[2024] UKUT 0135 (LC)

The 2022 Act is in six Parts which, as section 1(1) explains, contain provisions intended to secure the safety of people in or about buildings and to improve the standard of buildings. Only Part 5 is concerned with leaseholder protections. Part 5 is supplemented by The Building Safety (Leaseholder Protections) (England) Regulations 2022 (as amended) (“the Leaseholder Protections Regulations”).

Part 5 begins at section 116 which introduces sections 117 to 125 by explaining that, together with Schedule 8, they “make provision in connection with the remediation of relevant defects in relevant buildings”.

Before looking at these complex provisions in detail we draw attention to the fact that in a number of places in Part 5 and in the regulations made under it, Parliament has made use of “deeming” provisions, or presumptions, by which particular facts are assumed to be true unless some condition is satisfied. Usually the relevant condition requires the landlord to take the initiative in providing relevant information, or in requesting that leaseholders provide relevant information known to them. The presumptions operate where the landlord has failed to take the required step, and generally have the effect that information which has not been supplied or requested is assumed to be favourable to leaseholders. Another way of looking at these presumptions is to see them as tools for displacing the usual burden of proof in relation to specific matters; ordinarily the person who wishes to rely on a particular fact is required to prove it, but where one of the presumptions applies certain facts will be assumed in favour of the leaseholder unless the landlord has taken the steps required to oust the presumption. We draw specific attention to this device because these provisions are a trap for unwary parties and decision makers, as this case will illustrate.

A “relevant building” is defined in section 117 and includes any self-contained building in England containing at least two dwellings which is at least 11 metres high or contains at least 5 storeys.

A “relevant defect” is defined in section 120(2), as follows:

“Relevant works” are defined in section 120(3) and include works relating to the construction or conversion of the building concerned, provided it was completed in the “relevant period”, that being the period of 30 years ending with the commencement of the section (on 28 June 2022).

A “building safety risk” is defined in section 120(5). In relation to a building, it 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 or any part of it.

In summary, therefore, any defect in a residential building over 11 metres or 5 storeys high, constructed between 1992 and 2022 which arises out of the original construction and causes a risk from the spread of fire or building collapse is likely to be a relevant defect for the purpose of the Part 5 leaseholder protections. Those protections are described in Schedule 8. They are detailed and complex so, after focusing on those which are relevant to this appeal, we will provide a suggested route through them which parties and decision makers may find useful in seeking to apply them.

Section 122 introduces Schedule 8, as follows:

“122.

Remediation costs under qualifying leases etc

Schedule 8 —

(a)

provides that certain service charge amounts relating to relevant defects in a relevant building are not payable, and

(b)

makes provision for the recovery of those amounts from persons who are landlords under leases of the building (or any part of it).”

Schedule 8 is titled “Remediation costs under qualifying leases etc” and most of its provisions apply only to service charges payable under a “qualifying lease”. That expression is defined in section 119(2) as follows:

“A lease is a qualifying lease if –

(a)

it is a long lease of a single dwelling in a relevant building,

(b)

the tenant under the lease is liable to pay a service charge,

(c)

the lease was granted before 14 February 2022, and

(d)

at the beginning of 14 February 2022 (“the qualifying time”) –

(i)

the dwelling was a relevant tenant’s only or principal home,

(ii)

a relevant tenant did not have owned any other dwelling in the United Kingdom, or

(iii)

a relevant tenant owned no more than two dwellings in the United Kingdom apart from their interest under the lease.”

By paragraph 13 of Schedule 8 a lease which satisfies the conditions in paragraphs (a), (b) and (c) of section 119(2) will be treated as a qualifying lease unless the landlord has taken all reasonable steps to obtain a “qualifying lease certificate” from a tenant under the lease and no certificate has been provided. This is the first of the “deeming” provisions to which we have previously referred.

A qualifying lease certificate is one certifying that the condition in section 119(2)(d) was met in relation to the lease on 14 February 2022.

Schedule 8 affords protection to qualifying leaseholders against charges in respect of any “relevant measure” relating to a relevant defect. The definition of “relevant measure”, an expression repeated throughout the leaseholder protections, is found in paragraph 1(1) of Schedule 8, as follows:

““relevant measure”, in relation to a relevant defect, means a measure taken –

(a)

to remedy the relevant defect, or

(b)

for the purpose of –

(i)

preventing a relevant risk from materialising, or

(ii)

reducing the severity of any incident resulting from a relevant risk materialising;

“relevant risk” here means a building safety risk that arises as a result of the relevant defect.”

In summary, therefore, a measure will be a relevant measure if it is taken to remedy a relevant defect, or to diminish the harm which it might cause.

The first of the protections provided by paragraph 2 of Schedule 8 is an exception to the general rule that the leaseholder protections are available only to the owners of qualifying leases. Paragraph 2 applies “in relation to a lease of any premises in a relevant building”. It provides that no service charge is payable under such a lease in respect of a “relevant measure” relating to a relevant defect if the landlord under the lease on 22 February 2022 (the “qualifying time”) or a superior landlord was “responsible for the relevant defect” or was “associated with” a person responsible for the relevant defect (paragraph 2(2)).

For the purpose of paragraph 2 a person will be taken to be “responsible for” a relevant defect (i.e. one arising out of the original construction or conversion of the building which creates a building safety risk) if they were the developer or undertook or commissioned the construction or conversion of the building, or they were in a joint venture with the developer (paragraph 2(3)). A “joint venture” includes a partnership (paragraph 1(1)), and a “developer” means “a person who undertook or commissioned the construction or conversion of the building (or part of the building) with a view to granting or disposing of interests in the building or parts of it” (paragraph 2(4)).

