Building Safety (Leaseholder Protections etc.) (England) (Amendment) Regulations 2023

Thursday 20th July 2023 Lords Chamber

Motion to Approve

13:25

Moved by

[Baroness Scott of Bybrook]

That the draft Regulations laid before the House on 12 June be approved.

Relevant documents: 45th Report from the Secondary Legislation Scrutiny Committee and 44th Report from the Joint Committee on Statutory Instruments (special attention drawn to the instrument)

[The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)]

My Lords, in moving the draft regulations, I will also set out why the Government oppose the amendment tabled by the noble Earl, Lord Lytton.

The regulations amend the leaseholder protection regulations 2022 to address points raised by the Joint Committee on Statutory Instruments last July, as well as two stayed judicial review applications, and clarify some provisions to ensure the leaseholder protections have the effect originally intended. While many noble Lords will be aware of the background to the leaseholder protections, I will start by providing some context and background to these regulations. Before the Government introduced the leaseholder protections, many leaseholders found themselves liable for unlimited costs for remediating historical safety defects in their buildings—costs that they could not afford for problems that were not their fault. Since the provisions came into force last summer, many leaseholders have either been protected from these costs entirely or had their liability firmly capped.

During the debates on the affirmative regulations last July, the Government committed to bring forward further changes should it become apparent that they were necessary. Contrary to what the noble Earl, Lord Lytton, purports, these regulations do just that: delivering additional detail needed to address a number of operational points that had come to light in the early operation of the leaseholder protections. The regulations also address points raised in two stayed judicial review applications and points raised in the Joint Committee on Statutory Instrument’s report of July 2022, and make further changes to clarify and simplify the provisions in the 2022 regulations.

Since the protections came into force last summer, we have engaged extensively with leaseholders, landlords and others affected, including lenders and conveyancers. The Government do not consider that a formal consultation would add to our understanding of the issues specifically covered by these regulations, and I note that there is no requirement under the Building Safety Act 2022 to consult formally on these regulations. We have also engaged in two rounds of pre-laying scrutiny with the Joint Committee. In its 44th report of the 2022-23 Session, it reported the regulations for one case of defective drafting in relation to a lack of consequence for the failure to notify the landlord associated with the developer of their liability.

The Government are grateful to the Joint Committee for its careful scrutiny of these regulations and have considered this issue carefully. As set out in the department’s memorandum, published by the committee, the Government are satisfied that there are no issues with the regulations that will prevent the process operating successfully. We believe it is imperative that the regulations come into force before the Summer Recess to alleviate the issues facing named managers and landlords. However, we will, of course, monitor closely the progress of future cases, and if it becomes apparent that further changes are necessary we will come back to Parliament with proposals.

13:30

The House will be aware that the Secondary Legislation Scrutiny Committee has stated that the Explanatory Memorandum should provide further information about the judicial review applications. I am grateful to the committee for its recommendations, which the Government have carefully considered. I can confirm that we have replaced the Explanatory Memorandum to include the information provided to the committee and set out in the appendix to its report.

These regulations can be considered in three parts. First, the regulations address points raised in the ninth report of the Joint Committee on Statutory Instruments of July 2022. The regulations we are considering make it clear it that L—the body responsible for managing the building, be that the landlord, resident management company, right-to-manage company or named manager—must issue a notice to the landlord with the liability to pay to recover the remediation amount and set out the information to be included in the notice, which is the amount to be recovered and information on the appeals process.

The regulations clarify the powers of the First-tier Tribunal in determining the outcome of an appeal. If the appeal is unsuccessful, the appellant will have to pay the amount set out in the notice. If the appeal is successful, the appellant will have to pay nothing, or an alternative amount determined by the First-tier Tribunal.

The regulations remove Regulation 6(1) from SI 2022/859, which purports to allow a leaseholder to provide a leaseholder deed of certificate to their landlord. The Joint Committee considered this to be ultra vires, but nothing prevents a leaseholder doing so voluntarily. The regulations clarify that failure to provide a completed leaseholder deed of certificate and the required evidence will result in the lease being treated as if it were not a qualifying lease, and provide that “shared ownership lease” has the same meaning as that used in Schedule 8 to the Act.

Secondly, the regulations address points raised in two stayed judicial review claims. The regulations make provision for “named managers” to recover the cost of relevant measures in relation to relevant defects from building owners and landlords in the same way as resident-led management companies. The regulations also provide for L to be able to recover notified amounts as a civil debt, and for them to be able to pursue a remediation contribution order to recover costs, such as from a building owner or a developer. The regulations provide that landlords associated with the developer must be notified of their liability to pay for relevant measures or relevant defects, but nothing in the regulations stops L instead pursuing, for example, a landlord who met the contribution condition.

