Closed consultation

Alternative cost recovery for remediation works: consultation on proposals to make regulations and statutory guidance under the Landlord and Tenant Act 1985

Published 2 February 2023

Applies to England

Scope of the consultation

Topic of this consultation:

This consultation seeks views on statutory guidance and policy proposals for legislation that would create a duty for landlords to take reasonable steps to ensure that all alternative avenues of cost recovery have been explored before passing remediation costs on to leaseholders.

This consultation seeks views on proposals for:

• the buildings and defects to which the new duty should apply
• the detailed steps that landlords should follow before passing on remediation costs to leaseholders
• the information that landlords must pass onto leaseholders to demonstrate they have complied with this duty

Scope of this consultation:

Building safety service charges.

Geographical scope:

These proposals relate to England only.

Impact assessment:

There is an impact assessment (PDF, 430KB) which provides qualitative and quantitative analytical updates for some of the areas being consulted on through this consultation.

Basic information

Body responsible for the consultation:

Department for Levelling Up, Housing and Communities (DLUHC).

Duration:

This consultation will last for 8 weeks – from 2 February to 31 March 2023.

Enquiries:

For any enquiries about the consultation please contact: AlternativeCostRecovery.Remediation@levellingup.gov.uk

How to respond:

You may respond by completing the online survey

or

You can email your response to the questions in this consultation to AlternativeCostRecovery.Remediation@levellingup.gov.uk

or

You can send written responses to:

Consultation on Alternative Cost Recovery for Remediation
c/o Reform, Legislation and Regulators Division
Department for Levelling Up, Housing and Communities
3rd Floor, Fry Building
2 Marsham Street
London
SW1P 4DF

If you are responding in writing (via email or post), please make it clear which questions you are responding to.

When you reply, it would be very useful if you confirm whether you are replying as an individual or submitting an official response on behalf of an organisation and include:

• your name
• your position (if applicable)
• the name of organisation (if applicable)
• an address (including postcode)
• an email address
• a contact telephone number

Consultation overview

1. The Building Safety Act 2022 changes the law to make buildings safer, deliver improvements across the entire built environment, and strengthen oversight and protections for residents in high-rise buildings.

2. One of the key changes delivered by the Building Safety Act is the creation of a suite of statutory leaseholder protections, which ensure that those who built defective buildings take responsibility for remediating them, that industry contributes to fixing the problem, and that qualifying leaseholders are protected in law from the financial burden of remediating historical building safety defects.

3. Section 133 of the Building Safety Act creates the last stage in this suite of protections. It amends the Landlord and Tenant Act 1985 to insert a new duty on landlords. Where landlords are able to pass on certain remediation costs to leaseholders, they must take reasonable steps to ensure that all alternative avenues of cost recovery have been explored before doing so.

4. This consultation seeks your views on:

• the scope of these duties (the types of buildings and remediation costs that the duty should apply to)
• the proposed content of the guidance explaining the reasonable steps that landlords should follow before passing on remediation costs to leaseholders
• the information that landlords must pass onto leaseholders to demonstrate they have complied with this duty

5. There is an impact assessment (PDF, 430KB) which provides qualitative and quantitative analytical assessments for the areas being consulted on through this consultation.

Background

The Building Safety Act 2022 and leaseholder protections

6. The government has been clear that those who built unsafe buildings or profited from the cladding scandal must take full responsibility for their actions and pay to put things right.

7. The Building Safety Act 2022 received Royal Assent on 28 April 2022 – this is when it became an Act of Parliament (law). The main leaseholder protections came into force on 28 June 2022. This means that leaseholders are now protected in law from crippling bills for historical safety defects.

8. The leaseholder protections mean that, where a building owner or landlord of a relevant building is, or is connected to, the developer responsible for a relevant defect, they cannot legally pass on the costs associated with remediating the safety defect to any of their leaseholders. See the guidance on the definition of “relevant building” and the guidance on the definition of “relevant defect”.

9. Where they are not connected to the developer, a landlord still cannot pass on any costs associated with the remediation of historical safety defects where a leaseholder has a qualifying lease (see the guidance on the definition of “qualifying lease”) and at least one of the following applies:

• the costs are associated with the remediation of unsafe cladding systems
• the building owner meets the contribution condition (they have a net wealth of more than £2 million per relevant building, with the exception of local authorities and registered social landlords such as housing associations and arm’s length management organisations)
• the value of the lease on 14 February 2022 was less than £325,000 in Greater London or £175,000 elsewhere in England

10. If the above conditions (outlined in paragraph 9) are not met, then the building owner can pass on a proportion of remediation costs to their leaseholders (for more on information, see the guidance on what leaseholders do and do not have to pay). For qualifying leaseholders in relevant buildings, the amount that can be passed onto them is firmly capped at £10,000, or £15,000 in Greater London, and is spread evenly across ten years. The cap for qualifying leaseholders whose flats are valued at more than £1 million is £50,000 and if the flat is valued at more than £2 million, the cap is £100,000. The amount that can be shared with qualifying leaseholders depends on the value of the qualifying lease and is subject to contribution caps set out in law. For more information, see the guidance on the leaseholder contribution caps).

11. The leaseholder protections and the Alternative Cost Recovery for Remediation Works Duty described below apply only to buildings in England.

Alternative cost recovery for remediation works

12. Where a landlord is able to pass on a proportion of remediation costs to their leaseholders (both qualifying and non-qualifying), section 133 of the Building Safety Act 2022 amends the Landlord and Tenant Act 1985, to place a new duty on landlords to:

• take reasonable steps to ensure that all alternative cost recovery avenues have been explored before asking leaseholders to contribute to defined remediation works

• reflect any money recouped through these cost recovery avenues via a reduction in the remediation costs passed on via the service charge

• provide adequate evidence to leaseholders that they have taken these steps

13. In this context, “landlord” includes any person who has a right to enforce payment of a service charge (as per section 30 of the Landlord and Tenant Act 1985).

