investments and contribute to a safer living environment for all.
For more information, please contact a member of the London Flats Insurance team on 020 7993 3034.