Thirdly, the regulations deliver additional detail to clarify the intended effect of the leaseholder protections. The regulations also provide for Homes England—the department’s delivery partner for remediation work outside London—to apply to the First-tier Tribunal for a remediation order or remediation contribution order. The regulations provide that a landlord may apply for an extension to the appeal process of 30 days with the permission of the First-tier Tribunal, to enable out-of-court engagement. The regulations also provide for an additional point where the landlord must update the landlord certificate: within four weeks of becoming aware that a leaseholder deed of certificate has been submitted.

Finally, the Schedule to these regulations replaces and simplifies the existing landlord certificate, and amendments are made to the information regulations so that the current landlord does not need to provide certain evidence where they accept liability for a relevant defect. This reduces the information-sharing requirement to that essential for the leaseholder and L to determine liability. The regulations also provide that current landlords must provide L with copies of the landlord and leaseholder certificates within a week of completion or receipt, to enable them to apportion costs in line with the 2022 regulations. Where the current landlord fails to comply, the regulations provide that costs cannot be passed on to leaseholders.

The regulations are a key step to improve the implementation of the leaseholder protections set out in the Building Safety Act and regulations. They serve a specific purpose to provide the detail needed to give full effect to the leaseholder protection provisions, and they address concerns raised last summer by the Joint Committee on Statutory Instruments and points raised in the two stayed judicial review applications.

As my honourable friend the Minister of State, Rachel Maclean MP, noted in the debate in the other place on Monday 17 July, there is more to do on leaseholder protections, some of which will require primary legislation, and the Government will come back to the House with further proposals in due course. On the basis of the information I have set out for your Lordships, I hope noble Lords will join me in opposing the regret amendment to the Motion and supporting the draft regulations, which I commend to the House.

Amendment to the Motion

Moved by

[The Earl of Lytton]

At end to insert “but this House regrets that they have been laid without provisions to remedy operational defects in the Building Safety (Leaseholder Protections) (England) Regulations 2022 (SI 2022/711) and the Building Safety (Leaseholder Protections) (Information etc) (England) Regulations 2022 (SI 2022/859); and further regrets that His Majesty’s Government have not adequately consulted relevant practitioners prior to the laying of these Regulations.”

[The Earl of Lytton (CB)]

My Lords, before I proceed, I thank the Minister for reaching out. We did not succeed in getting a meeting together, but I hope that the bullet points I submitted to her office yesterday were of some help.

As the Minister explained, these regulations amend two previous sets of regulations, SI 2022/711 and SI 2022/859. It is true that these new regulations streamline some of the aspects in those regulations. My point is that they fail to deal with the fundamentals of those earlier regulations, which, given where we are now and what is known about their operation, should have been a proper matter for consideration in the application of regulatory power. They represent a theoretical approach at best and, from all that I have heard from practitioners, do not accord with the real world of buying and selling leasehold flats nor the technical or practical issues associated with conveyancing in particular.

It leaves one wondering where to start with all this. There are too many unknown issues: the extent of remediation; the responsibility that would arise under the Building Safety Act for defects; the true legal liability for those defects having arisen; the cost of remediation; and the potential for “known unknowns”, to quote Donald Rumsfeld, or indeed currently unknowable remediation requirements and their likely cost.

Professionals tell me that they do not believe that the comments made by the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments have been properly addressed. Why is that? There are too many variables, exclusions and qualifications in the process of leaseholder certificates of registration, the content and accuracy of requests to the landlord, the landlord certificates themselves, and the extent to which the landlord is, in turn, reliant on information from others not within its control. There is an essentially continuous iterative process of company worth evaluation and liability assessments. The time lag where land registration is an essential part of the information package, which I understand might occur, is governed by the fact that the Land Registry has a backlog it is working through of several months’ duration.

There seems to be a disparity between the information prevailing on 14 February 2022, which is the mandatory date when matters have to be assessed—certainly as regards matters of company ownership and so on—and the relevant facts relating to the financial consequences of remediation, which will arise only as a result of the regulations tabled initially last summer and not at some point in February at the whim of the Secretary of State. I am told that the timescales are too tight in many instances, leading to a high risk of default liabilities and perhaps setting in place a liability for something not caused by the person deemed liable. I feel that that is unlikely to procure a beneficial result. The strict application of four weeks—or seven days, as the case may be—is severely inflexible and, I believe, an impediment.