14. This new duty is intended to ensure that landlords explore other cost recovery avenues rather than charging leaseholders by default, protecting leaseholders from avoidable payments to remediate defects in their homes.

15. If the leaseholder feels that the landlord has failed to comply with their duty to take reasonable steps to recover costs from alternative avenues, they can make an application to the prescribed court or tribunal, to challenge the recoverability of these costs - in practice, this will be the First-tier Tribunal (Property Chamber).

16. Landlords are not required to have pursued any alternative avenues of cost recovery, or to have done anything in relation to pursuing these avenues, before carrying out remediation works. The expectation is that landlords will commence remediation works even if the monies are not guaranteed from alternative cost recovery avenues.

17. The legal expenses of pursuing these cost recovery avenues cannot be passed on to qualifying leaseholders (as per paragraph 9, schedule 8 of the Building Safety Act 2022). For this purpose, “legal expenses” means any costs relating to the liability (or potential liability) incurred (or to be incurred) as a result of a relevant defect. This includes obtaining legal advice, any proceedings before a court or tribunal, arbitration and mediation. Such legal expenses may be passed on to non-qualifying leaseholders, as per the terms of their individual lease.

Scope of the consultation

18. The amended Landlord and Tenant Act 1985 gives the Secretary of State the powers to:

• specify in regulations the buildings and defects to which this new duty should apply
• issue statutory guidance providing detail about the reasonable steps that landlords should follow before passing on remediation costs to leaseholders
• make regulations about the information that the landlord must give leaseholders to demonstrate they have complied with the duty

19. This consultation seeks your views on proposals on:

• the buildings (in England) and defects to which the new duty should apply
• the detailed steps that landlords should follow before passing on remediation costs to leaseholders
• the information that landlords must pass onto leaseholders to demonstrate they have complied with this duty

Part 1 – Buildings in scope of the duty

20. The Secretary of State has delegated powers under the amended Landlord and Tenant Act 1985 to define the buildings in England that are in scope of the new duty for landlords to take reasonable steps to explore alternative cost recovery avenues before seeking leaseholder contributions. This means that landlords would only be required by law to pursue these alternative cost recovery avenues where the building meets the criteria set out in the regulations.

21. We propose that, for a building to be in scope (covered by the new duty), it must meet all the following criteria:

• it is a self-contained building, or self-contained part of a building, that contains at least 2 dwellings
• it is at least 11 metres in height or has at least 5 storeys
• it is not a leaseholder-owned building
• it is not a leaseholder-managed building
• it is not on commonhold land

22. This definition largely aligns with that of a “relevant building” for the purpose of the leaseholder protections (see section 117 of the Building Safety Act 2022 and the guidance on the definition of “relevant building”).

23. Leaseholder-owned buildings are not included in this definition because, in these buildings, the leaseholders are also the freeholder and there is no separate party with which the remediation costs can be shared. These buildings are excluded from the leaseholder protection provisions, and we propose to exclude them from this provision for the same reason – that these proposals would not provide any additional protection to the leaseholders in such buildings.

24. In contrast with the leaseholder protections, we we propose that leaseholder-managed blocks should be also excluded from the scope of the new duty on landlords to explore other cost-recovery avenues, and associated information provision requirements. We are proposing this exclusion because the provisions inserted by section 133 do not allow the landlord (which includes any person who has a right to enforce payment of a service charge, such as a resident-led management company) to pass on the costs of pursuing alternative cost recovery avenues to leaseholders. In a leaseholder-managed block, the leaseholders are effectively the ‘landlord’ for the purposes of the new duty, because the leaseholder-owned management company has the right to enforce payment of the service charge. If they were prevented from passing legal costs on to qualifying leaseholders, they would be unable to pay to pursue alternative cost recovery avenues.

25. A degree of consistency with the wider leaseholder protections will avoid operational complexity and should therefore make the new duties clearer to landlords and leaseholders. This is expected to reduce the likelihood of misinterpretation amongst landlords and so would increase levels of compliance. This consistency would also reduce the likelihood of misinterpretation amongst leaseholders, meaning they would better understand their landlord’s responsibilities and feel confident whether to challenge charges at the prescribed court or tribunal - in practice, this will be the First-tier Tribunal (Property Chamber).

26. The application of this new duty is proposed to be limited to buildings that are at least 11 metres or 5 storeys. The government expects landlords of all buildings to make appropriate use of alternative cost recovery avenues before seeking to pass on costs. However, since there is no evidence to suggest a systemic level of building safety risks requiring remediation in buildings below 11 metres or 5 storeys, we consider that the proportionate approach is to only mandate this new duty to buildings of at least 11 metres or 5 storeys in height.

27. We are aware of a small number of low-rise buildings where remediation is being proposed. We are asking residents to contact the Department at under11mbuildings@levellingup.gov.uk about these cases so they can be considered on a case-by-case basis.

Question 1: Do you agree or disagree with the types of building to which we propose to apply this duty?

We propose that, for a landlord to be required to take reasonable steps to pursue other costs recovery avenues, the building must meet all of the following criteria:

• it is a self-contained building, or self-contained part of a building, that contains at least 2 dwellings
• it is at least 11 metres in height or has at least 5 storeys (whichever is reached first)
• it is not a leaseholder-owned building
• it is not a leaseholder-managed building
• it is not on commonhold land

These proposals are the same as those in place for the wider statutory leasehold protections, with the addition of excluding leaseholder-managed buildings (as explained in paragraph 24, above).

Please select one of the answers below.

