[2025] UKUT 298 (LC)

Schedule 8 makes provision for service charge payments in respect of relevant defects not to be payable by leaseholders in certain circumstances. By limiting or preventing altogether the amounts that are payable in respect of these defects from being passed on to the leaseholders through the service charge, leaseholders are protected from the costs associated with their remediation.

Schedule 8 removes the existing legal presumption under most leases that leaseholders are liable in full for the costs associated with remediating relevant defects. The Schedule and powers contained within it make provision for liability to sit in the first instance with landlords who are deemed to be responsible for the creation of those defects, and then with landlords that can afford to meet the costs in full. Where neither of these circumstances applies in respect of any relevant landlord, the Schedule provides for an equitable spread of costs, commensurate with a party’s likely ability to contribute to costs….”

Mr Hutchings argued that paragraphs other than 2 to 7 in Schedule 8 were also indicative of Parliament’s intention to provide a coherent structure to deal with relevant defects. He drew our attention to paragraph 9 which provides that “No service charge is payable under a qualifying lease 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” He said that it cannot have been the intention of Parliament not to afford this protection against legal costs to cladding litigation that did not also qualify as costs to remediate relevant defects.

He also cited paragraph 12 which allows the Secretary of State to make provision for the recovery by relevant landlords of a contribution towards costs from other prescribed landlords. That power was exercised in The Building Safety (Leaseholder Protections)(Information etc.)(England) Regulations 2023 but only in respect of relevant defects. Again, Mr Hutchings submitted that Parliament could not have intended landlords to be excluded from the ability to seek a contribution to costs from others for paragraph 8 cladding costs that did not also qualify as costs to remediate relevant defects.

He pointed out that the structure of sections 116-124 had a coherence which was underpinned by the concept of relevant measures to address relevant defects. He placed particular reliance on sections 123 and 124 of the BSA which give interested persons, including leaseholders, the right to apply to the FTT for Remediation Orders requiring relevant landlords to remediate relevant defects and Remediation Contribution Orders requiring contributions to the costs of remediating relevant defects to be made by specified companies and partnerships. Neither remedy would be available to lessees or indeed landlords in respect of non-relevant defect costs under paragraph 8. He submitted that the overall structure of the BSA and the way that the material is divided up in the BSA, is relevant as an indication of legislative intention: Bennion 455-456.

Finally on structure, Mr Hutchings referred to the position of paragraph 8 within the schedule pointing out that it comes after a series of paragraphs specifically dealing with relevant defects and before paragraph 9 which is also confined to relevant defects.

Overall, Mr Hutchings submitted that it would be illogical given the Explanatory Notes and the other provisions of schedule 8 and the background to the BSA, if paragraph 8 were to operate as a wholly “time-unlimited” provision, in circumstances where all the other paragraphs of schedule 8 are timeframe limited by reference to a “relevant defect.” In his submission had this alteration to the common law position been intended Parliament would have been bound to make any such alteration clear in the statutory wording and in truth, only “historical” defects which fall within the 30 year window were intended to be caught by the remediation provisions.

Finally, Mr Hutchings placed reliance on the decision of the Upper Tribunal in Lehner v Lant Street Management Co Ltd [2024] UKUT 0135 (which was decided after permission to appeal had been granted in this case). In an appendix to the decision a series of eight “steps” are suggested as a helpful future guide for those grappling with the complexities of the leaseholder protections. The steps propose a series of questions, the answers to which are intended to be a guide to the applicability of the various protections afforded by schedule 8. The question in relation to paragraph 8 is:

“14.

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?”

As has already been seen “relevant measures” directly relate to “relevant defects.” Additionally, Mr Hutchings said that Lant Street is clear as regards the scope of schedule 8 and supports the case that there must be a “relevant defect” in order for paragraph 8 to be engaged. He contended that we ought not to depart from Lant Street and that accordingly the protections afforded by schedule 8 are inapplicable to the works at CPH.

