Splitting liability among building owners
This guidance outlines the method of splitting costs in situations where the costs of remediation are greater than the total amount which can be passed onto to qualifying and non-qualifying leaseholders.
Applies to England
Summary
1. Regulations under the Building Safety Act 2022 set out how the costs for remediation are to be split between building owners (the definition of ‘building owner’ can be found in What are my building owner’s legal obligations?).
2. This guidance outlines the method of splitting costs in situations where the costs of remediation are greater than the total amount which can be passed onto to qualifying and non-qualifying leaseholders.
What does the legislation require?
3. In some circumstances, more than one building owner will meet the developer test and will be responsible for remediating a historical safety defect.
4. In limited circumstances, qualifying leaseholders are required to pay capped costs for non-cladding remediation and interim measures. Where remediation costs exceed the fixed caps, building owners must pay the shortfall.
5. In such situations, the leaseholder protections set out how building owners and landlords must split the costs of remediation. This method is in proportion to the number of floors (namely, the interest) held by the various building owners and landlords within the building.
6. Apportionment provisions in the leaseholder protections ensure that building owners and landlords who hold a greater interest in the building will have to contribute a greater amount than those with a lower interest.
7. More information on how costs should be allocated between building owners and landlords is set out in the Building Safety (Leaseholder Protections) (Information etc.) (England) Regulations 2022.
How will this affect you, the leaseholder?
8. If you are a qualifying leaseholder, you cannot be charged more than your contribution cap, spread over 10-years, even if more funding is required for works to take place.
9. If you are a non-qualifying leaseholder, you cannot be legally charged any amount greater than the amount set out in the terms of your lease.
Examples
Example 1:
- You are a qualifying leaseholder residing in your one-bedroom flat, in a building over 11 metres in Newcastle, therefore you qualify for protections under the Building Safety Act 2022. The value of your lease is calculated as being £250,000.
- The building owners are not – or are not associated with – the developer responsible for creating the defects within your building, nor does your landlord have a net worth calculated as being greater than £2 million per relevant building, meaning they do not meet the contribution condition.
- Under the Act, your maximum contribution for non-cladding remediation would be £10,000 over 10-years, but you have already paid £5,000 for interim measures. As such, your remaining remediation cap for non-cladding works and interim measures is £5,000. You cannot be charged for cladding remediation.
- Your building requires £25,000 worth of non-cladding remediation. This is greater than the amount that can be legally charged to you under the Act.
- Your contribution of £5,000, spread over 10 years, is not sufficient to cover the total costs of remediation, so your building’s owner and landlords must cover the shortfall of £20,000. This will be split between them based on the method set out in the regulations.
Example 2:
- You are a qualifying leaseholder residing in your 2-bedroom flat, in a building over 11 metres in London and do not own more than 3 properties. Therefore you qualify for protections under the Building Safety Act 2022. The value of your lease £400,000.
- Your building owners are not – and are not associated with – the developer responsible for creating the defects within your building, nor does your landlord have a net worth calculated as being greater than £2 million per relevant building meaning they do not meet the contribution condition.
- Under the Act, the maximum contribution for non-cladding remediation would be £15,000 over 10-years, but you have already paid £15,000 over the last 5 years towards interim measures and remediation costs. As such, you have already paid up to your cap and cannot be charged anything additional for remediation works.
- Your building owners and landlords must cover any shortfall between the amounts charged to leaseholders in your flat and the amounts required for remediation. The amounts your building owners and landlord will be in line with the formula’s set out in regulations.
Example 3:
- You are a qualifying leaseholder residing in a one-bedroom flat, in a building over 11 metres outside of London and this is your principal home. Therefore, you qualify for protections under the Building Safety Act 2022. The value of your lease is £500,000.
- Your landlord has a net worth greater than £2 million per building owned within their landlord group. As a result, they meet the contribution condition and so they must cover the costs of remediation which would have been allocated to you if they did not meet the contribution condition.
- You cannot legally be charged anything towards the costs of remediating your building.
Example 4:
- You are a qualifying leaseholder residing in your 3-bedroom flat in a building over 11 metres which is outside of London. You do not own more than 3 properties. Therefore, you qualify for protections under the Building Safety Act 2022. The value of your lease is £400,000.
- Your landlord is associated with the developer responsible for creating some of the defects in your building. This means that your landlord will be unable to charge you any costs to remediate the defects for which they were responsible. They must cover any costs to remediate the defect for which they were responsible.
- As only some of the defects were created by the developer, you may be asked to contribute to the remediation of the remaining defects. You can be a charged a maximum of £10,000 over 10-years, provided you or the previous owner of the flat have not already contributed any amounts towards remediation in the last 5 years.