Property Litigation: A date with Schedule 8

April 6, 2023

Word reaches even the ivory towers of the Bar that there is some consternation amongst solicitors, particularly conveyancing solicitors, at the impact of Part 5 of and Schedule 8 to the Building Safety Act 2022 (BSA 2022) on tenant liability for service charges.

I turned up these provisions in the expectation that I would be able to see instantly through the morass and dispense pearls of wisdom which would soothe furrowed solicitor brows. How wrong I was. It’s a minefield. A labyrinth. A minefield in a labyrinth. I now fully understand the anxiety.

The purpose of this article is to consider what advice solicitors who are instructed on the purchase of a flat need to give to their client about their future liability for service charges.

The starting point is section 122 of the BSA 2022 which announces that Schedule 8 “provides that certain service charge amounts relating to relevant defects in a relevant building are not payable”. The simplicity of this is deceptive; the concepts of “relevant defect” and “relevant building” are both complicated. Reference should be made to the full definitions, but put shortly:

“Relevant building” means a building which is at least 11 metres tall or has at least five storeys (and contains more than one dwelling) – see section 117 of the BSA 2022;
“Relevant defect” means a defect which arises as a result of works undertaken in the past 30 years or in the future which cause a building safety risk – see section 120 of the BSA 2022.

That in turn spawns the concept of “building safety risk” which (again put shortly) means a risk to the safety of people in or about the building arising from the spread of fire, or the collapse of the building (section 120(5), BSA 2022).

So, the Schedule 8 exceptions only apply to relevant defects in relevant buildings. Of course, relevant defects can pop up any time, anywhere. But if you are not concerned with a relevant building, you need consider Schedule 8 to the BSA 2022 no further.

If you are concerned with a relevant building, and so need to look at Schedule 8, you will see that many of the exceptions also only apply to a so-called “qualifying lease”. But to find the definition of that, one has to go (unhelpfully) back to the body of the statute and look at section 119(2) of the BSA 2022. That tells us that a lease is a qualifying lease if:

It is a long lease (which means a lease of a term of more than 21 years) of a single dwelling in a relevant building (condition 1);
The tenant under the lease is liable to pay a service charge (condition 2);
The lease was granted before 14 February 2022 (condition 3); and
At the qualifying time (defined as the beginning of 14 February 2022) (condition 4):
- the dwelling was a relevant tenant’s (which means any one of a number of tenants) only or principal home (condition 4(i));
- a relevant tenant did not own (which means, own on freehold or long lease) any other dwelling in the UK (condition 4(ii); or
- a relevant tenant owned (again, freehold or long lease) no more than two dwellings in the UK apart from their interest under the lease (condition 4(iii)).

Let us leave aside the curiosity that condition 4(ii) really adds nothing to condition 4(iii). Let us also leave aside the (untested) view that this definition will inadvertently exclude leases which have been extended after 14 February 2022, because extension takes place by way of surrender and regrant.

What is really noticeable about these provisions is that, while conditions 1 to 3 are broadly knowable from sight of the lease and a description of the building in question, condition 4 is not. How is this information to be ascertained?

Well, buried deep within Schedule 8 to the BSA 2022 is paragraph 13, which introduces a presumption about condition 4. That presumption is that if a lease satisfies conditions 1 to 3, it will be treated as a qualifying lease unless (a) the landlord has taken all reasonable steps (and any prescribed steps) to obtain a qualifying lease certificate from a tenant; and (b) no such certificate has been provided.

There are prescribed steps in force; regulation 6 and 7 of the (not so) snappily-named Building Safety (Leaseholder Protections) (Information etc.) (England) Regulations 2022 (2022/859) (BSLPI Regulations 2022) prescribe a highly-regimented scheme whereby a landlord must, within five days of becoming aware that the lease is to be sold, or that there is a relevant defect in the building, give notice calling upon the tenant to provide a so-called Deed of Certificate setting out the information required by condition 4.

The regime requires the landlord, within that time, to give a notice which complies with the various requirements of regulation 6(4) of the BSLPI Regulations 2022. The landlord must give the notice in accordance with regulation 6(5), that is by post and e-mail (if it has an e-mail address for the tenant). If the landlord hasn’t had a reply within six weeks, it must, within one further week, give a reminder notice, telling the tenant it can seek an extension of up to four weeks (regulation 6(8)). It must also telephone the tenant (where it has a number) to draw the further notice to the tenant’s attention. The landlord may not charge for any of this (regulation 6(10)).

If the landlord has followed this regime to the letter (and taken any other reasonable steps to get the certificate, and the tenant has not complied within whatever period the landlord has given, which must be not less than eight weeks) – then and only then will the condition 4 be considered not to be satisfied, preventing the lease from being a qualifying lease.

Of course, all this highly complex stuff is only the gateway to whether the exceptions and limitations in Schedule 8 to the BSA 2022 apply. Those exceptions and limitations are themselves extremely complicated; space and word count does not permit them to be considered here.

Returning to what I earlier described as the purpose of this article, one has I think to start by looking at the end danger for solicitors. It is possible that a purchaser who ends up paying lots of service charges which they were not in fact required to pay might wish to know why they were not advised by their conveyancing solicitor that their liability could be limited.

To avoid that difficulty, a solicitor could in my view take one of several courses at the time of instruction. One possible course is to make clear in their retainer letter (or perhaps the Report on Title, but probably better in the retainer letter) that they simply will not advise on the effect of the BSA 2022. That would be safe, but unhelpful to the tenant and, arguably, an incomplete service.

Alternatively, it seems to me that it would not be unduly onerous for a solicitor at least to try to ascertain whether any of the exemptions or limitations in the BSA 2022 are engaged. It should be possible to ascertain, from a few well-chosen questions to the client, whether the building is a relevant building. If it is, then at least paragraph 2 of Schedule 8 to the BSA 2022 will apply (which would prevent a landlord from recovering service charges for relevant defects if it or an associate is responsible for those defects).

Similarly, it should not be too difficult to ascertain whether a lease is a qualifying lease. If it is, then the remaining exceptions in Schedule 8 to the BSA 2022 (concerning well-resourced landlords, low-value leases, and various “permitted maximum” payments) will potentially apply.

Finally, while it will probably not be possible to give definitive advice about the impact of the BSA 2022 in the context of a usual conveyancing transaction, solicitors might want to consider offering this as a premium service for an additional fee. Particularly where the service charge, and thus the saving, is potentially high, clients might be prepared to pay for the considerable work this is likely to involve.

This article first appeared in the Property Litigation Column in Practical Law in April 2023.

Property Litigation: A date with Schedule 8

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