Guidance

Building safety leaseholder protections factsheet

Updated 5 April 2022

This guidance was withdrawn on 25 July 2022

This guidance is withdrawn as it is no longer current. Please see the latest guidance on the Building Safety Act.

In January, the government set out the three principles underlying its new approach to Building Safety:

• We must make industry pay to fix the problems for which it is responsible.
• We must protect leaseholders.
• We must restore common sense to the assessment of building safety risks, speeding up fixing the highest risk buildings and stopping buildings being declared unsafe unnecessarily.

It is unfair that innocent leaseholders, most of whom have worked hard and made sacrifices to get a foot on the housing ladder, should be landed with bills they cannot afford to fix problems they did not cause. We are clear that we want those responsible for building defective buildings – developers and construction products manufacturers – to pay the bulk of costs for remediation.

The government is taking significant action to ensure that industry fixes the mistakes it has made. New powers are being taken in the Building Safety Bill to compel companies to remediate the buildings for which they are responsible – this includes the ability to block non-compliant companies from building again in England.

We expect that remediation of the majority of buildings will accordingly be conducted, or funded, by the developer responsible for the safety defects. This factsheet explains what will happen in the minority of cases where that developer cannot be traced, or no longer exists.

How will the Building Safety Bill change who pays for remediation works?

The government has made a number of changes to its Building Safety Bill to shift the responsibility for paying remediation costs from the leaseholders in a building, to the freeholders or owners of a building.

Currently, when a person buys a leasehold property, the lease usually specifies that they are legally liable for a share of all the costs of maintenance or repair in their property or building. This means that leaseholders across the country are facing extortionate costs – of over £100,000 each in some cases – to fix safety defects which pose a significant fire risk in their building. This might include costs to replace flammable cladding on the outside walls of their building; or internal issues such as a lack of fire doors or alarm systems.

The Building Safety Bill now includes clauses that seek to change the terms of these leases, making building owners liable for the costs of remediating historical safety defects in a building. These clauses will set out in law the principle that government has long advocated; that building owners should not pass on costs to leaseholders for remediation works wherever possible.

We recognise of course that not all building owners will have the means or ability to pay the full costs of remediation, and may still need to raise some of the funding required from leaseholders in their building. We have accordingly included new protections for leaseholders in the Building Safety Bill, limiting in law the total amount any leaseholder will pay towards remediation in their lifetime.

How do these leaseholder protections work?

The Building Safety Bill is clear – developers are on the hook for fixing their own buildings (both cladding and non-cladding defects), and only where they cannot be traced will building owners be required to pay for remediation works in their building.

Where building owners have the means and wealth to pay in full for historical remediation works in their building, they will not be legally able to charge leaseholders any costs for those works. We have set out in the Bill that we expect all owners with net worth of over £2 million, per affected building they own, to pay in full for these works. Additionally, where a building requires external cladding to be removed or remediated, the Building Safety Bill sets out that a building owner cannot pass on any of these costs to leaseholders in their building. The government’s Building Safety Fund is available to fund all cladding remediation above 18 metres; and we plan for contributions from industry to fund all cladding remediation above 11 metres. Accordingly, building owners must draw on these sources of funding, and will be legally prevented from charging leaseholders any amount for this sort of work.

Where building owners do not have these means to pay for any remaining non-cladding defects, they will be legally able to recoup some costs from leaseholders in their building to help pay for works required. This will be fixed at no more than £10,000 per leaseholder (or £15,000 in London) for all but the most expensive properties, as you can see in the below table.

In practice, these protections operate as a “waterfall” – with developers paying first, followed by building owners, and costs only falling on leaseholders where building owners need support covering the full costs of remediation of a building.

Which leaseholders qualify for these protections?

These protections apply to leaseholders in buildings above 11 metres or five storeys in England where the property is their principal home, or is the only property they own, even if they do not live there. This includes owners who have moved out and sublet.

In addition, owners of a total of up to three properties in the United Kingdom will qualify for the protections. For example, if you own your own home plus two additional flats, those flats will qualify for the protections.

Even if a leaseholder owns a total of more than three properties, their principal home always qualifies for the protections.

What will this mean for cladding costs?

Qualifying leaseholders will be protected from all costs related to the remediation of unsafe cladding. This means that qualifying leaseholders will not have to pay for the removal of unsafe cladding and will no longer be the first port of call to pay for any costs relating to historical building safety defects.

What will this mean for non-cladding building safety costs?

Developers, followed by building owners and landlords will now be the first port of call to pay for non-cladding historical safety defects, not leaseholders. Building owners will be legally required to prove that there are no other routes for funding before passing any non-cladding remediation costs to leaseholders.

The building owner or landlord will be prevented from passing on any costs to qualifying leaseholders where they are – or are linked to – the developer, or where they have a net wealth over a set threshold. In these circumstances, no costs will be able to be passed on to qualifying leaseholders. Where these conditions are not met, costs for non-cladding defects and interim measures (such as waking watches) will be shared between the building owner and leaseholders, but for leaseholders those costs will be firmly capped and spread over ten years.

What is the cap and how will it be applied?

