This week we cover two important Government consultations on the implementation of service charge reforms contained in the Building Safety Act 2022, as well as a case report on a case concerning the disposal of land that was subject to public rights under a statutory trust, together with our usual round up of positive news and insights from around the firm.
Government consultations on service charge reforms under the Building Safety Act 2022
The Department for Levelling Up, Housing and Communities has issued two consultations regarding service charge law reforms in the Building Safety Act 2022 (BSA 2022).
The BSA 2022 has introduced a raft of new legal requirements relating to high-rise residential buildings to keep residents and buildings safe. Certain provisions relating to service charges for historic remediation costs are already in effect, but the latest consultations relate to further reforms to the law on service charges that are due to come into force later this year.
Alternative cost recovery for remediation works
The first consultation relates to section 133 of the BSA 2022, which (once in force) will impose a duty on landlords to take reasonable steps to pursue third party funding (e.g insurance, indemnities, claims against professional teams etc) before passing on remediation costs to leaseholders.
DLUHC is consulting on proposals as to which buildings and works should be within the scope of this duty, as well as the information landlords must provide to demonstrate that they have complied with it. They are also consulting on draft statutory guidance that would explain the reasonable steps landlords should follow.
You can respond by completing the online survey, or by emailing your response to the questions on the GOV.UK page to AlternativeCostRecovery.Remediation@levellingup.gov.uk
Service charge transparency requirements: ongoing costs of the new building safety regime
The second consultation relates to costs recovery provisions for the new building safety measures required by the BSA 2022 (e.g the cost of preparing the safety case report, or preparing the resident engagement strategy). The BSA 2022 introduces new implied covenants into long leases of flats within higher risk buildings, entitling landlords to recover the costs of compliance with the new regime via the service charge. This consultation relates to the administrative changes and forms of service charge demands required to implement the new transparency standards for recovering service charges for the new building safety measures, together with the time frame in which the proposals will be bought in. The Government is also calling for evidence from landlords of the costs that will be incurred and time needed to comply.
The consultations close on 31 March 2023 and can be accessed either via the online survey, or by emailing a response to AlternativeCostRecovery.Remediation@levellingup.gov.uk
Landlords of higher-risk buildings within the scope of the BSA 2022 are encouraged to review these proposals and submit consultation and call for evidence responses, as the outcome will set the new rules for recovering service charges for the cost of both compliance with the new regime and any future remediation works required to higher-risk buildings. Failure to comply with the new rules once in force could result in significant financial liabilities for landlords due to non-recovery of costs.
Supreme Court rules that development land was subject to a statutory trust
In R (on the application of Day) v Shropshire Council , the Supreme Court has overturned the decisions of the lower courts in a judicial review brought against Shropshire Council (the Council) over the grant of planning permission for the development of land subject to a statutory trust.
In a judgment that will be of particular interest to developers buying land from public bodies, the Supreme Court held that the sale did not extinguish public access and recreation rights in respect of the land where the Council had failed to comply with the statutory consultation requirements prior to the sale. This was despite the fact that the developer had bought the land in good faith with no notice of these rights.
The land in question was an area of waste land adjacent to a public park, which had been owned and used by Shrewsbury Town Council (STC) for allotments during the war and subsequently as a tree nursery but had since fallen into disuse. The fencing was not maintained and the public was able to gain access. It was considered by the STC to be separate from the adjacent Greenfields Recreation Ground, created for public use by a 1926 statutory trust.
Under the Local Government Act 1972 (LGA 1972), councils may dispose of land subject to a statutory public trust only if they first comply with sections 123(2A) and (2B), by advertising their intention and considering any public objections. STC, unaware that the land was subject to any trust, sold it in 2017 to a developer, and subsequently in 2018 the Council granted planning permission for houses.
A local resident, Dr Day, alerted to the sale by notice of the planning decision, researched the history of the land and found that it was part of the recreation ground. He and other residents applied for judicial review of the planning decision on the basis that the Council ought to have taken into account the existence of the statutory trust and did not.
Both lower courts accepted that STC should have followed the section 123 procedure. However, both refused to grant relief, on the basis that the purchaser was not bound by the trust and the planning decision would not have been altered had the Council considered it.
Supreme Court decision
The Supreme Court allowed the appeal, ruling that the land was bound by the statutory trust. They did so in part by making a distinction between a public statutory trust and private trust. The kinds of considerations that allow a private trust to be extinguished are not applicable in the case of a statutory trust. The Supreme Court also looked at a range of cases regarding public land and statutory rights more widely, comparing the sort of rights created by a statutory trust with those pertaining for example to village greens, highways and public rights of way together with the history of the statutory provisions relevant to the case and how these have been applied in the past.
They held that section 128(2) could not be meant to extinguish the very important public rights granted by a statutory trust under the LGA 1972 and that such rights could and did survive the transfer of the land into private ownership. The Council ought to have taken the trust into account in making their planning decision, and the grant of planning permission was therefore quashed.
Implications for developers
The judgment is a reminder that developers will need to be robust in their due diligence and/or seek indemnity provisions when purchasing public land from local authorities, to ensure that they are not inadvertently buying land that is subject to a statutory trust.
Insights from around the firm
- The Economic Crime and Corporate Transparency Bill – a short summary of key reforms for companies
- Webinar – Trowers Tuesday: How to deal with employees that don't fit
- Covid-19 Inquiry – Update on timetable
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