In part 1 of our blog on what the BSA means for landlords and tenants, which can be viewed here, we considered some of the key issues and risks for owners of multi-dwelling buildings, landlords and management companies (OLMC). In this part 2, we look in detail at the implications for OLMCs of "higher risk" buildings including implied terms to be read into existing leases, as well as mandatory information to be provided to tenants.
BSA: Implied terms to be read into leases of "higher risk" buildings
In the case of buildings at least 18 metres or 7 storeys tall and containing at least 2 flats (deemed "higher risk"), implied terms are to be read into leases, on the following basis:
Landlords will covenant to comply with their building safety duties, to cooperate with the person responsible for complying with building safety duties and, where a special measures order in relation to the higher-risk building is in force, to comply with that order so far as it relates to the landlord
Tenants will covenant to allow the landlord or its appointed agent to enter the premises for a building safety purpose at reasonable times on 48 hours' notice. Where the tenant is also resident, to comply with duties under the BSA such as not creating significant risk, not interfering with safety items etc. and complying with any special measures order.
Service charge provisions in leases with fixed terms of 7 years or more (but not social housing tenancies), are to be read as including an obligation to undertake 'building safety measures'. A 'building safety measure' includes actions such as applying for registrations or assessment certificates as defined in the BSA, keeping and giving information, establishing and monitoring reporting systems, etc. and includes the ability to pass on fees such as legal, professional and regulator fees together with management costs. Where the lease contains different methods for apportioning different relevant costs, these building safety measures costs are to be apportioned in the same way as the costs incurred in connection with insuring the building.
In the case of remuneration for management companies the lease will be read as providing for the appointment of a relevant person (as director for the landlord) for 'building safety' and the service charge payable shall include remunerating any director of the landlord appointed for such purpose. In the case of apportionment, as above, these will be dealt with akin to insuring the building.
Not all costs will be recoverable and excluded costs will include costs incurred as a result of any penalty imposed or enforcement action taken by the regulator, legal costs of a relevant person in connection with special measures order proceedings, costs as a result of negligence, breach of contract or unlawful act on the part of that relevant person or a person acting on their behalf, costs of a description prescribed by regulations made by the Secretary of State that are incurred or to be incurred by or on behalf of an accountable person or special measures manager for the building in connection with the taking of building safety measures.
The landlord will be required to provide mandated statutory information such as a notice containing the relevant building safety information (BSI) to the tenant. The BSI is defined within the legislation. Any rent, service charge or administration charge will be treated as not being due from the tenant to the landlord at any time before the landlord gives the BSI notice to the tenant. Further, any demand from the landlord to the tenant must also include the BSI within the demand itself. Any omission in the demand will render the service or administration charge being demanded to be treated as not being due from the landlord until such information is given. A BSI notice can be provided to a prospective tenant.
For commonholds there are further statutory requirements in relation to duties and disclosures in the commonhold community statement.
If you are a freeholder, landlord or management company having to deal with issues caused by defective cladding or, you have any concerns or questions about the impact the BSA may have on you or your business, please do not hesitate to get in touch with our Real Estate Disputes team or your usual Brodies contact.
For more of our industry insights on the impact of the BSA right across the built environment, please visit our Building and Fire Safety hub here.
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