Draft Building Safety (Leaseholder Protections) (Information etc.) (England) Regulations 2022

Marcus Jones Excerpts

Monday 18th July 2022 General Committees

[The Chair]

Before we begin, I would like to say that, in view of the heat, hon. Members may wish to remove their jackets.

[The Minister of State, Department for Levelling Up, Housing and Communities (Mr Marcus Jones)]

I beg to move,

That the Committee has considered the draft Building Safety (Leaseholder Protections) (Information etc.) (England) Regulations 2022.

It is, as ever, a pleasure to serve under your chairship, Mrs Murray. Laid before Parliament on 7 June, the regulations are part of the implementation of the leaseholder protection provisions in the Building Safety Act 2022, using powers in part 5 of and schedule 8 to the Act. I will start, if I may, by providing some context and background to these important regulations. As hon. Members will know, before the Government introduced the leaseholder protections via the Building Safety Act, many leaseholders found themselves liable for unlimited costs for remedying historical safety defects in their buildings—costs that they could not afford for problems that were not their fault. But since the provisions came into force at the end of last month, most leaseholders in England are no longer liable to meet those costs.

To be specific, leaseholders in buildings that are 11 metres or more than five storeys high, where the building owner or landlord is the developer or is connected to the developer, are now fully protected from paying for historical safety remediation. However, where that is not the case, qualifying leaseholders will still be protected from all cladding remediation costs and any costs for non-cladding remediation or interim measures, including waking watches; those costs will be firmly capped. In some cases, qualifying leaseholders will also be protected from all historical remediation costs and those protections will pass on to subsequent buyers.

Without the provision made by these regulations, leaseholders would not be able to demonstrate that their lease qualified for the protections; nor would building owners be able to apportion liability for remediation costs between themselves and other landlords. The regulations set out the essential detail needed to implement the Building Safety Act’s provisions and make sure that leaseholders are protected under law. They do not do anything to weaken the leaseholder protections that Parliament agreed in April.

These regulations can be considered in three parts. First, the regulations set out the information that leaseholders must provide to benefit from the protections: their qualifying lease status, their property’s last sale price and their shared ownership status. In line with schedule 8 to the 2022 Act, the regulations provide a form of certificate, which the leaseholder must complete—once per flat. The certificate and evidence requirements are intended to be as simple as possible for leaseholders, while also being robust enough to prevent fraud and assure landlords and lenders of the lease’s qualifying status.

There are two trigger points at which the landlord must notify the leaseholder of the need to complete the certificate: when a defect is found, or the leasehold property is being sold. But leaseholders can submit a completed certificate voluntarily as soon as they have collected the information required. These provisions enable leaseholders to demonstrate that they qualify for protections under the Act and therefore to understand what their maximum cap should be. We will be making available, on the gov.uk website, both guidance and an easy-to-use online tool to help leaseholders and landlords to understand how the system works.

Secondly, the regulations make provision to enable the landlord to identify who is liable to pay for remediation of historical safety defects and how much they will be liable for, and to recover those amounts. The regulations set out formulas that the landlord must use to apportion liability where more than one landlord is connected to the developer, or where full remediation costs are not recoverable from leaseholders. The effect is that in such cases the landlord may recover some costs from other landlords, enabling them to spread the cost of remediating historical safety defects fairly and equitably between those with an interest in the building.

Finally, the regulations set out further detail on the first tier tribunal process in respect of remediation orders. As the Committee will know, the tribunal settles leaseholder disputes in the private rented sector. A remediation order will be an order of the tribunal that requires a landlord to remedy particular defects in a building by a specified time. The regulations make clear the information that a person needs to provide as part of the application to the first tier tribunal for a remediation order. Applicants—who can be anyone connected with the building—along with enforcement bodies, such as the new Building Safety Regulator or a fire and rescue authority, will need to state under which provision the application is made, as well as the building, its landlord and the relevant defect. The first tier tribunal will then be able to determine whether to make an order to require the landlord to remediate the building.

The regulations are a key step towards delivering the leaseholder protections set out in the Building Safety Act. They serve a very specific purpose in providing the detail needed to give full effect to the leaseholder protection provisions in that Act. That in turn will enable buildings to be remediated without requiring leaseholders to pay large amounts of money, so that they benefit fully from the protections that Parliament agreed and that came into force at the end of last month. I hope that hon. Members will join me in supporting the draft regulations, which I commend to the Committee.

--- Later in debate ---

[Mr Jones]

I thank the hon. Member for Greenwich and Woolwich and other members of the Committee, who in many ways seem content to allow the regulations to pass. I will start by answering some of the questions raised by the hon. Member and the hon. Member for Stretford and Urmston. The hon. Lady mentioned landlords linked to the developer and the apportionment of costs. The regulations clearly set out a formula for how those costs will be apportioned. In cases where landlords or developers are no longer trading, as I am sure the hon. Member knows, there is a levy scheme where developers pay into that levy, so we can support those people who end up—through no fault of their own—in a situation where the people responsible are not likely to pay for the remediation.

