Landlord's Certificates under the Building Safety Act 2022 – what do landlords need to do?
The Building Safety Act 2022 (BSA 2022) introduced a significant volume of new legislation focused on the remediation of building safety defects in existing buildings. These sections together create new statutory remedies to require landlords and associated persons to pay for remediation works for cladding or other safety defects in residential buildings of at least 5 storeys or 11 metres height.
The government has also issued the Building Safety (Leaseholder Protections) (England) Regulations 2022 (the Regulations), setting out further details of the practical actions leaseholders and landlords will be obliged to take under the BSA 2022.
For landlords, a particularly onerous feature is the obligation to provide Landlord's Certificates in the form set out in the schedule to the regulations.
Sections 117-125 and Schedule 8 of the BSA 2022 makes provision for how the remediation of defects in higher-rise buildings will be paid for, and particularly the balance of liability between leaseholders and landlords. Schedule 8 sets out the restricted circumstances in which remediation costs can be passed on the tenants, and the extent to which landlords are expected to make contributions, which is partly dependent on their responsibility for the defects and partly on the net worth of what is referred to as the Landlord Group (i.e., the wider corporate structure within which the landlord company sits).
The Regulations prescribe the form and circumstances in which landlords must provide information to tenants to enable them to assess whether they will be required to contribute towards the costs of remedial works by payment of a service charge.
Landlord's certificates must be provided:
(a) when the current landlord makes a demand to a leaseholder for the payment of a 'remediation service charge', (i.e any service charge that includes costs for the remediation of defects causing a building safety risk);
(b) within four weeks of receipt of notification from the leaseholder that the leasehold interest is to be sold;
(c) within four weeks of becoming aware (either themselves or by notification from another person) of a relevant defect not covered by a previous landlord’s certificate; or
(d) within four weeks of being requested to do so by the leaseholder.
The certificates themselves are set out in a prescribed form annexed to the Regulations and require a wealth of financial detail and details of works carried out. They must also be accompanied by:
(a) details of the corporate structure of any group of which the landlord is part: this includes the names of any group companies; the beneficial owner of each company; the names of each company's directors; the names of any persons with significant control and details with regard to any trusts that are part of the corporate structure.
(b) financial details for the corporate group: the landlord's company accounts as well as, where relevant, accounts for each company in the landlord group, with the net worth certified by a chartered accountant or the finance director of the landlord's company;
(c) evidence and details as regards works carried out: full details of any persons or joint ventures undertaking works and evidence of the relevant details of the work carried out as well as costs.
Similar evidence will need to be provided for superior landlords and/or any previous landlord who was the landlord on 14 February 2022. Such landlords are obliged to provide this when requested to do so by a current landlord.
Certificates will need to be provided before a landlord can make any demand for a service charge contribution from tenants; in such a case, the certificates are likely to be relevant to all tenants in a building. However, landlords will also have to provide a certificate whenever a tenancy is sold, or whenever a leaseholder requests one, which may mean time consuming updating of the certificate.
If a landlord certificate is not provided in the form set out in the Regulations then it is assumed that the landlord was responsible for any relevant defects and no service charge is payable. It is therefore crucial that landlords who wish to demand a service charge for building safety remedial works comply with the Regulations and provide a landlord's certificate within the required timescales.
The Regulations have been designed in support of one of the objectives of the BSA 2022, which was to shift responsibility for the payment of remediation costs from leaseholders to developers and landlords. In so doing, however, the Regulations imposed a significant administrative burden on landlords.
On 9 February 2023 the Government brought into force the Building Safety (Leaseholder Protections) (England) (Amendment) Regulations 2023, which further modified the definition of Landlord Group in the Regulations. This amendment clarifies what appears to have been a mistake in the original Regulations, which as they stood excluded from the definition of Landlord Group not only companies associated by reason of a common director, but also companies associated by reason of one having control over the other or both being controlled by a third entity. The Regulations as amended retain the exclusion for companies merely associated by reason of having a common director. However, it is now clear that the Landlord Group will include parent and sister companies. This significantly increases the burden on landlords in terms of the requirement to provide information on the wider corporate group of which they are a part.
For further information on the wider implications see our Building Safety Act Essential Guide.