The King’s Speech has corrected an oversight in the Building Safety Act that flat owners looking to extend their leases will be relieved to see.
While Leasehold Reform and the potential capping of ground rents announced in the King’s Speech last week (as detailed in our attached article) captured the headlines in this sector, a key correction has been made to the Building Safety Act which may have flown under the radar.
Thanks to the Levelling Up and Regeneration Bill, which was given Royal Assent, lease extensions will now be included within the definition of a qualifying lease. This means that flat owners no longer stand to lose the protection of the Building Safety Act when extending their lease.
Those who have extended their leases since Valentine’s day 2022 will pleased to hear that the legislation also provides for this to benefit them by applying retrospectively.
To benefit from this, the new lease must meet certain criteria – it must:
- be of a single dwelling in a relevant building;
- contain a service charge obligation;
- be granted since Valentine’s Day 2022;
- replace a lease that qualified under the Building Safety Act.
- Provide for continuity.
So flat owners who hold a number of flats held within a single lease will not benefit. Nor will those holding a maisonette lease that has no service charge obligation.
If the lease being replaced was not a qualifying lease, then the new lease won’t be either.
While there must be continuity in the property let there is flexibility for the new lease to exclude land previously let or to include additional land (so, protection isn’t lost if, for example, the new lease adds a garden area to the flat) and for it to replace two existing leases (sometimes the flat will be held under one lease and say a garage under another).
Some effort has been made to deal with various scenarios that come up in practice in this regard and there is room for regulations to fix problems, discovered subsequently:
- Replacement for this purpose isn’t limited to statutory extensions; informal lease extensions benefit from the correction too. It also covers leases that start after the previous one ends.
- It includes deeds that despite their title operate legally as a new lease (a deemed surrender and regrant) and there is provision for deeds of rectification to benefit.
- Where there is a hierarchy of leases of a given flat. Only the lease in possession will benefit. Special rules apply with regard to a chain of qualifying leases.
Mark Vinall, Partner, Ashley Wilson