• Agree
• Disagree
• Not sure
• Something else

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Question 1a: If you answered ‘Disagree’ or ‘Something else’ for question 1, please provide an explanation for your answer.

Please provide your views.

Part 1 – Defects and works in scope of the duty

28. The Secretary of State has powers under the amended Landlord and Tenant Act 1985 to define the types of building defect and remediation work that are covered by this new duty. This means that landlords would only be required to pursue the alternative cost recovery avenues where the defect that needs remediating, and the works that need to be done to remediate the defect, meet the criteria set out in regulations.

29. We are proposing that, for a defect to be covered by this duty, it must meet all of the following criteria:

• it puts people’s safety at risk from the spread of fire, or from structural collapse
• it has arisen from work done to a building, including the use of inappropriate or defective products, during its construction, or any later works (such as refurbishment or remediation)
• it has been created in the 30 years prior to the leaseholder protections coming into force (meaning the defect had to be created from 28 June 1992 to 27 June 2022)
• it relates to at least one of the following types of works:
  • the initial construction of the building
  • the conversion of a non-residential building into a residential building
  • any other works undertaken or commissioned by or on behalf of the building owner, or management company

30. Work done before or after 28 June 2022 to remediate a relevant defect that was itself created during one of the above pieces of work is also covered by the above definition. For example, if you had a defective fire door dating from 2007 and replaced in 2023 with one that was also unsafe, replacing it again would be covered.

31. The broad scope of this definition would ensure that landlords are required to take reasonable steps to recover costs for a wide range of building safety defects, supporting the government’s aim to protect leaseholders from remediation costs. Routine work arising from wear and tear (for example, replacing a compliant but worn-out fire door) would not be covered by either the leaseholder protections or the new duty set out here.

32. The protections are proposed only to apply retrospectively (meaning the protections deal with historical defects, and not future ones). This is because tighter rules have been brought in for new products and properties.

33. This definition aligns with that of a “relevant defect” for the purpose of the leaseholder protections (see section 120 of the Building Safety Act 2022 and the guidance on the definition of “relevant defect”). Consistency with the wider leaseholder protections will avoid operational complexity and should therefore make the new duties clearer to landlords and leaseholders. This is expected to reduce misinterpretation amongst landlords and so would increase compliance with the duties. This consistency would also reduce misinterpretation amongst leaseholders, meaning they would better understand their landlord’s duties and feel confident to challenge charges where appropriate.

Question 2: Do you agree or disagree with the types of defect that this duty should apply to?

We propose that a defect in scope of the new duty must meet all of the following criteria:

• it puts people’s safety at risk from the spread of fire, or structural collapse
• it has arisen from work done to a building, including the use of inappropriate or defective products, during its construction, or any later works (such as refurbishment or remediation)
• it relates to at least one of the following types of works:
  • the initial construction of the building
  • the conversion of a non-residential building into a residential building
  • any other works undertaken or commissioned by, or on behalf of the building owner or management company

The proposed defects and works in scope of this duty are the same as those in scope of the wider statutory leasehold protections.

Please select one of the answers below.

• Agree
• Disagree
• Not sure
• Something else

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Question 2a: If you answered ‘Disagree’ or ‘Something else’ for question 2, please provide an explanation for your answer.

Please provide your views.

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Question 3: Do you agree or disagree that this new duty should only apply retrospectively?

In addition to the criteria outlined in question 2, we propose that this duty should apply to defects created from 28 June 1992 to 27 June 2022 (that is, the 30 years before the leaseholder protections came into force).

This means the duty would only apply retrospectively (meaning the protections deal with historical defects, and not future ones), in alignment with the wider statutory leaseholder protections.

Please select one of the answers below.

• Agree
• Disagree
• Not sure
• Something else

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Question 3a: If you answered ‘Disagree’ or ‘Something else’ for question 3, please provide an explanation for your answer.

Please provide your views.

Part 2 – Overview of the reasonable steps statutory guidance

34. New section 20D of the Landlord and Tenant Act 1985 places a new duty on landlords to take reasonable steps to ensure that they have explored all alternative cost recovery avenues and ascertain whether they can recover funds from these avenues (for example: insurance, indemnities, warranties and government funding).

35. The Secretary of State has delegated powers under the amended Landlord and Tenant Act 1985 to issue statutory guidance about the reasonable steps that a landlord should take.

36. This statutory guidance will help landlords to clarify their responsibilities.

37. The statutory guidance can also be used by leaseholders as a point of reference to clarify their landlord’s duties, and to provide evidence should they wish to make an application to the prescribed court or tribunal, in instances where they feel their landlord has failed to comply with their obligations - in practice, this will be the First-tier Tribunal (Property Chamber).

38. If costs are challenged by leaseholders, the prescribed court or tribunal may take the statutory guidance into account when determining whether a landlord has complied with, or breached, their section 20D duties - in practice, this will be the First-tier Tribunal (Property Chamber). A landlord would need to demonstrate compelling reason for having failed to comply with the guidance, or they may be found to be in breach of the new duty.

Part 2 – Cost recovery via insurance

39. Landlords must take reasonable steps to recover remediation costs from applicable insurances and indemnities.

40. The chapter on cost recovery via insurance can be found on pages 6-7 of the draft statutory guidance (PDF, 327KB).

41. Below is an overview of the proposed steps landlords should take:

• If, in the conduct of their statutory duties, landlords have discovered an issue or defect in common or demised part of building, they should notify their insurance company in accordance with the terms of the insurance policy.

• The landlord should follow any reasonable instructions from the insurance company whilst taking the instructions of the fire service, local authority and any other relevant body into account. They should provide information to the insurance company as required and ensure that they have complied with all duties under the policy.

