Since its inception, the Building Safety Act 2022 (“the act”) seems to have posed more questions than it has answered. As practitioners, it was not uncommon to feel as though we were having to seek clarity on this complex piece of legislation at every turn. This year however, has seen a significant increase in case law in the area, as is inevitable with new legislation after a short period of bedding in. As with most recent legislation, tribunals and courts have been hesitant in making any bold or potentially controversial rulings. Now however, as a result of the increase in cases, slowly but surely we are starting to glean more clarity on the drafting, parliamentary intention and real-world effects of the new act.
Lehner
In May 2024, the Upper Tribunal (Lands Chamber) (“UT”) heard the case of Lehner v Lant Street Management Company Ltd [2024] UKUT 0135 (LC) (“Lehner”) and sought to address the complexity of the issues involved in working out whether any of the protections in Schedule 8 apply. This judgement is likely to prove very useful for practitioners as it seeks to determine how and when to apply the specified leaseholder protections contained within the act. Schedule 8 is important because it sets out the circumstances in which limits are imposed on the ability of certain landlords to recover the costs of remediation work through the service charge. For those needing a refresh, Schedule 8 deals with exceptions to the landlord's ability to recover remediation costs under a “qualifying lease”, through the leaseholder's service charge. A “qualifying lease” being defined by section 119 of the act as being:
- A long lease of a single dwelling in a relevant building;
- The tenant under the lease being liable to pay service charge;
- The lease was granted before 14 February 2022; and
- At the beginning of 14 February 2022 (“the qualifying
time”) –
- The dwelling was a relevant tenant's only or principal home
- a relevant tenant did not own any other dwelling in the UK, or
- a relevant tenant owned no more than two dwellings in the UK apart from their interest under the lease.
Schedule 8 of the act operates to limit the recoverability of remediation costs in circumstances where:
- The service charges relate to remedying unsafe cladding
- Where the landlord is deemed responsible for the relevant defects
- Where the landlord has a high net worth
- Where the value of the lease is low
- Where the amount of the service charge on any given defect exceeds the permitted maximums
- Where the service charges relate to legal or professional fees
Lehner was brought to the UT as a challenge against the First-Tier Tribunal (Property Chamber)'s (“FTT”) decision which took a narrow interpretation of the term ‘cladding system' which sought, in this case, to exclude insultation and cavity barriers. As we know, pursuant to Schedule 8 of the act, any costs incurred in dealing with cladding, cannot be recouped by way the service charge. It was claimed by the appellant that the FTT failed to consider whether the lease was a “qualifying lease” and sought a review of the narrow approach applied when considering the definition of a ‘cladding system'.
The Upper Tribunal decision
The UT found in favour of the appellant, confirming that the work carried out in relation to insultation and cavity barriers could indeed be considered as remediation of cladding and thus, is not recoverable by way of the leaseholder's service charge. The UT held that the definition of ‘cladding remediation' involved the removal or replacement of any part of a cladding system forming the outer wall of an external wall system. It held that the FTT was wrong to dismiss the appellant's reliance on the relevant paragraph of the Schedule 8 protection and that the works in their entirety were to be considered as cladding remediation. This meant there was no reason why there would be a service charge payable in this respect.
What does Lehner tell us?
This approach shows the willingness of the Courts and Tribunals to apply a broader approach to interpretation than perhaps initially anticipated. It also confirms the Parliamentary intention that was aligned with the act, which was to ensure greater leaseholder protections, increased building safety and to hold landlords to account in relation to cladding, fire safety and general building maintenance.
Useful tools
As well as providing some much-needed indication as to the application of the act, Lehner also provides perhaps one of the most useful tools we have seen to be published with respect to the application of the legislation. Located in the Appendix of the judgement is an incredibly clear, step-by-step guide for practitioners confirming the preliminary conditions and applying the leaseholder protections. The check-list breaks down 8 steps in the application of the act, with clear yes or no questions and references to relevant sections below each step. This checklist will almost certainly dissipate some of the anxiety around providing more decisive advice to both landlord and tenants alike.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
