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**Update**
Since we published our blog post below, we have received the welcome news that the Department for Levelling Up, Housing and Communities (“DLUHC”) have legislated to resolve the issue outlined below.
They have confirmed that Section 243 of the Levelling-up and Regeneration Act 2023 inserts a new section 119A into the Building Safety Act which confirms that a connected replacement lease will also be a qualifying lease if the new lease replaces a qualifying lease, and thus if a lease was a qualifying lease before a lease extension is completed the new lease will also be considered a qualifying lease.
The legislation will have retrospective effect, so that no qualifying leaseholder that has completed a lease extension since the Building Safety Act came into force will lose their protections.
The new provision will come into force on 26th December 2023.
**Original Post**
It is safe to say that the Building Safety Act 2022 has brought with it a myriad of issues. It is a complex and lengthy piece of legislation which has had the most experienced and scholarly solicitors scratching their heads in confusion.
Luckily for us, the Building Safety Act has limited applicability to our specialist area of lease extensions and enfranchisement… or so we thought!
Unfortunately, the draftsman overlooked one major defect in the legislation which has a significant impact on any qualifying leaseholder who has or is intending to extend their lease on or after the arbitrary date of 14th February 2022.
The failing in the legislation means that if your lease had the benefit of the leaseholder protections under the Building Safety Act 2022 before undertaking a lease extension, if you extend your lease on or after 14th February 2022 then you will lose these protections.
This could have significant repercussions on such a leaseholder who may consequently be obliged to contribute substantial and unlimited sums of money to remediate unsafe combustible cladding or other building safety or structural issues through no fault of their own.
It must also be remembered why such leaseholders need to extend their leases on their flats in the first place. That is, to ensure that their home (likely being the largest investment that they have made in their lives) does not depreciate in value and to ensure that they can sell or remortgage their flat on normal market terms.
Thus, such leaseholders find themselves between a rock and a hard place where they either have to choose to extend their leases and lose the protections of the Building Safety Act, or retain the protections of the Building Safety Act and see their largest asset depreciate in value possibly to a point where it cannot be sold or mortgaged.
Clearly, this cannot be what the Government intended, especially when the government continue to pledge that it will significantly reform the leasehold system to make home ownership fairer, more secure, cheaper and easier for leaseholders to extend their lease or buy their freehold.
We strongly support calls from ALEP and other enfranchisement professionals and organisations for the Government to urgently remedy this alarming situation.
In the meantime, whilst we await Government action to remedy the defect in the legislation, we are taking action to safeguard our clients’ interests as far as possible.
For leaseholders in “relevant building” i.e. where the building is either at least 11 meters high or has at least 5 storeys we will now seek an express provision in the new Lease that, notwithstanding the new lease, the leaseholder will remain a “qualifying leaseholder” for the purpose of the Building Safety Act. However, unfortunately such provision must either be agreed by the Landlord or determined by the First-Tier Tribunal making the lease extension process more complex and expensive for the leaseholder.
If you require further advice relating to a lease extension in a “relevant building” our team will be pleased to assist you.