• If the outcome of the claim is not in the landlord’s favour, then where possible, they should follow the appeals process set by the insurance provider – this includes arbitration or mediation where available. In addition, if the landlord has not received a satisfactory resolution, may raise a complaint with the New Homes Ombudsman or the Financial Ombudsman Service and seek legal advice as to whether a claim should be challenged through the courts.

Question 4: Do you think that the proposed steps in the guidance, which we have outlined in the summary (paragraph 41), are reasonable?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 4a: If you answered ‘No’ or ‘Not sure’ for question 4, please provide an explanation for your answer.

Please provide your views.

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Question 5: Do you think that the proposed steps in the guidance, which we have outlined in the summary (paragraph 41) adequately protect leaseholders?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 5a: If you answered ‘No’ or ‘Not sure’ for question 5, please provide an explanation for your answer.

Please provide your views.

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Question 6: Are there any practical risks or issues that you think would result from landlords being expected to follow the proposed steps in the guidance, which we have outlined in the summary (paragraph 41)?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 6a: If you answered ‘Yes’ for question 6, please provide an explanation for your answer.

Please provide your views.

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Question 7: Please provide any comments you have on the full draft guidance on recovering costs via insurances and indemnities. The chapter on cost recovery via insurance can be found on pages 6-7 of the draft statutory guidance (PDF, 327KB).

Please provide your views.

Part 2 – Cost recovery via warranties

42. Landlords must take reasonable steps to recover remediation costs through warranties.

43. The chapter on cost recovery via warranties can be found on pages 7-8 of the draft statutory guidance (PDF, 327KB).

44. Below is an overview of the proposed steps landlords should take:

• Where appropriate, the landlord should make a home warranty claim immediately after the identification of the defect, so that the claim is submitted within the warranty period. If the issue has been identified during the builder liability period under the new home warranty, the landlord should notify the builder. If the builder does not then rectify the issue, the landlord may be able to seek assistance from the new home warranty provider. If this is not completed within the time frame stipulated by the warranty, the warranty may have a clause not to pay out owing to delay in identification and reporting of defect.

• Depending on the warranty provider’s requirements, the landlord may need to collate an evidenced body of information to support their claim. The defect may also need to be assessed by a relevant competent professional to understand the scope of the problem and suggest a proportionate path to remediation.

• Once the nature of the issue or defect has been assessed, the landlord should ascertain whether they are able to raise a claim under the terms and conditions of the warranty or warranties that their leaseholders possess or that they jointly possess with their leaseholders, and to what extent the warranty or warranties can cover the defect.

• If the defect in question affects common parts of the building and the warranty is within the limitation period, the landlord should make a claim to the warranty provider.

• If the warranty does not provide cover to the ‘owner’ (in this case, the leaseholder) for the demised or particular part of the building, the landlord should make a claim to the warranty provider for defects within the demised or particular part, where appropriate.

• The landlord should also note that, if they are not within a contractual defects’ liability period under a new build warranty, they may be able to raise a claim via individual manufacturer warranties.

• The landlord should follow any reasonable instructions from the warranty company whilst taking the instructions of the fire service, local authority and any other relevant body into account.

• The landlord should provide information to the warranty company as required and ensure that they have complied with all requirements under the warranty policy.

• If neither the builder, nor the developer, nor the warranty provider take action, or if the outcome of the claim is not in the landlord’s favour, then where possible, they should follow the appeals process set by the warranty provider – this includes arbitration or mediation where available. In addition, if the landlord has not received a satisfactory resolution, they may raise a complaint to the New Homes Ombudsman scheme or the Financial Ombudsman Service and seek legal advice as to whether a claim should be challenged through the courts.

Question 8: Do you think that the proposed steps in the guidance, which we have outlined in the summary (paragraph 44), are reasonable?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 8a: If you answered ‘No’ or ‘Not sure’ for question 8, please provide an explanation for your answer.

Please provide your views.

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Question 9: Do you think that the proposed steps in the guidance, which we have outlined in the summary (paragraph 44) adequately protect leaseholders?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 9a: If you answered ‘No’ or ‘Not sure’ for question 9, please provide an explanation for your answer.

Please provide your views.

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Question 10: Are there any practical risks or issues that you think would result from landlords being expected to follow the proposed steps in the guidance, which we have outlined in the summary (paragraph 44)?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 10a: If you answered ‘Yes’ for question 10, please provide an explanation for your answer.

Please provide your views.

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Question 11: Please provide any comments you have on the full draft guidance on recovering costs via warranties. The chapter on cost recovery via warranties can be found on pages 7-8 of the draft statutory guidance (PDF, 327KB).

Please provide your views.

Part 2 – Cost recovery via third-parties

45. Landlords must take reasonable steps to recover remediation costs from third parties.

46. The chapter on cost recovery via third-parties can be found on pages 9-11 of the draft statutory guidance (PDF, 327KB).

47. Below is an overview of the proposed steps landlords should take:

• Landlords should first seek independent legal advice regarding the likelihood of successfully recovering costs or partial costs of remediation works from a third party or third parties (such as developers, contractors, suppliers and product manufacturers). This should be carefully considered to determine whether it is feasible to recover costs.

• Landlords should consider pursuing a pre-action protocol with a view to reaching a settlement.

• Once the landlord has instructed legal advisors, the lawyers will be able to advise on whether there may be a feasible claim. The lawyers will also be able to advise on the material which should be collected, the identification of witnesses of fact, and the identification and instruction of any expert witnesses. The landlord should aim to carry out this process and collect information in a thorough and timely manner.

Settlement discussions

• Where appropriate, the landlord should attempt to enter negotiations before pursuing formal litigation. For example, if there is enough time to pursue a pre-action protocol before litigation, the landlord should do so.

• Legal advice may be that a claim is likely to be successful or that where there are lower prospects of success, there may still be room for negotiation.