All of the above will lead to uncertainty, risks and pitfalls, including, as I mentioned, default liability for remediation or for contribution in full, in part or not at all. The latest clarification on whether a leaseholder’s certificate of registration is required in an application for a landlord’s certificate is that a failure to provide it means that they fall into the non-qualified category; as I understand it, once something is non-qualified, it is non-qualified for ever. I fail to see how that is the advantage that the Minister appears to claim for it. I would be grateful if she could provide better detail about how leaseholders are supposed to check the accuracy of the information provided in that landlord’s certificate. Do the Government intend to use their powers under Part 11 of the Bill, which is entitled “Information about Interests and Dealings in Land”, to ensure that those certificates are in fact accurate? If not, I do not see how it is possible to verify this.

As for the certificates themselves, paragraph 15.c. of the department’s own guidance says that a landlord’s certificate must be provided

“within 4 weeks of them becoming aware of a relevant defect which was not covered by a previous landlord’s certificate”.

How much of a rolling event might that be? The things that affect that certificate were not crystallised on 14 February 2022 but are on an ongoing continuum. I see that as a real question of a practical nature. It means that a fresh certificate can be issued as and when new relevant facts emerge, which is intrinsically inimical to the concept of a reliable landlord’s certificate even if it could be deemed accurate at the time of its issue. It simply opens the door to more arguments about who knew what and when and whether the information provided could have objectively been deemed accurate, with all the consequences that flow from that in terms of recovery, accuracy and liability for cost, not to mention potential arguments through litigation.

Going on from that, the reason why 14 February is so important is because paragraph 17.b. says that the landlord’s certificate must

“be based on the circumstances of whoever was the relevant landlord on 14 February 2022”.

The circumstances of that person may be one thing but the practical and factual basis of what may be germane to that is, as I say, something that happens in real time—today, not 18 months ago. I assume from this that the legal situation is therefore taken at one date but the circumstances that may be germane to making that calculation in fact accrue at another date; I will leave that to one side for the moment. The facts may create a completely moveable feast in terms of whether you take one subsequent piece of information and then feed it back in. How is this loop ever going to be broken?

Does the Minister dispute this assessment? It seems that there is a disparity between the valuation date in question and the facts that are germane to that. It is essential that the financial information about landlords, particularly landlord groups, is provided in the landlord certificate and is accurate. Any inaccuracy could make the difference between a leaseholder paying nothing or up to the £15,000 cap. Concerns have been raised with me that landlords are, for understandable reasons, using the accounting definition of “a group” when it comes to assessing their net worth, rather than the definition of “associated” in the Building Safety Act.

13:45

I will give the House a couple of examples where there is, I believe, some ambiguity about which companies should be included in a landlord group. Section 121(8) of the Act states that:

“A body corporate (X) controls another body corporate (Y) if X has the power, directly or indirectly, to secure that the affairs of Y are conducted in accordance with X’s wishes”.

Rothesay Life plc, an insurer, has provided significant loans to a number of ground rent funds. In return, the landlord company borrowers are believed to have agreed that the ground rent should be paid into the bank accounts controlled by Rothesay rather than to them, assigning the rights to insurance policy then to Rothesay. The company then requires consent from Rothesay in turn before undertaking legal action against any leaseholders in breach of leases. There are also restrictions on further borrowing asset disposals and voting rights. Can the Minister clarify whether these extensive powers over the operation of landlord companies constitute control for the purposes of the Building Safety Act? I am bound to say that practitioners are not at all clear?

Another example is Jetty Finance DAC, one of the Long Harbour fund group of companies. Its shares are held on trust by Sanne Fiduciary Services Ltd. According to its annual report, the original shares entitle holders to receive notice of and vote at any general meeting of the company, to ordinary dividends as may be declared by the directors from time to time, and to participate in the winding up of the company. Can the Minister clarify whether she thinks that Sanne Fiduciary Services should be considered as part of a landlord group under Section 121(6)?

There are numerous other niggles. For instance, a Property Law UK article states that a tribunal can deal with a situation where false claims are made on the certificate but have no jurisdiction to force a landlord to provide a certificate where one has not been provided. Another is measurement of the height of buildings, which has become so mission-critical that it is now being regarded as a fairly high-risk exercise in itself.

