Leaseholder Protections
(Last Updated: 29/05/2024)
09/02/2023
62
5 min read
Key Takeaways
- Leaseholder protections came into force with The Building Safety Act 2022
- It applies to buildings over 11 metres or 5 storeys, for buildings built between 28th June 1992 and 27th June 2022 for Qualifying Leaseholders as at the 14th February 2022
- Qualifying leaseholders are protected from the financial burden of remediation costs concerning building safety
- Sellers will need a Leaseholders Deed of Certificate to confirm to buyers that the leasehold is subject to leaseholder protections
- There was an issue where leaseholder protections were not being transferred in a lease extension by the existing owner, but this has now been rectified with the enaction of the Levelling-up and Regeneration Act 2023. Leaseholder protections are transferred to the new lease or owner in sale and extension.
The Leasehold and Freehold Reform Act 2024 was passed on the 24th May 2024, but is not yet in effect and the date for this is not yet clear. We will update our content as and when the finalised legislation is published. Read more - Expected changes
Following the tragic Grenfell disaster, many more buildings around the country were discovered to have unsafe cladding. Many landlords and developers attempted to pass the burden of remediation costs onto the leaseholders, as they would have done with other major works.
Homeowners were rightly furious to find that they had invested all their money into unsafe homes. Not only was their safety at risk, they were expected to cover the expense of fixing the problem, while landlords and developers kept their profits. To add insult to injury, this devalued their leasehold, making it impossible to re-mortgage. Many were forced to sell at a loss.
What is leasehold protection?
Leasehold protection makes those responsible for building or refurbishing defective buildings pay to fix them. It ensures that the industry contributes to the solution and that the leaseholders are protected from the financial burden of remedying the problem.
Qualifying leaseholders are protected from all cladding remediation costs. Costs relating to non-cladding safety defects and interim measures (including waking watch) are also capped for qualifying leaseholders and must be spread over 10 years.
Do leaseholder protections apply to me?
To qualify for leaseholder protections, your building must meet all of the following criteria:
- it is at least 11 metres in height or has at least five storeys (whichever is reached first)
- it contains at least two dwellings
- it is not a leaseholder-owned building
A relevant building can be either a self contained building or a self contained part of a larger building.
The following buildings do not qualify for leaseholder protections:
- Commonhold buildings
- Leaseholder owned buildings
To qualify for leaseholder protections, the defect must meet all of the following criteria:
- it puts people’s safety at risk from the spread of fire or structural collapse
- it has arisen from work done to a building, including the use of inappropriate or defective products, during its construction, or any later works (such as refurbishment or remediation)
- it has been created in the 30 years prior to the leaseholder protections coming into force (28 June 1992 to 27 June 2022), and
-
it relates to at least one of the following types of works:
- the initial construction of the building,
- the conversion of a non-residential building into a residential building, or
- any other works undertaken or commissioned by or on behalf of the building owner, or management company.
Work done before or after 28 June 2022 to remediate a relevant defect is also covered
Defects that have arisen in relation to professional services are also covered by the definition of relevant defect. (i.e. If an architect or building designer specified the inappropriate use of flammable materials on a building and the contractor followed those designs).
The following defects are not relevant defects to qualify for leaseholder protections:
- Wear & tear
- Routine maintenance
To qualify for leaseholder protections, your lease must meet all of the following criteria:
- it is a long lease (more than 21 years in length) of a single dwelling within a building of above 11 metres or at least five storeys
- you are responsible for paying a service charge
- the lease was granted before the 14 February 2022
-
on 14 February 2022:
- the dwelling was your only or main home, meaning it was the home where you spent most of your time, or
- you did not own more than 3 dwellings in the United Kingdom in total - please note, dwellings outside of England will not be covered by the leaseholder protections.
- it is in England.
The protections do not apply to properties
- in Wales,
- in Scotland, or
- in Northern Ireland
The 'qualifying date' is 14th February 2022.
The leaseholder and landlord tests apply from the qualifying date.
If a dwelling was let under two or more leases on the qualifying date, any lease which is superior to another lease (head lease) is not a qualifying lease.
If a lease/leasehold qualifies for leaseholder protections on the qualifying date, the leaseholder protections pass on to future buyers of the lease.
Source: Gov.UK
Do I need a Deed of Certificate?
To enjoy the leaseholder protections granted by the Act, you'll need a Deed of Certificate. You can complete one voluntarily at any time, but you must complete one if your landlord requests it, either because you are selling your leasehold or because there is a relevant defect in the building.
How do I get a Deed of Certificate?
You complete an online form, which you give to your building owner, who will use it to determine that you qualify and to calculate the cap which applies for non-cladding remediation costs.
Is there a time limit to produce a Deed of Certificate?
Your building owner will ask you for a Deed of Certificate, by issuing a written notice, if there is a relevant defect or if you are selling your leasehold. You must complete a deed of certificate and submit it to your building owner within 8 weeks of receiving this request (unless they give a longer deadline, in the written notice).
If you do not return the completed Deed of Certificate in time:
- your lease will be treated as though it is not a qualifying lease
- your building owner may assume that you own a 100% share, even if your lease is shared ownership
- the qualifying lease may be deemed to have a higher value
You may wish to send it to your landlord by recorded post, but this is not necessary and your landlord does not need to provide any receipt. You should keep copies of your Deed of Certificate.
What legal rights do leaseholders have?
In addition to the leasehold protections of 2022, leaseholders have many legal rights set out in the Leasehold Reform Act, including the right to:
- extend the lease or buy the freehold of a house under the Leasehold Reform Act 1967
- extend the lease or buy the freehold of a flat provided that certain criteria are met
- buy the freehold of a flat when it is sold, under the Landlord and Tenant Act 1987
- pay a service or administration charge in as far as it is 'reasonable', and to be consulted about certain works
- have information on how to challenge service charges
- form a company which can take over responsibility for management of the block
- avoid repossession for arrears of ground rent or service charges when the debt is relatively low
Source: Shelter
Many of your rights are granted by the terms of your lease, which become legal rights under contract law.
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Written by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
Reviewed by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