• Pre-action protocols explain the conduct and set out the steps the court would normally expect parties to take before commencing litigation. The court will expect the parties to have exchanged sufficient information to:

  • understand each other’s position
  • try to settle the issues without proceedings
  • make decisions about how to proceed
  • consider a form of alternative dispute resolution to assist with settlement
  • support the efficient management of those proceedings
  • reduce the costs of resolving the dispute

• The parties involved may be able to come to an agreement during the settlement discussions.

• If the parties involved do not agree to an out of court settlement, litigation may be the next step. If litigation is being pursued, the court will expect both parties to have complied with a relevant pre-action protocol and will consider any non-compliance when giving directions for the management of proceedings.

Factors for landlords to consider

• The landlord should obtain independent legal advice to determine the likelihood of their bringing a successful claim, the costs of pursuing such a claim, and the risks involved. With this knowledge, the landlord should consider whether they wish to pursue a claim or not.

• The landlord may wish to consider the following factors before deciding to pursue a cause of action:

  • Likelihood of success: the pursuit of remediation through litigation includes an inherent degree of risk. This risk should be assessed by legal advisors and carefully considered by the landlord before proceeding.
  • Timing: the landlord should consider the length of time to pursue the process of litigation versus the pace of remediation and ongoing costs to leaseholders.
  • Cost: if the cost of pursuing litigation is likely to be disproportionate to the sum required to remediate the building’s defects, it would be unreasonable to expect the landlord to pursue such an avenue and would place further potential burden on the landlord if the claim is unsuccessful.

• A landlord may decide not to pursue litigation if they have received strong legal advice against it (for example, if their legal team has confirmed that they would be unable to litigate due to onerous anticipated costs).

Question 12: Do you think that the proposed steps in the guidance, which we have outlined in the summary (paragraph 47), are reasonable?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 12a: If you answered ‘No’ or ‘Not sure’ for question 12, please provide an explanation for your answer.

Please provide your views.

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Question 13: Do you think that the steps in the guidance which we have outlined in the summary (paragraph 47) adequately protect leaseholders?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 13a: If you answered ‘No’ or ‘Not sure’ for question 13, please provide an explanation for your answer.

Please provide your views.

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Question 14: Are there any practical risks or issues that you think would result from landlords being expected to follow the proposed steps in the guidance, which we have outlined in the summary (paragraph 47)?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 14a: If you answered ‘Yes’ for question 14, please provide an explanation for your answer.

Please provide your views.

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Question 15: Please provide any comments you have on the full draft guidance chapter on recovering costs via third parties. The chapter on cost recovery via third-parties can be found on pages 9-11 of the draft statutory guidance (PDF, 327KB).

Please provide your views.

Part 2 – Cost recovery via government funding or grants

48. Landlords must take reasonable steps to recover remediation costs through government funding or grants.

49. The chapter on cost recovery via government funding or grants can be found on page 11 of the draft statutory guidance (PDF, 327KB).

50. Below is an overview of the proposed steps landlords should take:

• If the landlord has not achieved full cost recovery through insurance, warranty or litigation, they should determine whether they would be eligible to receive funding through an appropriate government scheme.
• The landlord should determine whether there is any funding available to them through an appropriate government scheme, such as the Building Safety Fund, the Social and Private Sector ACM Cladding Remediation Funds, other future government funds including the new scheme for buildings between 11-18 metres in height (details will be published in 2023), and any available local authority schemes.
• Where an appropriate government scheme exists, the landlord should pursue it as a cost recovery avenue.
• When deciding whether to apply for a government scheme, the landlord should familiarise themselves with any application guidance related to the fund to ensure eligibility and avoid causing unnecessary delays to the process. It should be noted that government grant schemes may require the landlord to demonstrate that all reasonable steps have been taken to recover costs from other parties during the application process, and so the landlord should take this into account.
• The landlord should apply for funding where a building may be eligible and comply with any requirements set out by the department in a timely manner.
• As any government funding or grant is subject to legal due diligence and departmental assessment, the landlord should ensure that any information provided is accurate so that it does not impede the process and cause any unnecessary delays.

Question 16: Do you think that the proposed steps in the guidance, which we have outlined in the summary (paragraph 50), are reasonable?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 16a: If you answered ‘No’ or ‘Not sure’ for question 16, please provide an explanation for your answer.

Please provide your views.

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Question 17: Do you think that the proposed steps in the guidance, which we have outlined in the summary (paragraph 50) adequately protect leaseholders?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 17a: If you answered ‘No’ or ‘Not sure’ for question 17, please provide an explanation for your answer.

Please provide your views.

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Question 18: Are there any practical risks or issues that you think would result from landlords being expected to follow the proposed steps in the guidance, which we have outlined in the summary (paragraph 50)?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 18a: If you answered ‘Yes’ for question 18, please provide an explanation for your answer.

Please provide your views.

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Question 19: Please provide any comments you have on the full draft guidance chapter on recovering costs via government funds or grants. The chapter on cost recovery via government funding or grants can be found on page 11 of the draft statutory guidance (PDF, 327KB).

Please provide your views.

Part 3 – Overview of the information sharing duties

51. The Secretary of State has delegated powers under the amended Landlord and Tenant Act 1985 to specify in regulations the minimum information that landlords will need to provide to demonstrate that they have taken reasonable steps to explore alternative routes of cost recovery before they are able to pass remediation costs onto leaseholders.

52. We intend to use these powers to specify what information landlords will have to provide. This will be an absolute duty and must be adhered to before the landlord is able to pass costs on.

53. This information is intended to demonstrate to leaseholders that their landlord has carried out the duty to explore all alternative cost recovery avenues before passing on remediation costs. This will ensure leaseholders are provided with accurate, up to date information, helping them to make informed choices and to challenge costs when they feel their landlord has not fulfilled their duties.

