February 2023

What is the Building Safety Act 2022?

The Building Safety Act 2022 is new legislation which has brought major changes to give homeowners and tenants more rights, powers and protection so that homes will be safer all over the country.

If you are a landlord, please refer to our article Building safely act and fire safety act 2022: implications for landlords

Building Safety Act 2022 summary

The Act came into force in June 2022, largely in response to the issues brought to light following the tragic Grenfell disaster, which left some leaseholders facing huge bills to remedy building defects to make buildings safe and preserve the financial value of their properties.

A key part of the legislation is to deliver strong protection for qualifying leaseholders from the costs of fixing historical defects and safety problems (such as unsafe external cladding). It makes sure those responsible for past faults are held accountable instead.

What are the leaseholder protections in the building safety act 2022?

The leaseholder protections came into force on 28 June 2022, with new financial protections for leaseholders in relevant buildings with relevant historical safety defects.

The law now requires those who constructed faulty buildings to take responsibility for fixing them, while also granting legal protection to leaseholders from exorbitant bills for historical safety problems.

The government is firm that developers must pay for repairing buildings they were involved in building or renovating, even if they don’t own the building anymore. The law holds building owners or those associated with the developer, responsible for paying for the remediation of historical safety defects.

Courts now have expanded powers to impose liability on related companies, so that legal cases for claims against defective buildings can be brought against companies linked to the developer, preventing them from escaping responsibility by using complex corporate structures.

In cases where a developer can’t be found or has not yet agreed to pay for their own buildings, funds will be provided directly, to cover the cost of fixing cladding systems and remediation, ensuring that no eligible leaseholder has to bear the expense.

Eligible leaseholders are protected from all external cladding system remediation costs. Leaseholders whose property is valued at less than £325,000 in Greater London (£175,000 in other parts of England) or whose building owner has a group net worth of more than £2 million per building as of 14 February 2022, are exempt from historical safety remediation costs.

The law sets a firm cap on contributions from eligible leaseholders for non-cladding defects and interim measures (including the costs of trained personnel to detect and respond to any potential fire hazards i.e: “waking watch” costs), spread over 10 years, with costs already paid since 28 June 2017 counting towards the cap. If the remediation costs exceed the cap, building owners must make up the difference.

The law includes strong measures to ensure those responsible finally rectify dangerous buildings they contributed to and to protect leaseholders from the unjust costs of remediation they previously faced.

If you’re a leaseholder in England, please refer to the Gov.uk link to check whether you’ll have to pay to replace cladding or to fix other safety problems with your building.

What leases qualify for protection?

There are criteria which must be met in order for a leaseholder to benefit from the protections created by the Act:

The lease must be for a single dwelling within a building of above 11 metres high or at least five storeys
The lease must be for more than 21 years
The leaseholder must pay a service charge
The lease must have begun before 14 February 2022 and as of 14 February 2022, either:

a) the dwelling must have been the leaseholder’s only or main home; or

b) the leaseholder did not own more than 3 dwellings in the UK.

What is a Leaseholder Deed of Certificate?

A lease must have satisfied each of these criteria as of 14 February 2022 to qualify for protection and, as evidence of this, the status of a lease on that key date must now be documented in a Leaseholder Deed of Certificate.

The Leaseholder Deed of Certificate will demonstrate whether the leaseholder can be responsible for paying for remediation works. Where the leaseholder can be asked to pay for these works, it enables building owners to calculate the cap on those costs.

The Leaseholder Deed of Certificate contains a series of questions and answers which assess whether the lease meets the required criteria for protection for example:

It must contain details of the current leaseholder,
who the leaseholder was on 14 February 2022,
the price the property was last sold for
and whether the lease is a shared ownership lease.

There may also be required additional documents that must accompany the Deed of Certificate, such as evidence of past sales of the property and the price paid.

Notwithstanding the importance of the Leaseholder Deed of Certificate for protecting leaseholders from repair costs, requests for deeds of certificate will become routine in conveyancing transactions and leaseholders planning to sell their properties should be aware of this and prepare in advance if possible.

What should I expect from my landlord or building owner?

The Leaseholder Deed of Certificate outlines the cap on costs the leaseholder can be asked to pay. Equally, a Landlord Certificate is a new requirement under the Building Safety (Leaseholder Protections) (England) Regulations 2022 and contains parallel information to calculate how much the landlord can charge leaseholders for building-safety works.

The Landlord Certificate acts as a permanent record as to the status of the lease on 14 February 2022 and must contain details about the current landlord, who the landlord was on 14 February 2022, their involvement in commissioning the defective work and any remediation works which have been carried out previously.