There is some gaming of the system going on and suspicion in professional circles that some landlords are offering lease extensions at bargain prices, counting on the Government clarifying in due course that the protections will not apply retrospectively to leaseholders who have extended their leases since 14 February 2022, doubtless hoping that leaseholders see this as a good deal that will make their property more mortgageable but hopefully not with them realising or being advised by their conveyancer that they would lose their leaseholder protections as a result. One professional told me of a client’s case where a housing association landlord tried to present height measurements, saying that the building did not meet the requirements for a certificate thereby but then provided a photograph showing clearly that it was five storeys and covered in cladding. You would have thought that the measuring of building and setting out whether it was more or less than five storeys would be straightforward, but it seems that even the simplest thing cannot be got right.

Property experts tell me that the complexity of the whole matter has resulted in confusion and a degree of mayhem in transacting leasehold flats, with several significant outcomes. First, UK Finance is the parent of the lenders, if I can call it that. In its handbook, at paragraph 5.14.17, there is an instruction to the effect that landlord certificates are required for all leasehold properties, regardless of height, meaning that everybody gets caught up, not just a few hundred thousand hapless leaseholders.

Secondly, legal and conveyancing professional indemnity insurers are already advising that no work on blocks over 11 metres should be undertaken, whether for sales, purchases or remortgages. That means that practitioners who are affected by that are effectively prevented from participating in that work. The evidence is that mortgage valuers are now starting to get concerned that they are at risk through being unable to ascertain the sort of discount that should be applied for non-qualifying leaseholds, as against qualifying ones that might be identical and in the same block.

I understand that there may be a further, growing issue about the very basis of measurement of the height of buildings. Apparently, the requirement is to use a basis of measurement that is defined by—and, as I understand, produced for—a wholly different purpose. It is not surprising that practitioners and others are withdrawing from this area of work. As a result, leaseholders are unable to sell, remortgage or purchase property and may be caught, regardless of the actual need for remediation. This has a very wide and pernicious effect.

We already know that there are about 1.7 million non-qualified leaseholds. Not all of them will be faced with remediation costs, but a very significant number may, in fact, end up being coloured by the same issues as those that are. How many more are we going to add by the default mechanisms in these regulations? How much detriment do the Government think it reasonable to visit on the wholly innocent home owners in this category? All these regulations assume a theoretical path that is not matched in reality. I think unsaleable property will become a growing issue. It is in a very important market sector. These are not generally flats; we are dealing with relatively high-density development on scarce urban land. It is where people very often have their first home. It is near facilities, jobs and public transport—the things people need when they are first setting up. Is it really the Government’s intention to substantially prejudice this sector of the market? I suggest that is a mistake.

I offered the Government a way out of this more than a year ago when we were discussing the Building Safety Bill, as it was then. It was then labelled the “polluter pays” amendment. It is not labelled that any more, because I felt that was a bit tendentious. It is now called the building safety remediation scheme, and I have retabled it in the context of the Levelling-up and Regeneration Bill. It is not true that there is not an opportunity, in terms of legislative time, to deal with this if the Government simply had the will. It seems to me that they prefer to have an approach that is based on a hideous level of complexity and has unspeakably detrimental outcomes for individuals. I continue to offer my solution to the Government for a consumer protection issue that they really need to address. As I say, it is not the case that the Government can do nothing, or nothing without further primary legislation. They have all the tools and the opportunity ready right now.

This is not a static situation. I have seen suggestions that perhaps things will settle down in due course. How many years do noble Lords or the Government think it will take for this matter to settle down? How much grief do noble Lords think it is reasonable to visit on an often quite impecunious but entirely innocent part of the home-owing sector? I apologise for the length of my explanation, but those are the reasons why I think these regulations are a significant missed opportunity, which is why I tabled my amendment. I beg to move.

[Lord Stunell (LD)]

My Lords, I remind the House that my noble friend Lady Pinnock moved a regret Motion on 21 March on a previous version of this statutory instrument. She pointed out that the Government’s poor drafting had led to scores, perhaps hundreds, of innocent leaseholders having to foot a bill for remediation of fire safety defects that should have been paid by landlords. Your Lordships supported my noble friend, and the regret Motion was passed by 185 to 138. Today, the Government are having their third go at getting this particular set of statutory instruments right. They have been challenged in court, have had stern criticism from the Secondary Legislation Scrutiny Committee, and now have reluctantly come back with some amendments and clarifications, which the noble Baroness set out from the Front Bench very clearly a few minutes ago.

The Government’s statutory instrument that we are amending had four cases of defective drafting and one of ultra vires, and generated two judicial review cases, which is quite a hefty charge list. I think the Minister, in presenting to your Lordships in this debate, has been skating over some pretty thin ice, because she did not exactly acknowledge the pedigree, if that is the right word, of the document that the noble Earl, Lord Lytton, has brought to our attention today. She did say that she was leaving the door open to a fourth or fifth iteration of the document, and possibly primary regulation, if it turned out that it was even worse than she thought. That seems not a very satisfactory way to proceed with legislation in this Parliament. Sadly, it is not an unusual circumstance; a very high proportion of statutory instruments have to be corrected after the event—not necessarily corrected twice more, with a promise of more to follow.

