The Government has launched two new consultations on aspects of the comprehensive legislative reform brought about by the Building Safety Act 2022 (the "Act"). The proposed legislation will have effect in England only. Both consultations are open until 31 March 2023.
Alternative Cost Recovery
As regular readers of our blogs will be aware, there are existing regulations in force that prevent, and in some cases reduce, the ability of certain landlords of residential developments to recover remediation costs relating to building safety defects from leaseholders through existing service charge provisions. The new proposals provide that if the existing regulations do not preclude recovery through the service charge, a landlord will still have to:
- take reasonable steps to ensure that all alternative cost recovery avenues have been explored before asking leaseholders to contribute;
- reflect any money recouped through these cost recovery avenues; and
- provide adequate evidence that they have taken these steps.
The consultation seeks views on the buildings and defects to which these steps should apply; the detailed nature of the steps that landlords should follow; and the nature of the evidence that landlords should be required to provide to tenant to demonstrate that they have complied. The possible alternative cost recovery avenues being considered include: insurance, warranties, third parties (such as developers, contractors, product suppliers and manufacturers) and any Government funding or grants.
Transparency
As well as dealing with remediation costs, the Act also sets out a regime for the ongoing management of building safety risks in higher risk buildings (such as applications for registration of a higher-risk building and applying for building assessment certificates). The existing restrictions on recovering remediation costs from tenants do not apply to these ongoing costs.
The proposed regulations aim to ensure that landlords are transparent about these ongoing costs by making it a requirement to include certain information about them in service charge demands and service charge statements. It is also proposed that leaseholders will be able to request itemised breakdowns of the total money spent in this area.
Comment
Whatever their final form, it is likely that these new pieces of secondary legislation will be of significant importance to all landlords and management companies (including resident owned management companies) of residential developments. It will also be important for tenants to be aware of their rights and the further ways in which they will be able to resist paying for remediation works where landlords have not sought alternative sources of recovery.
For further information on matters relating to the Building Safety Act and the related legislative changes please see our Building & Fire Safety Hub
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