Part 3 – The information that landlords will have to provide

54. We propose that landlords must provide the information outlined below in order to demonstrate that they have explored all alternative cost recovery avenues:

Information about the defect

• date of practical completion of the construction of the building
• date of installation or creation of the defect (if different)
• building control body which gave approval for the installation of the defect

Insurance information related to the installation of the defect

• whether there is an insurance policy of any nature which may cover the defect – if so, for each insurance policy, they must specify:
  • name of insurer
  • length of cover
  • list of any exclusions of cover related to the defect
  • whether the policy covers the relevant period
  • whether the policy may cover the defect
• whether the above information cannot be provided, why, and what efforts have been made to obtain this information

Warranty information related to the installation of the defect

• whether there is a warranty of any nature which may cover the defect – if so, for each warranty, they must specify:
  • name of warranty provider
  • length of warranty cover
  • list of any warranty exclusions related to the defect
• whether the above information cannot be provided, why, and what efforts have been made to obtain this information

Information about the companies involved in the installation of the defect

• names of the companies responsible for the installation the defect – this should include:
  • the installer of the defect
  • the principal contractor for the installation of the defect (if different)
  • the developer (if the defect was installed as part of initial construction of the building)
  • the freeholder at the time the defect was installed (if the defect was installed after initial construction)
• registered company numbers for the companies
• whether the companies are still solvent
• whether the companies are still trading
• contact details for the Head Office of each company
• if available, details of any contracts or agreements between the installer of the defect and the developer at the time the defect was installed
• whether the above information cannot be provided, why, and what efforts have been made to obtain this information

Information about government grants or funding

• whether there is a government fund of any nature which may cover the defect – if so, for each government grant or fund, they must specify:

  • name of the fund
  • whether eligibility has been confirmed

• whether the above information cannot be provided, why, and what efforts have been made to obtain this information

Information about the cost recovery steps taken

• details about the steps taken to recover the cost of remediating the defect from those responsible – this may include (but is not limited to):

  • action taken to pursue insurance claims, details of the relevant company/companies and the stage(s) or outcome reached
  • action taken to pursue warranty claims, details of the relevant company/companies and the stage(s) or outcome reached
  • action taken to pursue third parties, details of the relevant company/companies and the stage(s) or outcome reached
  • action taken to pursue government funding and details of the stage(s) or outcome reached
• whether they have sought legal advice on the chances of bringing a successful claim for recovery of the costs of remediation, and if not, why not
• if it has been assessed that there is no reasonable chance of cost recovery success, and on what basis this decision has been made
• the monies recovered through any relevant claim or claims, and the resulting reduction in service charge for each leaseholder

55. Applicants to the Building Safety Fund are required to demonstrate that they have taken all reasonable steps to recover the costs of addressing the life safety fire risks caused by the cladding from those responsible. During the application process, applicants are asked for information regarding such steps, before drawing on government funding. The information that we are proposing landlords must provide to comply with this new duty (outlined in paragraph 54) closely aligns with the information requested by the Building Safety Fund. Aligning the proposed information provision requirements with the Building Safety Fund will ensure consistency and proportionality in the demands placed on landlords. In theory, if a landlord has already applied for the Building Safety Fund, they will have the much of the information outlined above readily available.

56. Furthermore, the proposed information should provide leaseholders with the information they need to determine whether their landlord has complied with their duty to take reasonable steps to recover remediation costs.

Question 20: Do you agree or disagree with these proposals?

Under our proposals, landlords will be required to demonstrate that they have taken reasonable steps to recover costs.

We propose that landlords must provide the information specified in paragraph 54 in order to demonstrate that they have complied with this duty.

Please select one of the answers below.

• Agree
• Disagree
• Not sure
• Something else

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Question 20a: If you answered ‘Disagree’ or ‘Something else’ for question 20, please provide an explanation for your answer.

Please provide your views.

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Question 21: Do you expect that a landlord would be unable to disclose any of the information outlined in paragraph 54 due to legal privilege or commercial confidentiality?

Please select one of the answers below.

• Yes
• No
• Not sure
• Something else

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Question 21a: If you answered ‘Yes’ or ‘something else’ for question 21, please provide an explanation for your answer.

Please provide your views.

Part 3 – When landlords should provide the information

57. Leaseholders should be kept informed promptly and as thoroughly as reasonably possible. We therefore intend to use the statutory guidance to establish the expectation about when the information outlined in paragraph 54 is to be provided.

58. We are proposing that the expectation will be that landlords provide an update about the progress of their cost recovery pursuits a minimum of once per year. Landlords would need to be able to demonstrate a compelling reason for failing to meet the timelines set out in the guidance (for example, in some cases, an annual update might not align with the terms of the lease).

59. The landlord then has a legal duty to provide leaseholders with a final summary outlining the information in paragraph 54, included with the service charge demand for contributions to remediation costs.

60. Landlords would be expected to provide summaries on a defect-by-defect basis - this means that the prescribed information must be provided with respect to each defect that is in scope of the duty. In practice, this could be done in a single document.

Question 22: Do you agree or disagree that leaseholders should receive both the regular update and the final summary?:

• the regular update would provide an update on the progress of the landlord’s claim, at least annually
• the final summary would be included alongside the service charge demand for the contribution to remediation works

Please select one of the answers below.

• Agree
• Disagree
• Not sure
• Something else

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Question 22a: If you answered ‘Disagree’ or ‘Something else’ for question 22, please provide an explanation for your answer.

Please provide your views.

Part 3 – Implementing the information sharing duties

61. We are also grateful for views on implementing these changes.

Question 23: If you would be involved in implementing the proposed information provision duties, do you agree or disagree that it would be simple for you to implement these changes?

