Beware of Buying a Flat: Are you eligible for financial protection in relation to historical safety remediation costs?

Buying a leasehold flat has changed, and there are now new and important fire safety considerations to consider.

 

Much of these changes stem from the response to the tragic fire at Grenfell in 2017, and the publication of the Hackitt Building a Safer Future Report.   There are now also in place financial protection measures to address service charge demands in relation to cladding and other building safety remedial works.  These were introduced in June 2022 by the Building Safety Act. 

 

You may like the location and the flat may be your dream home, however do not let your heart rule your head. To do so could be costly and leave you very much out of pocket.   

 

It is important to consider:

 

• Is it a safe place to live
• How much might you be asked to contribute to make the flat a safe place to live
• When it comes to move on how easy will be to sell on
• What fire or other building safety work needs to be carried out
• Will any future works affect your enjoyment of the flat especially if you plan to work from home 
• Is there any statutory protection against financial demands in relation to planned remedial works

 

Not all flats are affected, however you may be part of a chain of linked transactions with someone in the chain who is affected. This could cause delay and added cost. 

 

Your solicitor will check if the property you are purchasing is affected by these new changes.  The focus is on taller buildings, but the reality is that any building may be affected.

 

If it discovered that work is required to make the property safe than you will need to make sure your solicitor raises the following enquiries:

 

• Is there an effective fire watch system to alert residents in case of fire?
• Who pays for this system? 
• How much does it cost?
• Who will pay for the works needed to make the building safe, which may include removing and replacing the external cladding? 
• How much will those works cost?
• When will those works be done and the costs be paid?
• Is there any statutory protection against the demand for a contribution towards the cost of such works?
• Has any work already taken place? If so, how much has the owner already paid? 
• How much disruption will be involved? 
• Who will be responsible for any costs associated with the disruption? You may need to vacate the flat while the work is undertaken.  This could be for a long time, so you need to know who will be paying for the alternative accommodation.  

 

You need to make sure your solicitor raises these questions with landlord or the managing agents of the building and ensure the enquiries are fully answered.   

 

You may also wish to engage a fire engineer ( if you can get hold of one) or at the very least a surveyor with expertise in this area.  Speak also to other flat owners about their experience. 

 

Keep in mind solicitors are not able to advise on the physical structure of buildings or related matters generally. They also cannot advise in relation to fire safety issues.

 

Your solicitor should also ask for the following documents to be produced:

 

Fire Risk Assessment: The responsible owner ( This is usually the owner of the freehold ) must have a suitable risk assessment carried out to identify the general fire precautions they need to take to comply with the requirements.

 

EWS1 form:  EWS1 stands for 'external wall system' and relates to the walls made up of insulation, cladding and other materials. It provides a rating of the building’s external wall system for fire safety. It must be renewed every five years. Some ratings are suitable for certain mortgage lenders while some are not. It is important to note that the existence of a EWS1 form does not mean nor should it mean that you cannot ignore the risks outlined above. You could still be faced with very high costs, now or later, and you may still find it difficult to sell your property in the future, particularly to anyone who needs a mortgage.

 

Leasehold Deed of Certificate and Landlord Certificate: These relate to the recovery from a leaseholder of the cost of historical  non cladding remedial works.    You will need to know if there are any such works and if so to ask for these to be produced so that you solicitor can advise on your eligibility for financial protection.  

 

If remedial works are or become necessary it cannot be assumed that the costs of any necessary works will be covered by the freeholder’s insurance policy.  Whether the flat that you’re buying is a new build property or not, you should read the freeholder’s insurance policy carefully and seek expert advice on the cover from a specialist broker. 

 

Certain new build warranty providers, such as the NHBC (National House Building Council), may contribute to some of the remediation costs, but this may not cover the full costs of necessary works. 

 

Under the Fire Safety Act 2021 makes it clear that flat owners are primarily responsible for the costs of making buildings safe where they pay a service charge.  

 

The Building Safety Act 2022 however offers some flat owners financial protection against the cost of historical building safety remedial work . The law in this area is complex and legal advice on eligibility should always be sought. 

 

Qualification for protection depends on fulfilling certain criteria based on the following definitions:

 

Is the flat situated within a relevant building? A ‘Relevant Building’ is a block at least 11 meters high or has at least 5 storeys ( from ground level) and comprises of more than two dwellings and is not owned by the leaseholders

 

Is the lease of the flat a ‘Qualifying Lease’?   A Qualifying Lease is a lease granted for more than 21 years and before 14 February 2022, and was it on that date the flat owners only or main home.   Those owning more than three properties cannot hold a Qualifying Lease. 

 

The remedial work costs must relate to a ‘Relevant Defect’.  This is defined in the legislation and covers most property safety related defects ( going back 30 years ) including fire risk related defects. 

 

If you have a qualifying lease and live in a relevant building with an unsafe cladding system, 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.

 

In relation to other non cladding property safety risks the following financial protection is offered:

 

You will not be required to meet the cost of a relevant defect on a relevant building if as of the 14 February 2022 the building owner was the developer or associated with the developer. 

 

What if there is no association with the developer?

 

If you are a qualifying leaseholder, there is a relevant defect, the building is a relevant building, then even if there is no association with the developer, the building owner is still required to foot the bill for all the cost of non-cladding remedial works if they or their associated landlord group has a net worth of more than £2 million per relevant building

 

Furthermore, if you are a qualifying leaseholder and the value of your lease was on 4 February 2022 less than £325K in greater London or £175K elsewhere you are protected in law from paying any amount to remediate a historical building safety defect.   To claim this protection, you must provide your landlord with a Leasehold Deed of Certificate.  

 

If where there is a qualifying lease, and non-cladding remedial costs are sought, and there is no association between the building owner and the developer, and neither of the two exceptions set out above apply, the cost passed on is subject to caps and the flat owner must be allowed to pay over a 10-year period.  The caps depend on the location and uprated value of your leasehold property. In calculating the cap any payments already made towards the works will be deducted from the capped sum. 

 

To demonstrate whether you are a qualifying leaseholder for the purpose of the protections set out above, and to enable your building owner to calculate your cap for historical non cladding remedial works  you must supply your landlord with a Leasehold Deed of Certificate. 

 

You should also request a Landlords Certificate especially if you are in the process of selling.   The Landlord Certificate will set out details of any relevant defects and any remediation works since 28/6/2017. It will also set out the cost of all works , as well as costs to be incurred and how the cost of that work is to be apportioned between the flat owners.  It will also set out the maximum remaining liability for each flat owner.   The Building Owner is required to provide evidence to back up its claims if they believe themselves to be exempt from the full costs of remediation of historical safety defects. Failure to disclose information or dishonestly making a false claim may be a criminal offence under the Fraud Act 2006, and their director, manager or secretary may also be held criminally liable.

 

If you require advice or help on any aspect of the above, please do feel free to contact me at davidp@mjpconveyancing.com 

 

Law is correct as of 1 February 2023 

 

Whilst every effort has been taken to ensure that the law in this article is correct, it is intended to give a general overview of the law for educational purposes. You are respectfully reminded that it is not intended to be a substitute for specific legal advice and should not be relied upon as legal advice. No liability is accepted for any error or omission contained herein.