The circumstances in which one person will be “associated with” another person for the purpose of the 2022 Act are explained in section 121(2) to (5). It is not necessary to consider these provisions in detail in this appeal.

In summary, paragraph 2 of Schedule 8 provides for all leaseholders of premises in self-contained residential buildings of at least 11 metres or 5 storeys to have full protection from liability to pay service charges if their landlord or superior landlord on 22 February 2022 was the original developer of the building (or an associate) and the service charge is payable for work to remedy or mitigate a defect in the building which gives rise to a risk from fire.

The paragraph 2 protection is the subject of another important deeming provision. Paragraph 14(2) permits the Secretary of State to make regulations providing that (in some or all cases) the condition in paragraph 2(2) is to be treated as being met unless the landlord under the lease provides a certificate to the leaseholder that complies with prescribed requirements.

Regulation 6 of the Leaseholder Protections Regulations is made pursuant to the power in paragraph 14(2). It makes provision for the contents of a certificate, referred to as a “landlord’s certificate”, which the current landlord is required to provide to leaseholders in specified circumstances. Those circumstances include when the current landlord becomes aware of a relevant defect not covered by a previous landlord’s certificate. Regulation 6(1)(c) requires that the landlord’s certificate be provided within four weeks of the landlord acquiring that knowledge.

The landlord’s certificate is required to be in the form set out in Schedule 1 of the Leaseholder Protections Regulations and it must contain the detailed information and relevant documents identified in regulation 6. The consequence of a current landlord not providing a certificate in the prescribed form is specified in regulation 6(7) and is that “the condition in paragraph 2(2) of Schedule 8 to the Act is to be treated as met in accordance with paragraph 14(2) of Schedule 8 to the Act”. In other words, if the current landlord has not complied with the requirement to provide a landlord’s certificate, it is taken to be responsible for the defect for the purpose of paragraph 2, with the result that no service charges will be payable in respect of relevant measures.

The Leaseholder Protections Regulations came into force on 20 July 2022, 17 months after the demand for the disputed service charge in this case but 9 months before the FTT made its decision that the charge was payable. A landlord’s certificate was first provided to Mr Lehner a few days before the hearing of this appeal.

The first of the protections available only to qualifying leaseholders is provided by paragraph 3 of Schedule 8. By paragraph 3(1), no service charge is payable under a qualifying lease in respect of a relevant measure relating to any relevant defect if the landlord under the lease on 14 February 2022 (“the qualifying time”) met the “contribution condition”. The contribution condition is that the landlord group’s net worth at the qualifying time was more than N x £2m, where N is the number of relevant buildings of which the landlord or a member of the landlord group was, at the qualifying time, a landlord (paragraph 3(2)).

The contribution condition is also subject to an important evidential presumption. By paragraph 14(1) of Schedule 8, the contribution condition is to be treated as having been met by the person who was the landlord at the qualifying time (the “relevant landlord”) unless the landlord under the lease provides the tenant with a certificate, complying with any prescribed requirements, and stating that the relevant landlord did not meet the condition. The landlord’s certificate provided for by regulation 6 of the Leaseholder Protections Regulations is required to deal with this issue and to include confirmation whether or not the relevant landlord met the contribution condition.

In this appeal the parties disagree over a fundamental question as to the identity of the relevant landlord on 14 February 2022. We will return to that issue shortly.

No service charge is payable under a qualifying lease in respect of relevant measures relating to any relevant defect if the value of the lease on 14 February 2022 (determined in accordance with paragraph 6 of Schedule 8 and any regulations made under the power it confers) fell below certain limits (those limits are £325,000 if the premises are in Greater London and £175,000 if they are elsewhere.

Paragraph 8 of Schedule 8 says this:

“8.

No service charge payable for cladding remediation

(1)

No service charge is payable under a qualifying lease in respect of cladding remediation.

(2)

In this paragraph “cladding remediation” means the removal or replacement of any part of a cladding system that—

(a)

forms the outer wall of an external wall system, and

(b)

is unsafe.”

This further protection is afforded only to qualifying leaseholders and applies only to the cost of cladding remediation, as defined in paragraph 8(2). In this case the FTT decided that it did not apply to the work carried out by LSMC because it did not involve “cladding remediation”. Whether that conclusion was correct is the subject of one of Mr Lehner’s grounds of appeal.

Paragraph 9 of Schedule 8 provides protection against service charges which would otherwise be payable in respect of legal or other professional services relating to the liability or potential liability of any person incurred as a result of a relevant defect (including the cost of obtaining legal advice, or in connection with proceedings before a court or tribunal, arbitration or mediation). This protection has already been considered by the Tribunal in the first appeal determined under the 2022 Act, Adriatic Land 5 Ltd v Long Leaseholders at Hippersley Point [2023] UKUT 271 (LC).

Where none of the other protections apply, paragraphs 5, 6 and 7 of Schedule 8 provide a degree of protection from service charges otherwise payable in respect of relevant measures relating to relevant defects. These protections are in the form of a limit on the total payable in respect of charges over a period beginning up to five years before a disputed demand and, separately, an annual limit. Each limit is determined by reference to a permitted maximum which varies according to the value of the qualifying lease on 14 February 2022. If the value of the lease was less than £1 million, the permitted maximum is £15,000 where the premises are in Greater London and £10,000 if they are elsewhere. If the value of the lease (wherever the premises are located) was between £1 million and £2 million, the permitted maximum is £50,000, or if greater than £2 million, £100,000. Paragraph 6 confers a power to make regulations concerning the determination of value and also deals with shared ownership leases.