Since receiving Royal Assent on 28 April 2022, the Building Safety Act 2022 has caused many a head to be scratched. Whilst not fully enforceable until October 2024, there are four provisions in Schedule 8 that have created some of the biggest headaches so far, that all concern service charges.
Paragraph 2
(2) No service charge is payable under the lease in respect of a relevant measure relating to a relevant defect if a relevant landlord—
(a) is responsible for the relevant defect, or
(b) is associated with a person responsible for a relevant defect
A lease needn’t be residential. It must, however, relate to a premises in a ‘relevant building’ which must, amongst other criteria, contain at least two dwellings. It must also provide for the leaseholder contributing towards the cost of the activity.
At the start of 14 February 2022, the landlord to whom the service charge contribution would be payable, needed to have been either landlord under the lease or a ‘superior landlord’.
A ‘relevant defect´ is either an ‘initial defect’ or ‘any other case’, which seems to be any other defect that is not an ‘initial defect’.
A ‘relevant landlord’ is the developer or in a joint venture with them, or they undertook or commissioned works relating to the defect. In contrast, a ‘relevant landlord’ is responsible for an ‘any other case’ type of defect, only if they undertook or commissioned works relating to it.
Paragraph 3
(1) No service charge is payable under a qualifying lease in respect of a relevant measure relating to any relevant defect if the landlord under the lease at the qualifying time (“the relevant landlord”) met the contribution condition.
(2) The contribution condition is that the landlord group’s net worth at the qualifying time was more than N x £2,000,000, where N is the number of relevant buildings within sub-paragraph
The various terms within sub-paragraph (1) are defined at sections 119 and paragraph 1 to schedule 8 of the Act.
Despite appearances, the definition of ‘landlord group’ refers to ‘the relevant landlord and any person associated’ with them. Calculation of the wealth of potentially many individuals will surely be no mean feat, nor will the identification of such people and extraction of their financial information.
Paragraph 8
(1) No service charge is payable under a qualifying lease in respect of cladding remediation.
(2) In this paragraph “cladding remediation” means the removal or replacement of any part of a cladding system that—
(a) forms the outer wall of an external wall system, and
(b) is unsafe.
Whilst ‘cladding remediation’ has been defined, the definition itself leads ironically, to only further questions over what exactly the provision relates to: what is the difference between an ‘external wall system’ and a ‘cladding system’? What is the ‘outer wall’ of an ‘external wall system’? And what is meant by ‘unsafe’?
A seemingly simple provision is quite clearly, not so simple at all.
Paragraph 9
(1) No service charge is payable under a qualifying lease in respect of legal or other professional services relating to the liability (or potential liability) of any person incurred as a result of a relevant defect.
Of note is that the person who retains the services, need not be the person who is burdened with liability; all that matters is that the services relate to that liability. What’s more, legal or professional services commissioned to investigate simply whether there is a liability, will not be recoverable as a service charge.
But does ‘incurred’ relate to the services or the liability? Based on verb usage, liability sems more likely.
Kirsten Blower, Senior Solicitor at Luscombe Gray
