The Leasehold and Freehold Reform Act 2024 (“the Act”) has, after a rather rushed ending, received Royal Assent on 24 May and was published on 3 June 2024 in its final form.
Alongside a raft of provisions relating to leasehold reform – including a ban on the sale of new leasehold houses (save for exceptional circumstances) but notably not including the abolition of ground rent – the Act seeks to further amend and clarify the Building Safety Act 2022 (BSA) (which was itself rather rushed through Parliament and has been amended several times since enactment).
Amendments Relating to Remediation of Defects
The amendments primarily relate to Part 5 of the BSA, which sets out the ‘new’ rights of recourse in relation to building safety defects, and follows publication of the first judgements concerning remediation orders (ROs) and remediation contribution orders (RCOs).
With the addition of a new definition of “relevant steps”, the scope of both ROs and RCOs are extended beyond simply remedying relevant defects/ recovering the costs of the same.
A “relevant step” is defined as a step which has as its purpose:
- Preventing or reducing the likelihood of a fire or collapse of a relevant building (or any part of it) occurring as a result of the relevant defect;
- Reducing the severity of any such incident; or
- Preventing or reducing harm to people in or about the building that could result from such an incident
Remediation Orders
The grounds on which the First Tier Tribunal may make an RO are extended accordingly, to cover both remedying relevant defects (as per the original drafting) and taking relevant steps in relation to relevant defects. An application could theoretically be made both for a relevant landlord to remedy the relevant defects and, in the meantime, to introduce a waking watch as a “relevant step” to reduce the severity and/or prevent or reduce harm to people.
The Tribunal may also direct that a relevant landlord provide or produce an expert report or survey, which may save leaseholders the costs of commissioning the report themselves, although the corresponding amendments to RCO provisions have ensured a ‘dual protection’ for leaseholders seeking recovery of the cost of expert reports.
Remediation Contribution Orders
Amendments to s124(4) BSA provide that an applicant for an RCO may request payment of either (a) a specified amount; or (b) the reasonable cost of specified things done or to be done – meaning applicants will not need to have established a finalised valuation of costs before making an application.
Perhaps most interesting for those exploring the new rights of recourse introduced by the BSA is s116 of the Act, which further particularises the “costs incurred or to be incurred in remedying relevant defects” that may be captured by an RCO to include:
- costs incurred or to be incurred in taking relevant steps in relation to a relevant defect in a relevant building;
- costs incurred or to be incurred in obtaining an expert report relating to the relevant building;
- temporary accommodation costs incurred or to be incurred in decanting residents due to threat to life, encroachment of works or any other reason prescribed by the Secretary of State.
It is clear from the Act that the above is not an exhaustive list. However, in the absence of further secondary legislation prescribed for by new section 124(2B) BSA, which permits the Secretary of State to make further regulations specifying further costs to be included (or not), we anticipate it will be applied narrowly, which leave some unanswered questions about the scope of recovery of costs.
The amendments to both ROs and RCOs apply to both future applications and any applications in progress as at the date the amendments come into force.
Duties following insolvency of a “responsible person”
Somewhat confusingly, for those of us accustomed to advising on the Regulatory Reform (Fire Safety Order) 2005, the Act also introduces a new definition of “responsible person” in the context of duties on an (insolvent) accountable person.
A “responsible person” within the meaning of the BSA now encompasses:
- in relation to a higher-risk building – an accountable person; and/or
- in relation to a “relevant building” – a person who would have been an accountable person had the criteria for a higher risk building been satisfied (i.e. had the relevant building been at least 18m or seven storeys, and contained two or more dwellings, rather than being 11m or five storeys).
An insolvency practitioner appointed in relation to a “responsible person” is obliged to give the “required information” set out in the Act to (a) the local authority; (b) the fire and rescue authority; and (c) the Building Safety Regulator (as applicable) within 14 days of its appointment. This adds yet another layer of information provision to the extensive existing requirements of the BSA and its secondary instruments.
The obligation to share information does not, as yet, extend to leaseholders of the buildings in question and is limited to brief information on the building, the insolvency practitioner’s appointment and the information set out in rule 1.6 of the Insolvency (England and Wales) Rules 2016.
Comment
The provisions relating to duties following insolvency of a “responsible person” will come into effect on 24 July 2024, meaning insolvency practitioners have approximately seven weeks to familiarise themselves with their new duties.
However, the substantive amendments to the BSA dealing with ROs and RCOs are to be enacted at a date to be prescribed by the Secretary of State. In light of the upcoming election, commencement could follow shortly afterwards or fall into the next Parliament – potentially leading to further uncertainty for entities seeking to recover costs relating to, or compel their landlord to remediate, relevant defects.