In the debate in March, the Minister was not able to tell noble Lords how many innocent leaseholders had fallen foul of the first version of the defective statutory instrument. She did say, by way of mitigation of her offence, so to speak, that the liability of those leaseholders was limited and capped, and that it could not get any worse than them having to pay £15,000, which I am sure they found a great consolation.

The Government will, of course, eventually find out about those who have wrongly been charged more than £15,000 because, the cap having been exceeded, the cost falls back on to the Treasury. Is the Minister in a position to improve on the complete lack of information she had about the impact of the defects in the original version when she spoke last time? How many cases of charges exceeding the leaseholder cap have come to the attention of the department? What help and advice have been given to those who have found themselves in that position? It will be a pity if she says that she is disinclined to help rectify the errors exposed at that time.

I hope that we will get a bit more of an apology than the Minister was able to offer when moving the regulations at the beginning of this debate. I hope she can do a little better than the repetitive circumlocutions in the Explanatory Memorandum. I am pleased to hear that more explanatory notes are being issued, although I note that announcing it from the Front Bench in the debate on whether these are good regulations is rather late in the day for noble Lords to have absorbed what the new information contains. It may be that the Minister would like to say a little more about that.

14:00

I am reminded that when the first version was produced, MPs were assured by the then Minister that it was in good order. By the time we got to the second version, he was still assuring MPs—in fact, I could better say that he was swearing blind—that everything was in order. Now we are back for a third time and I am sure that the Minister, in a very polite way, will assure us all that they are absolutely fine. Except, actually, she did not; she said that there might be further amendments. I wonder, when we consider the detailed and thorough explanation that the noble Earl, Lord Lytton, has given us of the technical problems of a professional industry grappling with this statutory instrument, whether this story is anywhere near over.

For innocent leaseholders watching the Government’s halting and error-strewn work in this area, the latest episode confirms their worst assumptions. We all know that errors happen, but when accidents and errors are always in the house’s favour, the punters begin to suspect that something worse than a mishap is happening. It seems that due diligence is not being practised. There is a certain carelessness, perhaps even recklessness, in the impact on innocent leaseholders of what has been going on.

This reminds me of some elements of the Windrush scandal, where a department completely failed to grasp what it needed to do, and the spirit in which it needed to do it, in order to achieve the policy outcome that it said it wanted to achieve. It seems to me, on the third time round, with the promise of a fourth time round, that this is rapidly escalating into one of those circumstances. I hope the Minister can give us some reassurance on that very important matter.

[Baroness Taylor of Stevenage (Lab)]

My Lords, while we do not object to this regulation’s contents in principle, we too regret that it has been necessary for the Government to bring this instrument forward. After all, the regulations consist mostly of technical amendments to regulations previously made under the Building Safety Act after it came into force. Surely the need for such basic definitions could have been anticipated in the drafting of the previous regulations. We appreciate fully that these are not simple matters, but instruments coming forward to correct what are largely obvious deficiencies and admissions in the drafting of previously approved regulations do not exactly inspire confidence in the Government’s approach to leaseholder protection and to the building safety crisis more generally.

At the heart of this issue are the millions of leaseholders who are losing sleep and their hard-earned cash over the remediation costs issue. During the passage of the Building Safety Bill, Members of both Houses warned about the consequences of rapidly overhauling what was already a complex and technical piece of legislation in order to reflect the Government’s belated change of approach. Indeed, my honourable friend Matthew Pennycook MP said at the time that

“this is no way to make good law”.—[Official Report, Commons, 20/4/22; col. 191.]

The noble Lord, Lord Stunell, referred to a previous regret Motion tabled by the noble Baroness, Lady Pinnock, regarding judicial reviews and attempts at redrafting.

All this could have been avoided if the Government had just grasped the nettle and brought forward a comprehensive Bill to abolish the outdated and anachronistic system that leasehold tenure is. I pay tribute to my noble friend Lord Kennedy of Southwark’s work—he has brought this matter before the House so many times—but we still seem to be no further forward. The Secretary of State described leasehold as an outdated feudal system in January this year and promised to bring forward a Bill to scrap it, saying that

“the fundamental thing is that leasehold is just an unfair form of property ownership. In crude terms, if you buy a flat, that should be yours. You shouldn’t be on the hook for charges which managing agents and other people can land you with”.