The landlord must provide leaseholders with a Landlord Certificate in the following circumstances:

When the landlord wants to pass on any costs for repairing defects onto a leaseholder through the service charge
Within four weeks from receiving notification from a leaseholder that the leaseholder intends to sell their property
Within four weeks of the landlord becoming aware of a relevant defect which was not covered by a previous Landlord Certificate; or
Within four weeks of a leaseholder requesting a Landlord Certificate.

As with the Leaseholder Deed of Certificate, the Landlord Certificate will also become a necessity in conveyancing transactions and requests for them will become routine.

Leaseholders that are planning to sell their properties should ensure they request a Landlord Certificate as early as possible in the transaction, if not prior to finding a seller, to minimise any potential delays while landlords deal with requests and preparation of the certificates.

If you have any queries arising from the points raised in this article, please contact Amy Barrington who will be very happy to help.

What is Before the Event Insurance?

Before the Event (BTE) Insurance is a type of legal expense cover that may arise as part of a wider insurance policy, such as your home, business, motor or bank insurance. This cover is normally an ‘add-on’ in personal policies, but is also common in a wide variety of business contexts including partnerships, companies, and other corporate organisations.

BTE cover provides you with support in the event that legal assistance becomes necessary. Legal assistance covers a wide variety of circumstances including investigations, inquiries, and legal proceedings. These circumstances can be cumbersome and financially onerous, especially in large commercial settings. Accordingly, BTE insurance is often viewed as a prudent element of the wider business insurance cover policy. BTE insurance may cover an array of eventualities but typically will cover your legal costs including solicitor fees, costs of expert witnesses, court fees and legal costs for the opponent, in the event that they win the claim.

How does BTE cover work?

Most insurers will have a preferred group of solicitors, or ‘panel’, they will refer policyholders to, in the event legal cover is required. The insurers and panel solicitors will agree to fixed fee rates within their terms of appointment which are favourable to the insurers. If legal proceedings are initiated, you will be referred to the insurer’s panel solicitors. There can be benefits to being represented by your insurer’s panel solicitors. For example, panel solicitors will have the relevant expertise for the matter in hand and will have considerable experience in dealing with your type of issue.

Can you instruct Tees to act for you if you are claiming through your insurer?

Yes. Although insurers will place a strong emphasis on you staying with their panel solicitors, there is no obligation for you to do this. In fact, under the Insurance Companies (Legal Expenses Insurance) Regulations Act 1990, policyholders have the freedom to choose their own legal representation.

Indeed, many policyholders prefer to appoint solicitors they know and trust. If you know a solicitor that has represented you before, you may feel this solicitor will serve your interests better, particularly if the legal proceedings are complex or require specialist knowledge. It’s important, therefore, that you are clear on your rights in relation to choosing your own legal representation.

The right to appoint a solicitor of your choice does not arise at the start of your policy. The policy itself is likely to include terms that reference your insurer’s panel solicitors. It will only be at the point where legal ‘inquiries or proceedings’ begin that your own solicitor can be sought. The definition of ‘proceedings’ is broad and includes initial steps that need to be taken (including consultation, investigation, mediation, as well as other early stages of legal assistance), in addition to claims that go on to require litigation. In Nobile v DAS Rechtsschutz-Versicherungs AG, the court ruled that the policyholder’s right to appoint their own solicitor started as soon as a cause of action arose.

Where circumstances such as these do arise, you can either seek confirmation from your insurer that your own solicitor may be used or alternatively, you can ask your preferred solicitor to contact the insurers directly. In either case, it is advisable to act swiftly, to ensure your solicitor can begin to take steps on your behalf.

Are there any limitations on who I choose to appoint?

If you decide to choose your own solicitor, it will be necessary for your insurer and your solicitor to agree on fees and hourly rates, as well as the scope of the work which will be covered under your policy. It’s essential that you check the terms of your insurance policy to ascertain any restrictions or limitations on fixed hourly rates from the outset. If your insurer’s fixed hourly rates are lower than the rates of your solicitor, the insurer cannot simply refuse to pay towards any of the legal costs.

Insurers may try to insist that your solicitor charges the same hourly rate as their panel solicitors. This can be a considerably lower rate than your solicitor’s standard rate of work, so it’s important to note that your solicitor is not bound to agree to these terms. The Court of Appeal case of Brown-Quinn & Anor v Equity Syndicate Management Ltd & Anor [2012] states that insurers may restrict the level of recoverable fees, but not to the extent that it renders your freedom of choice meaningless. This means the insurers cannot set their fixed rates for non-panel solicitors so low that you have no real choice of which solicitors may represent you.