Caps will be strictly limited at the maximum of £10,000 (£15,000 in Greater London) spread over ten years. Money already paid out in the last five years will count towards the cost cap. In practice, many leaseholders will pay less than the cap for any non-cladding defects, and some will pay nothing.

The cap is only relevant where the building owner or landlord is not linked to the developer and doesn’t have net wealth over the set threshold. In either of these instances, or where the flat is valued at less than £325,000 in Greater London or £175,000 outside London, no costs can be passed on to leaseholders. Liability for any costs above these caps will sit with the building owner. Where costs are shared, the following caps apply for qualifying leaseholders:

Rest of England		Greater London
Property value	Cost cap	Property value	Cost cap
< £175,000	£0	< £325,000	£0
£175,000 - £1m	£10,000	£325,000 - £1m	£15,000
£1m - £2m	£50,000	£1m - £2m	£50,000
£2m+	£100,000	£2m+	£100,000

The higher thresholds in Greater London reflect the proportionately higher property values in the capital, helping to ensure protections extend to approximately the same proportion of flat owners. Only a very small number of leaseholders, such as those living in the highest value properties (over £1 million), will be expected to make the higher contributions.

If you are a shared owner your cap is reduced in proportion to your equity in the property (for example, a cap of £7,500 for a 50% shared owner in London).

Illustrative examples:

• John in Newcastle has a flat in a six storey building valued at £200,000. He is a qualifying leaseholder as it is his primary residence, and his building owner and landlord are not connected to the developer or sufficiently wealthy. His flat’s non-cladding remediation cap is £10,000, and he is exempt from any cost of cladding
• Sarah is a shared owner in Bromley, London, who owns 50% of a £400,000 fifth storey flat. She is a qualifying leaseholder as it is her only property, and her building owner and landlord are not connected to the developer or sufficiently wealthy. Her flat’s non-cladding remediation cap is £7,500.
• Michael in Birmingham has a fifth-storey flat valued at £150,000. He is a qualifying leaseholder as it is his primary residence. His flat’s remediation cap is £0, as he is below the lower property value threshold.
• Zainab owns a flat where the developer is the freeholder. Her flat’s remediation cap is £0.
• Daniel owns a tenth storey flat valued at £500,000 in Mile End, London. Over the past five years he has paid £3,000 in waking watch costs. He is a qualifying leaseholder as he only owns two other properties, and the building owner and landlord are not connected to the developer or sufficiently wealthy. His flat’s non-cladding remediation cap is now £12,000.

Additional routes for redress

The above protections will become the law in England two months after the Building Safety Bill achieves Royal Assent – which we expect to achieve this summer subject to Parliament voting in favour of these changes. At this point any developer or building owner who attempts to ignore or avoid paying their share of costs, will be acting illegally. Leaseholders and other interested parties will be able to pursue them to comply through the courts.

However, we of course recognise that mounting a full court challenge will be expensive and time-consuming for many leaseholders. That is why the Government is bringing forward an ambitious toolkit of other measures to allow those responsible to be pursued more effectively. This includes:

• Extending the limitation period under the Defective Premises Act to apply retrospectively for 30 years in England and Wales, making it possible to launch legal action against developers and contractors where they have constructed a building that is unsafe.
• Allowing the High Courts to extend the reach of civil liability to associated companies, to ensure that some of the largest businesses in the sector who have used shell companies and special purpose vehicles within their corporate structures can be pursued for contributions. This will apply to England and Wales.
• Creating a new cause of action in England, Wales and Scotland which will allow manufacturers, distributors, and sellers of construction products to be pursued where defective or mis-sold products have been used in buildings. The cause of action will be extended to Northern Ireland at a later date.

Frequently Asked Questions

What does “historical safety defect” mean? What work is included?

Historical safety defects include anything done, or not done, during construction or later works to a building, that results in people’s safety being put at risk from the spread of fire or structural collapse.

What does this mean for the current bills I am facing?

No one living in their own flat in a building taller than 11 metres or five storeys will face bills to remediate dangerous cladding, and their bills for non-cladding remediation work will be capped at a maximum of £10,000 (£15,000 in Greater London), with many paying far less than that or nothing at all. Once the provisions come into effect, which will be two months after the Bill gains Royal Assent, any money paid out towards historical defects in the last five years will count towards the caps.

What about bills I have already paid?

Costs already paid out in the last five years – including for interim measures such as waking watches – will count towards the cap. In practice, many leaseholders will pay less than the fixed caps, and some will pay nothing at all. Our new Remediation Contribution Orders do allow for polluters – such as responsible developers – to be forced to reimburse leaseholders for costs they have already paid out.

How will I know if I qualify for the protections?

The protections will apply to you if your property:

• is in a building over 11 metres or five storeys; and
• is your main home, or if you own no more than three UK properties

The protections will apply to the properties, based on who owned them on 14 February 2022. The status at 14 February 2022 is transferred to future buyers of the property. This means that if a property eligible for the protections on 14 February 2022 is sold, the buyer also benefits from those protections.

What if my building’s owner has links to the developer?

We are clear that developers must fix their own buildings. Where a building’s landlord is – or has links to – the developer, they will be unable to pass costs on to any leaseholder. This includes non-qualifying leaseholders such as those with more than three properties, and commercial leaseholders.