That should apply to remediation costs, too.

The Law Commission, asked to review leasehold by the Government, produced a report proposing an overhaul of the right-to-manage process and suggested that landlords’ legal costs should not be passed to leaseholders. Yet here we are, seven months later, with no sign of a Bill so far and increasingly complex instruments coming before us to try to sort out the mess that the Government have made in previous regulations. The Secondary Legislation Scrutiny Committee said in its report on 29 June, which has already been highlighted by the Minister:

“We are disappointed that this is a further example of a wider concern we have highlighted in recent reports, whereby we have had to ask basic questions about the rationale of changes made in an instrument and report the answers in our weekly reports, when such information should have been in the EM accompanying the instrument”.


What assurances can the Minister give that, in rectifying the deficiencies and omissions in previously approved regulations, the same errors will not recur in respect of the many other building safety instruments we still need to consider? What is the Minister doing to ensure that the overall quality of statutory instruments that come before this House is improved so that they are not the subject of amending instruments and judicial review?

The noble Earl, Lord Lytton, set out in great detail the technical issues in relation to this regulation. Our concern is that, while we understand that the Government’s intention is to ensure that landlords cannot avoid their responsibility to leaseholders in relation to building safety through complex corporate structures, if the instruments are not properly drafted, they will provide loopholes that enable that avoidance. What reassurance can the Minister give us today that this new instrument is sufficiently tight in its drafting to ensure that landlords will have to meet their obligations? The introduction given to us by the Minister, which referred to potential further redrafts and potentially even further primary legislation, does nothing to reassure us.

We note that Regulation 4 adds Homes England to the list of interested persons who may seek remediation orders and remediation contribution orders. Leaving aside the obvious question of why it was not included from the outset, particularly given that it administers the Building Safety Fund outside London, the Minister in the other place, Rachel Maclean, clarified that it is not the Government’s intention that Homes England takes over these responsibilities from government. However, the regulation does give it new responsibilities, so will Homes England be provided with further funding to fulfil these new responsibilities?

While we understand and share some of the concerns that sit behind the amendment moved by the noble Earl, Lord Lytton, the instrument contains a series of perfectly sensible refinements to previous regulations, the effect of which, we hope, will be to streamline the landlord certificate and leaseholder deed of certificate process. We take no issue with those measures, but we regret that, although the instrument makes the necessary changes, it is a missed opportunity to resolve other glaring deficiencies in the Building Safety Act that the Government should have resolved by now, such as the gap relating to leaseholders extending or varying their lease on or after 14 February 2022, which the noble Earl, Lord Lytton, referred to, which the Government promised in this House on 2 May that they would legislate to resolve as soon as parliamentary time allowed, and the fact that service charges to cover remedial acts were sent out to leaseholders quickly before the Act came into force, because those charges could not be applied retrospectively. That has left leaseholders at the expense of litigation to resolve the matter. We, too, are interested in the cost to the Treasury of claims that exceed the cap referred to by the noble Lord, Lord Stunell. Why are the Government not using this instrument to address the shortcomings I have mentioned?

I thank the noble Earl, Lord Lytton, for moving his amendment to give us the opportunity to have this debate, and I thank noble Lords who have contributed. I look forward to hearing the response from the Minister.

[Baroness Scott of Bybrook (Con)]

I thank the noble Lords for their contributions today. I will try to answer as many points as I can, but I imagine that on many points, particularly those from the noble Earl, Lord Lytton, I will have to write. I reiterate my invitation to him to meet us to talk about some of his concerns.

The noble Earl asked about the complexity and clarity of existing regulations and what they do to address the concerns of the SLSC and the JCSI. As I said, this is what these regulations are for. They are there to address those concerns. The department will be publishing further guidance on GOV.UK to accompany the regulations. This will be published shortly after the regulations come into force.

The noble Earl also asked why the regulations do not address his concerns in relation to some leaseholders being liable in some circumstances. I am aware that I responded previously to the noble Earl when he brought forward his “polluter pays” amendments recently, which I now understand are being called building safety remediations. He seeks to return us to a subject that your Lordships debated extensively in the spring of last year, in what was then the Building Safety Bill. I say once more to the noble Earl, with the greatest of respect, that this House and the other place considered his arguments very carefully last year and rejected them. I still do not think that the Levelling-up and Regeneration Bill is an appropriate place to try and reopen these issues.