Please select one of the answers below.

• Agree
• Disagree
• Not sure
• Something else
• I am not involved

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Question 23a: If you answered ‘Disagree’ or ‘Something else’ for question 23, please provide an explanation for your answer.

Please provide your views.

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Question 24: Please provide any comments you have on the draft guidance chapter on the information sharing duties. The chapter on information sharing duties can be found on page 12 of the draft statutory guidance (PDF, 327KB).

Please provide your views.

Part 4 – General feedback on the reasonable steps statutory guidance

Question 25: Do you have any other feedback on the proposed statutory guidance?

We are grateful for any other feedback on the full draft statutory guidance (PDF, 327KB).

Please provide your views.

Part 5 – The impact of these proposals

62. We have modelled the range of costs that landlords may incur in complying with these new duties, as proposed in this consultation. These have been published in an impact assessment (PDF, 430KB).

63. We are also seeking views on the potential impacts our proposals may have on groups of people with protected characteristics. Protected characteristics include age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation.

Question 26: Do you agree or disagree with the approximate costs of complying with the statutory guidance, as found in the impact assessment?

Please select one of the answers below.

• Agree
• Disagree
• Not sure
• Something else

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Question 26a: If you answered ‘Disagree’ or ‘Something else’ for question 26, please provide an explanation for your answer.

Please provide your views.

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Question 27: What do you consider to be the impact on individuals with protected characteristics of any of the proposed details to be included in the regulations? Please give reasons and any evidence that you consider relevant.

Please give reasons and any evidence that you consider relevant in the text box below.

Please see Annex B: Personal data for more information on the use of sensitive types of data, and please take this into account when formulating your response.

Please do not share special category personal data or criminal offence data if we have not asked for this unless absolutely necessary for the purposes of your consultation response.

Part 6 – Demographics

64. See Annex B: Personal data for more information on how your data will be used and for more information on the use of sensitive types of data. Please take this into account when formulating your response.

If the views that you have expressed on this consultation are your own personal views, please answer questions 31-34a. If the views that you have expressed on this consultation are an official response from an organisation you represent, please answer questions 35-37a.

Question 28: What is your name?

Please write your first name and last name.

If you would prefer not to say, please specify this.

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Question 29: What is your email address?

Please write your email address in the text bow below.

If you do not have an email address, please write ‘N/A’. If you would prefer not to say, please specify this.

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Question 30: Are the views that you have expressed on this consultation your personal views, or an official response from an organisation you represent?

Please select the option which applies to you.

• Personal
• Organisation
• Prefer not to say

Demographic questions for individuals

Please answer questions 31-34a if the views that you have expressed on this consultation are your own personal views.

See Annex B: Personal data for more information on how your data will be used, and for more information on the use of sensitive types of data. Please take this into account when formulating your response.

Question 31: Which of the below statements apply to you?

Please select all of the below options which apply to you.

• I am a leaseholder
• I am a freeholder
• I live in a leaseholder-owned block
• I live in a leaseholder-managed block
• I am a commonhold unit holder
• Other
• Not sure

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Question 31a: If you answered ‘Other’ for question 31, please specify.

Please write your answer in the text box below.

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Question 32: Do you know who manages your building?

Please select one of the answers below.

• Yes
• No
• Prefer not to say

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Question 32a: If you answered ‘Yes’ to question 32, who manages the building?

Please select one of the answers below.

• Commonhold Association with no Managing Agent
• Commonhold Association with an appointed Managing Agent
• Freeholder or Landlord with no Managing Agent
• Freeholder or Landlord with an appointed Managing Agent
• Residents Management Company with no Managing Agent
• Residents Management Company with an appointed Managing Agent
• Resident owned freehold with no Managing Agent
• Resident owned freehold with an appointed Managing Agent
• Right to Manage Company with no Managing Agent
• Right to Manage Company with an appointed Managing Agent
• Not sure
• Other
• Prefer not to say

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Question 32b: If you answered ‘Other’ to question 32A, please specify.

Please write your answer in the text box below.

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Question 33: Is your building over 11 metres or 5 storeys?

Please select one of the answers below.

• Yes
• No
• Not sure

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Question 34: Where is your primary home located?

Please select one of the answers below.

Please note that the duty on landlords to explore other routes of cost recovery apply only to buildings in England.

• Northeast
• Northwest
• Yorkshire and the Humber
• East Midlands
• West Midlands
• East of England
• London
• Southeast
• Southwest
• Outside of England
• Prefer not to say

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Question 34a: If you answered ‘Outside of England’ for question 34, please specify. Please write your answer in the text box below.

Demographic questions for organisations

Please answer questions 35-37a if the views that you have expressed on this consultation are an official response from an organisation you represent.

See Annex B: Personal data for more information on how your data will be used, and for more information on the use of sensitive types of data. Please take this into account when formulating your response.

Question 35: What is your organisation?

Please select one of the answers below.

• Charity
• Commonhold association
• Developer
• Government body
• Housing association
• Insurance services
• Investor
• Legal services
• Local authority
• Managing agent
• Professional body
• Representation group
• Residents’ Management Company
• Residents’ association or tenants’ association
• Retirement sector developer
• Right to Manage Company
• Survey or valuation services
• Trade association
• Warranty provider
• Other
• Prefer not to say

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Question 35a: If you answered ‘Other’ for question 35, please specify. Please write your answer in the text box below.

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Question 36: What is the name of your organisation?

Please write the name of your organisation in the text box below. If you would prefer not to say, please specify this.

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Question 37: Where does your organisation operate?

Please select all of the answers below that apply. Please note that the duty on landlords to explore other routes of cost recovery apply only buildings in England.

