Leaseholder contribution caps
This guidance provides an overview of what the contribution caps for qualifying leaseholders’ non-cladding remediation are and how these will work in practice.
Applies to England
Summary
1. The Building Safety Act 2022 changes the law so that leaseholders are only required to contribute towards remediation costs in limited circumstances.
2. In the tightly controlled circumstances where building owners (the definition of ‘building owner’ can be found in What are my building owner’s legal obligations?) can legally pass on a share of the non-cladding remediation costs to qualifying leaseholders, these contributions must be firmly capped and spread over 10 years.
3. The amount that can be passed on to non-qualifying leaseholders will be determined by the terms of the lease agreement and cannot be more than this amount.
4. 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.
5. This guidance provides an overview of what the contribution caps for qualifying leaseholders’ non-cladding remediation are and how these will work in practice.
What does the legislation mean?
6. The contribution caps set out in the Act place a limit on the amount which can be legally charged to qualifying leaseholders to remediate non-cladding related defects in your building.
7. The contribution caps protections will apply to you if your lease qualifies.
8. The caps depend on the location and uprated value of your leasehold property (see below for an explanation of how to work this out). Any costs charged to you must be spread over a 10 year period and the maximum you can be charged in one year will be no greater than one-tenth (10%) of the cap.
9. Table 1.0 (below) sets out the caps which can be legally charged for non-cladding remediation costs for qualifying leaseholders, according to their property value and location of the property. It is illegal for building owners to attempt to pass costs on to you, as a qualifying leaseholder, above these caps.
Table 1.0 - Caps which can be legally charged for non-cladding remediation costs for qualifying leaseholders
| Maximum amount which can be charged for non-cladding remediation to qualifying leaseholders over 10 years | ||
|---|---|---|
| Property Value | Greater London* | Rest of England |
| Less than £175,000 | £0 | £0 |
| £175,000 - £324,999 | £0 | £10,000 |
| £325,000 - £1 million | £15,000 | £10,000 |
| More than £1 million but less than £2 million | £50,000 | £50,000 |
| More than £2 million | £100,000 | £100,000 |
10. The higher caps in Greater London reflect the proportionately higher property values and building work costs in the region.
11. If you are a shared owner, your cap is reduced in proportion to your equity in the property. For example, if you own 50% of a property in Greater London, the maximum you can be charged would be 50% of the contribution cap (that is, £7,500, spread over a 10-year period).
12. Any amount paid since 28 June 2017 towards remediation of building safety defects or interim measures will count towards the capped amount you can be charged. Any measures which have been taken to mitigate a building safety risk are included within this definition of ‘interim measures’. This includes, but is not limited to, waking watches which have been put in place to patrol the building until historical building safety issues are resolved.
13. Costs paid since 28 June 2017 towards these measures must be deducted from the total capped amount you can be charged.
14. For example: If your lease is worth £200,000 and located outside London, and you have already contributed £10,000 or more towards remediation since 28 June 2017, you will not be liable to contribute anything further. (Please note that no compensation is available if you have paid an amount greater than your contribution cap).
15. Any additional costs required to complete remediation works must come from your building owner. The Act, and its associated regulations, set out a process through which costs are to be split between building owners. This means that, if you are a qualifying leaseholder, you will not be required to contribute anything above the contribution cap, even if further funding is required to complete remediation work.
16. Where the property was not your main home on 14 February 2022 because you had to move or sublet, your property will still be covered if you owned 3 or fewer UK properties in total on 14 February 2022 including the leasehold property.
17. The protections and caps are tied to the lease so will automatically transfer to any future buyers of the leasehold property. This means that all new owners of a leasehold property that was eligible for the protections on 14 February 2022 will be covered.
How to determine the value of your lease
18. To understand which contribution cap will apply to you, you can use the Leaseholder Protections Checker. Alternatively, you can work out the value of your lease manually. To ensure fairness, the value of your lease must be worked out using the method outlined below.
19. These multipliers are based on HM Land Registry data. This is what informs the House Price Index which is a historical dataset that observes average house price movements.
20. House price data from HM Land Registry for the categories ‘all properties’ and ‘flats and maisonettes’ was downloaded. Values were converted from monthly to yearly averages, and the percentage change year on year for both sets of data was calculated. Data on flats and maisonettes was only available from 1995 onwards, which we used for the yearly change percentage from 1995 onwards. Before this, from 1970 to 1995, we used the percentage change in the ‘all properties’ data for the yearly values. The average price for 2021 was then divided by the average values for each year, generating the multiplier.
21. This is not meant to be a market valuation, nor a forecast of a sale price. This is because, for the caps to work, there must be a simple formula, based on objective criteria, that can be easily established and cannot be challenged. Purchase price is an objective fact, and the multiplier is a way of extrapolating that forward. In some cases, near-identical flats in the same building will have different notional lease values, because of the way the market has moved at different times and the unique factors involved in agreeing a price for any individual property sale.