On behalf of the respondents, Mr Bates submitted that the words of paragraph 8 are clear and unambiguous and the difference between paragraph 8 and paragraphs 2 to 4 should be taken to be intentional. Parliament could easily have chosen to use the words “relevant defect” and/or “relevant measure” but did not do so.

He argued that this interpretation accords with the legislative purpose of the BSA, to secure the safety of those in and around buildings and to give radical protection to the leaseholders specifically in respect of cladding remediation. He said that the distinction between “cladding” and “relevant defects” had been recognised by the Court of Appeal in Adriatic and Triathlon where reference was made to the Explanatory Notes published in April 2022 in connection with the amendments to the Bill which had recently been made. At paragraph 33(iii) of Adriatic Lord Justice Newey referred to the following extract from those notes:

“In respect of what became schedule 8 to the BSA:

‘Lords Amendment 184 inserts a new schedule which outlines the conditions under which the service charge is not payable in respect of relevant defects. No service charge is payable under a qualifying lease in relation to relevant defects for which landlord or associate is responsible or if a landlord meets the contribution condition. No service charge is payable for cladding remediation.’

And in paragraphs 170 to 172 of Adriatic, Lord Justice Newey noted the differences between paragraphs 8 and 9 of schedule 8 when compared with earlier provisions as follows:

“170.

Next, leaseholders with qualifying leases do not have to pay any service charges in respect of cladding remediation. This is the effect of paragraph 8 of schedule 8, which provides that “No service charge is payable” under a qualifying lease in respect of cladding remediation (as defined). It applies even if the landlord does not meet the contribution condition. This can be seen to have implemented the Secretary of State’s announcement that no leaseholder living in their own flat “would pay a penny to fix dangerous cladding”.

171.

Similarly the effect of paragraph 9 of schedule 8 is that “No service charge is payable” under a qualifying lease in respect of certain legal or other professional services. This is of course the provision with which we are directly concerned. Again, it applies even if the landlord does not meet the contribution condition.

172.

Taken together paragraphs 8 and 9 show that a third feature of the legislative scheme is that there are certain categories of costs that Parliament decided should not be claimable at all from leaseholders with qualifying leases – namely cladding remediation costs, and relevant legal and professional costs.”

So far as section 122 is concerned, Mr Bates contended that since the substance of the leaseholder protections is set out entirely in the schedule, section 122 must be read as subject to the schedule rather than the other way round (Bennion at 16.9) and the wording of paragraph 8 of schedule 8 should be afforded more weight than the wording in section 122.

Mr Bates said that any suggestion by Almacantar that unless paragraph 8 is limited to “relevant defects”, the decision might open the floodgates in preventing landlords from recovering service charges in respect of buildings like CPH, of significant age, where the exterior is simply life-expired and in need of repair or replacement, ignores the requirement in paragraph 8 that the cladding system is “unsafe.”

Finally, Mr Bates contended that reliance should not be placed on Lant Street as support for the proposition that paragraph 8 is only engaged if there is a relevant defect since the point was not at issue in the case and there was simply no argument on the matter and as a result, this is not a binding decision on the point.

Both Mr Allison and Mr Amin endorsed the submissions made by Mr Bates. Mr Allison also made a number of additional points. Firstly, that the wording of paragraph 8 differs in important respects from paragraphs 2-4 and if it had been intended that the protection should be limited to cladding which was in a condition amounting to a “relevant defect” there would have been no need to include the limiting condition “unsafe.”

He contended that the even if the cladding remediation in question did not engage the remediation order provisions of section 123, this did not mean that the leaseholders would be without remedy. They would still be entitled to seek specific performance of repairing covenants. And further that a broad interpretation of paragraph 8 did not mean that a landlord of an older building with (as in CPH) deteriorating components would necessarily be in a worse position than previously as older leases were less likely than modern leases to give landlords the right to recover rebuilding or substantial refurbishment costs in any event.

Finally, Mr Allison submitted that although the policy generally underlying the leaseholder protections in sections 116-124 and schedule 8 contain “bright lines” between those leaseholders who benefit and those who do not, that was not sufficient to displace the clear words and policy underpinning paragraph 8 which provided a limited exception from those “bright lines.”