Remediation costs: what leaseholders do and do not have to pay
This guidance sets out further information about what you, the leaseholder, do and do not have to pay for remediating a building safety defect via your service charge.
Applies to England
Summary
1. This section sets out further information about what you, the leaseholder, do and do not have to pay for remediating a building safety defect via your service charge.
2. It is illegal for your building owner to pass historical safety remediation costs on to you if they were - or were associated with the developer who was responsible for that historical safety defect. This is known as the ‘developer test’ - see further detail.
3. If you are a qualifying leaseholder, you are always protected from all cladding system costs.
4. It is illegal for your landlord to pass historical safety remediation costs on to you if you are a qualifying leaseholder and your landlord meets the contribution condition (outlined below), or your property does not meet the set value threshold (also outlined below).
5. If you are a qualifying leaseholder, you are also protected from meeting any of the legal costs associated with your building owner pursuing remediation costs, for example, via legal action.
6. These protections apply retrospectively - your building owner cannot demand payment of invoices simply because they were issued before the protections came into force on 28 June 2022.
7. For information on what happens when qualifying leaseholders are liable to contribute towards non-cladding remediation works and interim measures, see Leaseholder contribution caps.
What the legislation means
Developer test
8. You are protected in law from paying to remediate a historical building safety defect if, on 14 February 2022, your building owner was - or was associated with - the developer. For guidance on what an associated company is, and definition of ‘building owner’, see What are my building owner’s legal obligations?
9. The following criteria must also be met:
a. the defect is a relevant defect, and
b. the building is a relevant building
10. This provision applies regardless of whether or not you have a qualifying lease. This means that non-qualifying leases can benefit from the costs of remediating cladding systems or non-cladding relevant defects created during construction or refurbishment of the building and for interim measures (such as waking watch) where their building owner was - or was associated with - the developer.
11. If your current building owner is a new building owner with no links to the developer, but the building owner on 14 February 2022 was linked to the developer, your new building owner will take on the liabilities of the previous landlord. This means that your new building owner will be responsible for remediating the defect and they cannot pass on any costs to you via your service charge. Your landlord must set this out in the landlord certificate.
12. It is not always the case that the building owner that is classed as responsible for the defects must ultimately pay to fix them. Your building owner may be able to pursue the contractor or other professional that is directly responsible for carrying out the defective work or providing a defective product. However, they must not pass this cost on to you, and this should not delay work from commencing or work underway from continuing.
Contribution condition
13. If you are a qualifying leaseholder and your landlord is not associated with the developer, but they or their associated landlord group has a net worth of more than £2 million per relevant building, they have an obligation to pay for all costs associated with the remediation of non-cladding relevant defects and associated interim measures.
14. This means that your building owner has an obligation to pay for all historical safety remediation costs when all of the below criteria are met:
a. the defect is a relevant defect
b. the building is a relevant building
c. you are a qualifying leaseholder, and
d. they (or the associated landlord group) have a net worth of at least £2 million per relevant building
15. The landlord group is the landlord under the lease on 14 February 2022 and any person(s) associated with the relevant landlord. In this context, associated means a person whose interest was held on trust or was beneficiary to a trust or any person who was a partner in a partnership at any time between 28 June 2017 and 29 June 2022.
16. The contribution condition does not apply to the following landlords if, on 14 February 2022, they were any of the following:
a. a superior landlord within the building - that is a landlord who owns the interest in the property which gives them the right of possession at the end of the landlord’s lease
b. a private registered provider of social housing
c. a local authority, or
d. a prescribed person in accordance with Regulation 8 of the Building Safety (Leaseholder Protections) (England) Regulations 2022 - that is, government departments and their associated arm’s-length bodies, the Crown and NHS Foundation trusts.
17. In summary, if you hold a qualifying lease and your landlord’s group has a net worth of more than £2 million per relevant building owned, you cannot be charged for the cost of fixing historical safety defects, unless they are listed at paragraph 16.