In any event, the noble Earl presents his amendments—I thought it was “polluter pays”, but it is now building safety remediation—as though that is not what the Act and the various government schemes do. His scheme seeks to use the planning system to force compliance, as does the Government’s responsible actors’ scheme. We are told that the proposed scheme would avoid expensive litigation, yet it would replace the expanded jurisdiction of the First-tier Tribunal, which is now dealing with a significant number of cases, with that of the High Court, where costs and delays are far higher. The noble Earl’s scheme would not make a significant difference to leaseholders, other than to set back the progress of remediation by over a year as the industry and leaseholders work to understand yet another new system, just as they get to grips with the Building Safety Act.

The noble Earl also asked whether liability should fall on L for unavoidable errors in certificates. Under the leaseholder protection regulations, as he will know, L is the person with managing and repairing obligations. It is the current landlord who must provide the landlord certificate, not L. Where the current landlord produces a certificate that does not meet the prescribed requirements, liability for the relevant defect falls to them. L, the person responsible for the maintenance and repairs, may pursue them for amounts owed via a remediation contribution order.

The noble Earl also asked about consultations with practitioners and leaseholders, including those who have been prevented from selling. I set out in my opening speech that the department has engaged with numerous practitioners, including landlords, named managers, conveyancers and lenders. I can confirm that this was done through written correspondence to the department and stakeholder round tables. I reiterate that the department is not required to consult on these regulations.

The noble Earl also asked about the ability of leaseholders or professionals, in particular, to check facts in landlord certificates. There is no expectation on any party to verify the information set out in the landlord certificates, and these regulations do not change that. Regulation 11 of SI 2022/711 provides that those leaseholders may apply to the First-tier Tribunal for an order, where they have a reason to believe that the information in a landlord certificate is incorrect. He also asked about the volume of information required to be sourced and collected. I have said before that regulations reduce the evidence requirement or burden on landlords where they accept liability for a relevant defect.

The noble Earl asked about the disparity between ascertainable facts, as at 14 February 2022, and subsequent facts coming to light at a later stage. The tests apply on 14 February 2022 to ensure that landlords cannot circumvent the rules, particularly in relation to their net worth. Subsequent facts are not considered for the purpose of the tests. Where the landlord has since sold their assets then their liability, determined on 14 February 2022, falls to the person who bought the landlord’s asset, but the original landlord may still be pursued by a remediation contribution order. The Building Safety Act 2022 provides for insolvency orders to recover remediation amounts from a company that is in the process of winding up, and associated companies of that insolvent company may be held liable.

The noble Earl then asked about the need for the landlord to gather information from L. We are aware of the issues concerning the landlord being unable to legally enforce the provision of information in relation to relevant defects in the building. It is of course in the leaseholders’ interest for the person responsible for repairs and maintenance, often resident led, to provide that information to reduce a qualifying leaseholders cap. We are looking to bring forward primary legislation to resolve this issue as soon as parliamentary time allows.

14:15

The noble Earl then asked about the operation of the concept of associated companies and landlord groups. The term “associated person” was defined in the Building Safety Act 2022 and amended in the February regulations SI 2023/126. As the noble Earl will recall, it is not being amended for these regulations.

The noble Earl asked about UK Finance requiring a landlord certificate. I would like to clarify that a landlord certificate is not normally required for the sale of a leasehold property. On 20 December, the six major mortgage lenders committed to lend on properties in buildings in England of 11 metres or five storeys and above, and there is no requirement for the building to have been remediated, providing it is part of a developer or government remediation scheme or the property is protected by the leaseholder protections in the Building Safety Act, as evidenced by the leaseholder deed of covenant only.

We are working with UK Finance and representative bodies from the conveyancing industry to ensure that the positive impact of a mortgage lender’s commitment is fully understood and customers experience a smooth customer journey when buying or selling a property. UKF has given its commitment to DLUHC that it will update the handbook and engage with the conveyancing sector to address wider concerns with the lender instructions.

The noble Earl asked about professional risks and PI insurance for this. We are working closely with representative bodies from the conveyancing industry to ensure conveyancers fully understand the protections provided in the Building Safety Act and the solutions in place to fix buildings so they can advise clients looking to buy impacted flats appropriately. We do not consider these regulations have a material impact on the market or the other issues raised by the noble Earl.

The noble Earl asked about leaseholders losing their protection as a result of failing to provide a leaseholder deed of certificate. Where the leaseholder does not provide the certificate in the required timeframe, they may be held liable for remediation costs as if they were not qualifying for that relevant defect. These regulations provide that a landlord must update their landlord certificate to take into account a new leaseholder deed of certificate. Therefore, if a leaseholder provides one at a later date, their qualifying status and protections can then apply.