The hon. Lady asked a question about enfranchised buildings and leaseholders, which I will come to when I respond to the hon. Member for Greenwich and Woolwich. The hon. Lady also mentioned management companies. The type of arrangements she was thinking about were those with non-resident owned management companies that are subject to tripartite leases and arrangements with the landlord and leaseholders. It is important and urgent to prepare these two sets of regulations in the way that we have, so that they enable the protections to take place. We are confident that the way the regulations have been drafted will be effective in ensuring that the qualifying leaseholders gets the right outcome for the type of arrangements the hon. Member has mentioned. We are absolutely clear that all types of management company should be covered by the regulations, and we will closely monitor the progress of cases. If it becomes apparent that changes are necessary, we will come back to Parliament with further proposals.

[Kate Green]

Perhaps I could write to the Minister to set out the specific circumstances that pertain to my constituency. The regulations were helpfully accompanied by some worked-through examples, so perhaps I could add another one that is being faced by my constituents at the moment and the Minister could respond in detail as to how they would be affected?

[Mr Jones]

I would very much welcome that correspondence. I would be more than happy to receive the example that the hon. Lady is talking about and to come back to her with a response.

The hon. Member for Greenwich and Woolwich mentioned that the protections came into force on 28 June, which was two months after the Act received Royal Assent. The regulations, along with the Building Safety (Leaseholder Protections) (England) Regulations 2022, which were laid on 28 June, will provide the detail to operationalise the new leaseholder protection regime. Landlords are now only able to pass on costs where the Building Safety Act permits them to do so, and that includes pursuing unpaid bills for historical safety remediation issued prior to commencement. As of 28 June, landlords must not pursue bills for historical safety remediation that are not in accordance with the Act. As the hon. Gentleman said, doing so would be illegal and I will come back to him on his point about the operation of that.

Leaseholders should seek to complete the leaseholder deed of certificate that is outlined in the regulations as soon as possible, so they can demonstrate to their landlord whether they qualify for the protections.

In an enfranchised building, the freehold is owned by some or all of the leaseholders. Capping leaseholder liability in a fully enfranchised or commonhold building would not have the effect of reducing or limiting leaseholders’ liability as leaseholders are the freeholder. The other complication is that often not all the leaseholders own part of the freehold, which is why my right hon. Friend the Member for Pudsey (Stuart Andrew) committed to bringing forward a consultation and a call for evidence on this important issue, which will be released shortly. It is important that we try to help clarify matters for people in that position.

On the report by the Joint Committee on Statutory Instruments, the Committee will know that the underlying statutory provisions for leaseholder protections were added to what is now the Building Safety Act 2022 about half way through its passage through Parliament, in recognition of the unfair and intolerable position that many leaseholders were in. They faced bills, as has been acknowledged across the House, running into thousands of pounds to fix problems that they had no part in creating. In many senses, as the hon. Member for Greenwich and Woolwich said, those people were put into significant financial distress as a result.

The leaseholder sections were devised and drafted at pace, drawing on expertise in a number of fields, including proposals put forward by Members of both Houses. I record my thanks for their time and engagement on that. The Act received Royal Assent at the end of April and the protections came into force two months later. It was therefore both important and urgent to prepare the two sets of regulations that will enable the protections to take practical effect. The urgency meant that we were not in a position to share the regulations in draft with the Committee, as is the usual practice. That meant, however, that the Committee and its staff had limited time to get to grips with both the regulations and the underlying primary legislation in what is in many ways a groundbreaking piece of law.

None the less, we engaged in two rounds of correspondence with the Joint Committee, culminating in the memorandum and response set out in Appendix 1 to the Committee’s report. Some Members will have read that report in full—I am sure the hon. Gentleman will have—and we have seen the detail of the Committee’s concern and the Government’s response.

To summarise, the Joint Committee raised a number of technical and legal issues with the draft instrument in respect of its drafting and of its vires. The Government have considered those issues carefully, including by working closely with the first tier tribunal about the way in which it will deal with appeals. The Government are satisfied that, notwithstanding the Committee’s concerns, there are no issues with the regulations that will prevent the process from operating successfully.

As I have described, the Government consider it imperative that the regulations come into force before the summer recess to alleviate the issues facing leaseholders in defective blocks. We will of course monitor closely the progress of cases. If it becomes apparent that changes are necessary, we will come back to Parliament with proposals. Therefore, as I said before, I ask colleagues to show some forbearance. I am glad that that seems to be the case, but that hon. Members will still feed in their particular cases.

On the final point made by the hon. Member for Greenwich and Woolwich on the memorandum from the Law Officers about confirmation of the retrospection on the 28th due date, if he will forgive me, I will take that away and come back to him with a fuller response. On that basis, and given that we have considered the draft regulations, I hope that the Committee will approve them.

Question put and agreed to.