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Leaseholder protection – a suggested approach
Leaseholder protection – a suggested approach
The complexity of the new statutory provisions is obvious, but it is essential that they be grappled with in any case where liability to pay a service charge relating to building safety defects is in issue. It was suggested by Mr Pratt that the FTT had not been required to consider any issue under the Act which had not specifically been raised by Mr Lehner, but that is a misunderstanding of the role of the FTT, which was to determine the amount of the service charge payable. It is incumbent on the FTT to consider whether there is some statutory provision (of which the parties may be unaware) which affects the answer to that question. That responsibility is particularly engaged where the parties’ rights may be affected by new or complex legislation, such as the 2022 Act.
It may assist in other cases if we suggest a sequence of questions which a decision maker should address when determining whether service charges are payable in respect of work to which the leaseholder protections may apply. We identify the headline issues below and provide a fuller list of the questions and sub-questions which may arise in the appendix to this decision. The headline list addresses the issues in this appeal and additional questions may need to be considered in other cases.
The headline questions in this appeal seem to us to be these:
Step 1 – preliminary conditions
Is the building a relevant building (section 117)?
Does the disputed service charge relate to a relevant defect (section 120)?
Is the disputed service charge a charge in respect of a relevant measure relating to the relevant defect (paragraph 1(1), Schedule 8)?
Step 2 – paragraph 2 protection
Did the disputed service charge become payable after 20 July 2022?
If so, did any of the circumstances listed in regulation 6(1), Leaseholder Protections Regulations occur between 20 July 2022 and the date the disputed service charge became payable?
If so, did the current landlord provide a landlord’s certificate which complied with regulation 6? If not, regulation 6(7) applies, the paragraph 2(2) condition is taken to be satisfied and the service charge is not payable.
If the current landlord provided a landlord’s certificate, or if the disputed service charge became payable before 20 July 2022, was the landlord or any superior landlord on 14 February 2022 responsible for the relevant defect, or associated with a person responsible for the relevant defect? If so, the paragraph 2(2) condition is satisfied, and the service charge is not payable. If the landlord or any superior landlord or an associate was not responsible for the defect, the paragraph 2 protection does not apply.
Step 3 – qualifying lease
Does the lease satisfy the conditions in section 119(2)(a) to (c)?
If so, has the landlord taken all reasonable to obtain a qualifying lease certificate from the tenant for the purpose of paragraph 13 of Schedule 8? If not, the lease is to be treated as a qualifying lease and the protections in paragraphs 3 to 9 of Schedule 8 may apply.
If the landlord has taken all reasonable steps to obtain a qualifying lease certificate, and either no certificate has been provided, or the leaseholder has certified that the conditions in section 119(2)(d) were met, were those conditions in fact met? If so, the lease is a qualifying lease and the protections in paragraphs 3 to 9 may apply. If not, none of those protections apply.
Step 4 – paragraph 3 protection – the contribution condition
Has the landlord provided a certificate to the leaseholder that the person who was the landlord on 14 February 2022 (the relevant landlord) did not meet the contribution condition? If not, the contribution condition is taken to be satisfied and no service charge is payable (paragraph 14(2) and regulation 6(7)).
If the landlord did provide such a certificate, did the relevant landlord in fact meet the contribution condition on 14 February 2022? If so, no service charge is payable (paragraph 3(1)).
Step 5 – paragraph 4 protection - low value leases
On 14 February 2022 was the value of the qualifying lease less than £325,000 (Greater London) or less than £175,000 (elsewhere)? If so, no service charge is payable.
Step 6 – paragraph 8 protection – cladding remediation
Do the relevant measures in respect of which the service charge is claimed comprise the removal or replacement of any part of a cladding system?
If so, (a) does the cladding system form the outer wall of an external wall system, and (b) was the cladding system unsafe? If so the paragraph 8 protection applies, and no service charge is payable in respect of the removal or replacement works.
Step 7 – paragraphs 5, 6 and 7 – other protections
If after considering the previous steps the FTT is satisfied that a service charge is payable in respect of relevant measures, is that sum capped because it exceeds the maximum payable under a qualifying lease permitted by paragraph 5 and 6 of Schedule 8, or the annual limit permitted by paragraph 7?