• Northeast
• Northwest
• Yorkshire and the Humber
• East Midlands
• West Midlands
• East of England
• London
• Southeast
• Southwest
• Outside of England
• Prefer not to say

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Question 37a: If you answered ‘Outside of England’ for question 37, please specify. Please write your answer in the text box below.

Next steps

65. Thank you to all participants for taking the time to respond to our consultation.

66. The consultation will close on 31 March 2023. We will be considering these comments when determining how best to take forward the proposed policy.

Annex A: About this consultation

This consultation document and consultation process have been planned to adhere to the Consultation Principles issued by the Cabinet Office.

Representative groups are asked to give a summary of the people and organisations they represent, and where relevant who else they have consulted in reaching their conclusions when they respond.

Information provided in response to this consultation may be published or disclosed in accordance with the access to information regimes (these are primarily the Freedom of Information Act 2000 (FOIA), the Environmental Information Regulations 2004 and UK data protection legislation). In certain circumstances this may therefore include personal data when required by law.

If you want the information that you provide to be treated as confidential, please be aware that, as a public authority, the Department is bound by the information access regimes and may therefore be obliged to disclose all or some of the information you provide. In view of this it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on the Department.

The Department for Levelling Up, Housing and Communities will at all times process your personal data in accordance with UK data protection legislation and in the majority of circumstances this will mean that your personal data will not be disclosed to third parties. A full privacy notice is included below.

Individual responses will not be acknowledged unless specifically requested.

Your opinions are valuable to us. Thank you for taking the time to read this document and respond.

Are you satisfied that this consultation has followed the Consultation Principles? If not or you have any other observations about how we can improve the process please contact us via the complaints procedure.

Annex B: Personal data

The following is to explain your rights and give you the information you are entitled to under UK data protection legislation.

Note that this section only refers to personal data (your name, contact details and any other information that relates to you or another identified or identifiable individual personally) not the content otherwise of your response to the consultation.

1. The identity of the data controller and contact details of our Data Protection Officer

The Department for Levelling Up, Housing and Communities (DLUHC) is the data controller. The Data Protection Officer can be contacted at dataprotection@levellingup.gov.uk or by writing to the following address:

Data Protection Officer
Department for Levelling Up, Housing and Communities
Fry Building
2 Marsham Street
London
SW1P 4DF

2. Why we are collecting your personal data

Your personal data is being collected as an essential part of the consultation process, so that we can contact you regarding your response and for statistical purposes. We may also use it to contact you about related matters.

We will collect your IP address if you complete a consultation online. We may use this to ensure that each person only completes a survey once. We will not use this data for any other purpose.

Sensitive types of personal data

Please do not share special category personal data or criminal offence data if we have not asked for this unless absolutely necessary for the purposes of your consultation response. By ‘special category personal data’, we mean information about a living individual’s:

• race
• ethnic origin
• political opinions
• religious or philosophical beliefs
• trade union membership
• genetics
• biometrics
• health (including disability-related information)
• sex life
• sexual orientation

By ‘criminal offence data’, we mean information relating to a living individual’s criminal convictions or offences or related security measures.

Please consider this when drafting your responses, in particular where there is a free text box or an opportunity to write out your response.

3. Our legal basis for processing your personal data

The collection of your personal data is lawful under article 6(1)(e) of the UK General Data Protection Regulation as it is necessary for the performance by DLUHC of a task in the public interest or in the exercise of official authority vested in the data controller. Section 8(d) of the Data Protection Act 2018 states that this will include processing of personal data that is necessary for the exercise of a function of the Crown, a Minister of the Crown or a government department (in this case a consultation).

Where necessary for the purposes of this consultation, our lawful basis for the processing of any special category personal data or ‘criminal offence’ data (terms explained under ‘Sensitive Types of Data’) which you submit in response to this consultation is as follows. The relevant lawful basis for the processing of special category personal data is Article 9(2)(g) UK GDPR (‘substantial public interest’), and Schedule 1 paragraph 6 of the Data Protection Act 2018 (‘statutory etc and government purposes’). The relevant lawful basis in relation to personal data relating to criminal convictions and offences data is likewise provided by Schedule 1 paragraph 6 of the Data Protection Act 2018.

4. With whom we will be sharing your personal data

DLUHC may appoint a ‘data processor’, acting on behalf of the Department and under our instruction, to help analyse the responses to this consultation. Where we do, we will ensure that the processing of your personal data remains in strict accordance with the requirements of the data protection legislation.

5. For how long we will keep your personal data, or criteria used to determine the retention period

Your personal data will be held for 2 years from the closure of the consultation, unless we identify that its continued retention is unnecessary before that point.

6. Your rights (for example, access, rectification, restriction, objection)

The data we are collecting is your personal data, and you have considerable say over what happens to it. You have the right:

1. to see what data we have about you
2. to ask us to stop using your data, but keep it on record
3. to ask to have your data corrected if it is incorrect or incomplete
4. to object to our use of your personal data in certain circumstances
5. to lodge a complaint with the independent Information Commissioner (ICO) if you think we are not handling your data fairly or in accordance with the law. You can contact the ICO at https://ico.org.uk/, or telephone 0303 123 1113.

Please contact us at the following address if you wish to exercise the rights listed above, except the right to lodge a complaint with the ICO: dataprotection@levellingup.gov.uk, or:

Knowledge and Information Access Team
Department for Levelling Up, Housing and Communities
Fry Building
2 Marsham Street
London
SW1P 4DF

7. Your personal data will not be sent overseas

8. Your personal data will not be used for any automated decision making

9. Your personal data will be stored in a secure government IT system

We use a third-party system, Citizen Space, to collect consultation responses. In the first instance your personal data will be stored on their secure UK-based server. Your personal data will be transferred to our secure government IT system as soon as possible, and it will be stored there for 2 years before it is deleted.