Finally, the noble Earl asked about lease extensions. I have said to noble Lords before, most recently on Monday, that we are aware of the issue concerning leaseholder protections where leases are extended or varied and are looking to bring forward primary legislation to resolve this issue as soon as parliamentary time allows. This is not something that could have been addressed through these regulations.

I am pretty sure that I missed more than one issue, but as I said, we will look at Hansard, respond in writing and put a copy in the Library and send it to everyone who has spoken today. I am very happy to have a further meeting because these are very technical issues, and I am happy to speak further on them

The noble Lord, Lord Stunell, asked why the Government are amending leaseholder protections again. I thought I had made it clear, but I want to assure the noble Lord that the Government absolutely committed in the House last summer to making any necessary amendments to the leaseholder protection regulations. That is exactly what we are doing. The Building Safety (Leaseholder Protections etc.) (England) (Amendment) Regulations 2023, which came into force in February, corrected an error in the definition of associated persons to ensure that complex corporate structures cannot avoid liability, which was always the Government’s intention. Those regulations were able to be dealt with under the negative procedure, which is why were able to bring them into force the day after making them. It was important to do that to ensure that landlords could not avoid the new requirement of these regulations. These regulations, considered under the affirmative procedure, minimise information sharing requirements for landlords and provide clarity to ensure the protections have the effect in the way they were originally intended.

I am sorry that I still do not have the number of cases that were affected—we may never get the full numbers. I think the noble Lord said that the cap on the amount of money that would be paid by these cases would be £15,000; just to clarify, it is £1,500.

I can tell the noble Baroness, Lady Taylor of Stevenage, who spoke on behalf of the noble Lord, Lord Kennedy, that as I have said many times at this Dispatch Box, we will bring further leaseholder reforms. That was in our manifesto and we will bring them forward in this Parliament.

[The Earl of Lytton (CB)]

My Lords, I am grateful for the Minister’s comments, for the support of the noble Lord, Lord Stunell, who has much greater credibility in this area than I will ever have, and for the support and comments of the noble Baroness, Lady Taylor of Stevenage.

In a sense, I shrug my shoulders slightly here, because the cat is already coming out of the bag. Yesterday, my attention was drawn to the case of URS Corporation Ltd v BDW Trading Ltd, which is a defective premises case which looks set to attach liabilities to all sorts of people, not just the developer. I appreciate the Minister’s comments about my building safety remediation scheme, which tries to effect strict liability for defects rather than this rather curious containment process that is neither fish nor fowl. None the less, if the Minister does not accept it, and the Government cannot take it on board, I think interaction with the courts and litigation will probably procure it but in a slower, more painful and more gruesome fashion. That is where I think things are heading.

I want to take a moment to pay tribute to some of the people who have helped me. Alison Hills, Zahrah Aullybocus and Stephen Desmond are practitioners who have been very happy to share their experiences with me—and their experiences seem to be widely shared by other professionals. What the department is saying and what is happening in reality seem to be two quite different things.

I quoted from the UK finance guidelines, which are the ones that people look to at the moment, and commented on the professional indemnity insurance issues. These are not matters of regulation. This is not a case of raising a magic wand and saying, “We have made a regulation and therefore it is all right, is it not?” This is the court of practical application in real life.

It appears to me that, notwithstanding what the Minister says, the department does not seem to have consulted in depth with practitioners, otherwise I would not be getting all this feedback from people who have attended seminars and courses and discoursed with specialists in this area. All sorts of people, from the likes of Falcon Chambers downwards through a number of specialist firms and practitioners, are saying the same thing. I suspect that, whatever consultation and discussion process is going on—noting that they do not have a duty at all to consult on this—the Government do not appear to be getting their information from the sources they need, and the proof of the pudding is what is happening in the market.

The Government do not appear to have acquainted themselves with the actual experience of leaseholders and professionals. Over recent weeks, some 240 individuals have written to me about one thing or another—not necessarily about this particular set of regulations but about the way in which the Building Safety Act provisions and regulations are not working for them. I believe that is simply the tip of the iceberg.

Although I will continue to press for much more significant reform, and I appreciate the support from all round the House on this, it is not my intention to put this to a vote. I end by saying that I am grateful for the positive points of clarification that the Minister has been able to make on landlord certificates and leaseholder extensions. I certainly look forward to the opportunity of having a dialogue with her and her officials as time goes forward, and perhaps bring together some of the experts that have been helping me. With that, this is not the time to press this amendment, and I beg leave to withdraw.

Amendment to the Motion withdrawn.

Motion agreed.