22. If you purchased your lease on or before 31 December 2020, you must use the following formula to determine your lease value:
[Purchase Price] x [Multiplier] = Lease Value
Where:
- ‘Purchase Price’ is the price paid at the point of sale of the lease on the open market, to the nearest pound
- ‘Multiplier’ is the multiplier for the year in which the sale took place as set out in table 2.0 (below)
Table 2.0 – Multiplier for the year
| Year | Multiplier | |
|---|---|---|
| 1970 | 72.14 | |
| 1971 | 64.15 | |
| 1972 | 47.16 | |
| 1973 | 34.53 | |
| 1974 | 32.22 | |
| 1975 | 30.58 | |
| 1976 | 28.29 | |
| 1977 | 26.38 | |
| 1978 | 22.65 | |
| 1979 | 17.45 | |
| 1980 | 14.39 | |
| 1981 | 13.61 | |
| 1982 | 13.34 | |
| 1983 | 11.95 | |
| 1984 | 10.86 | |
| 1985 | 9.97 | |
| 1986 | 8.70 | |
| 1987 | 7.38 | |
| 1988 | 5.71 | |
| 1989 | 4.80 | |
| 1990 | 4.89 | |
| 1991 | 5.00 | |
| 1992 | 5.25 | |
| 1993 | 5.36 | |
| 1994 | 5.22 | |
| 1995 | 5.21 | |
| 1996 | 5.11 | |
| 1997 | 4.63 | |
| 1998 | 4.17 | |
| 1999 | 3.72 | |
| 2000 | 3.10 | |
| 2001 | 2.72 | |
| 2002 | 2.25 | |
| 2003 | 1.92 | |
| 2004 | 1.69 | |
| 2005 | 1.61 | |
| 2006 | 1.51 | |
| 2007 | 1.37 | |
| 2008 | 1.43 | |
| 2009 | 1.59 | |
| 2010 | 1.51 | |
| 2011 | 1.52 | |
| 2012 | 1.49 | |
| 2013 | 1.43 | |
| 2014 | 1.28 | |
| 2015 | 1.19 | |
| 2016 | 1.10 | |
| 2017 | 1.04 | |
| 2018 | 1.04 | |
| 2019 | 1.05 | |
| 2020 | 1.04 |
23. If you purchased your lease after 31 December 2020 and before 14 February 2022, the price paid at the point of sale on the open market (to the nearest pound) is the value of your lease. If you purchased your lease on the open market before 1970, you should use the multiplier 72.14.
24. If you purchased your lease on or after 14 February 2022, you will need to do the calculations according to the lease that was in place and circumstances of the leaseholder at the start of 14 February 2022. If you did not purchase your property on the open market or the value is unknown, then your building owner will be able to calculate its nominal value based on a substitute lease of a similar size in your building.
How will this affect you, the leaseholder?
25. If you are a qualifying leaseholder, the amount you can be charged will be subject to the contribution caps outlined in the previous sections.
Examples
Example 1 - Greater London:
- You own a leasehold for property in a building over 11 metres in Greater London, and as of 14 February it was your main home.
- The value of your lease is £400,000.
- The building requires essential non-cladding remediation works to make it safe.
- To date you have paid £5,000 in the last 5 years towards interim measures such as waking watches.
- The building owner is not responsible or associated with the person responsible for creating the defect which requires remediation.
- The landlord does not meet the contribution condition as they do not have a net worth greater than £2 million per building they own.
- As the property is in Greater London and its value is calculated as being below £1 million but greater than £325,000 the cap on contributions is £15,000. Due to £5,000 already being paid towards interim measures, the maximum you can now be charged is £10,000 (£15,000 over 10 years, minus £5,000).
Example 2 - Outside London:
- You own a leasehold for property in a building over 11 metres in Birmingham, and as of 14 February it was your main home.
- The value of your lease is £300,000.
- The building requires essential non-cladding remediation works to make it safe.
- To date you have paid £3,000 in the last 5 years towards interim measures such as waking watches.
- The building owner is not responsible or associated with the person responsible for creating the defect which requires remediation.
- The landlord does not meet the contribution condition as they do not have a net worth greater than £2 million per relevant building they own.
- As the property is outside Greater London and has a value below £1 million but greater than £175,000 the cap on contributions is £10,000. Due to £3,000 already being paid towards interim measures, the maximum you can now be charged is £7,000 (£10,000 over 10 years, minus £3,000).
Example 3 - Outside London:
- You own a leasehold for property in a building over 11 metres in Manchester, as of February 14 it was your main home.
- The value of your lease is £150,000.
- The building requires essential non-cladding remediation works to make it safe.
- To date you have paid £0 towards interim measures.
- The building owner is not responsible or associated with the person responsible for creating the defect which requires remediation.
- The landlord does not meet the contribution condition as they do not have a net worth greater than £2 million per relevant building they own.
- As the property is outside greater London and has a value below £175,000, the cap on contributions is £0. The maximum you can be charged is £0.