Low value lease
18. You are protected in law from paying any amount to remediate a historical building safety defect if both of the following criteria are met:
a. you are a qualifying leaseholder, and
b. the value of your lease on 14 February 2022 was
i. less than £325,000, if the property is in Greater London or
ii. less than £175,000, if the property is elsewhere in England
19. The value of the lease will be calculated using the formula set out in Schedule 2 of the Building Safety (Leaseholder Protections) (England) Regulations 2022. This is based on the price at which your property was last sold on the open market before 14 February 2022, updated in accordance with the national House Price Index, produced by the Office for National Statistics. For more information on this formula, see Leaseholder contribution caps. For help with applying the formula, visit Check building safety costs.
Cladding-system remediation costs
20. If you have a qualifying lease and live in a relevant building with an unsafe cladding system, this means your building owner will be responsible for covering all costs of the cladding remediation. You will not be charged for the cost of fixing or replacing any unsafe cladding systems. This also applies to those with non-qualifying leases in buildings still owned by, or associated with, the original developer.
21. Your building owner may wish to pursue the developer, contractor, or other professional who they consider to be directly responsible for carrying out the defective work. They may also be eligible for government funding.
Legal costs
22. If your building owner intends to pursue legal action to recover any remediation costs, you cannot be charged for any of the legal or professional services undertaken by your building owner. This includes legal costs related to settling disputes related to the remediation.
Reserve Funds
23. Any money already collected by the landlord before the qualifying date (14 February 2022) and still available, for example in a reserve fund, can be used for remediation and interim measures, but ought not to be spent unless the work is urgent (such as waking watch to prevent a building being emptied). This does not prevent leaseholders from seeking a Remediation Contribution Order to recover such funds from the building owner.
How will this affect you, the leaseholder?
Qualifying Leaseholders
24. Costs that cannot be passed on:
- Any historical safety remediation costs where the developer who built or refurbished the building is - or is associated with - the building owner
- Any historical safety remediation costs where the landlord has a net worth of more than £2 million per relevant building
- Any historical safety remediation costs where the property is valued at below £325,000 in Greater London or £175,000 elsewhere in England
- Unsafe cladding remediation costs
- Cost of legal or associated professional services relating to liability for relevant defects
25. Costs that may be able to be passed on up to a capped amount:
- Waking watch costs
- Remediation of non-cladding defects, for example:
- replacement of a fire door that has prematurely degraded and is no longer safe
- installation of missing fire compartmentation
- inadequate structural fire protections presenting an unacceptable risk of early collapse in fire scenarios
- inadequate structural design presenting an unacceptable risk of collapse (for example balcony design which presents an unacceptable risk of vertical fire spread)
- professional services in relation to relevant works (for example surveys to determine relevant works)
26. We have amended the Building Safety Act 2022 to ensure that the statutory protections for leaseholders continue where qualifying leases are extended, varied or replaced by an entirely new lease. This means that the statutory protections limiting or preventing remediation costs from being passed onto qualifying leaseholders will continue to apply as if the new lease were a qualifying lease.
27. The amendment is retrospective, so that it applies to leases extended, varied or replaced since 14 February 2022. This means that those leaseholders who have, for example, extended their leases or are in the middle of the process, are covered by the protections.
28. This amendment came into effect on 26 December, 2 months after Royal Assent of the Levelling Up and Regeneration Act 2023.
29. The relevant provision can be found in section 243 of the Levelling Up and Regeneration Act 2023.
Non-qualifying leaseholders
30. Non-qualifying leaseholders are only protected from the costs of historical safety remediation if your building owner is - or is associated with - the developer who is responsible for that defect. Where this is not the case, you will be liable for remediation costs as per the terms of your lease - but the costs passed on to you cannot be increased to replace money that qualifying leaseholders are protected from paying.
31. Costs that cannot be passed on:
Any historical safety remediation costs where the developer who built or refurbished the building is - or is associated with - the building owner.
Last updated 16 November 2023 + show all updates
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Guidance updated to announce changes to the Building Safety Act 2022 on lease extensions/variations.
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Updated to provide guidance on lease extensions/variations.
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Updated to provide guidance on lease extensions.
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First published.