Hayley Bruce highlights the headaches being caused by the new protections for leaseholders
Poorly drafted legislation; a practical mechanism which lacks clarity; onerous and unclear lender requirements; silent regulators and professional bodies; baffled conveyancers; confused clients and concerned PI Insurers – yes, the Building Safety Act has all the hallmarks of a conveyancing nightmare.
The act introduces protections for leaseholders against landlords and management companies seeking to recover the cost of remedial work (including, but not limited to, the removal of unsafe cladding) through service charges. This seems noble enough. However, there are qualification criteria; the definition of ‘relevant building’ and ‘qualifying lease’ is where the trouble begins. Immediately leaseholders, landlords and conveyancers are asking who knows the height of their building? A qualifying lease depends on the status of the lease on 14 February 2022. This is likely to cause problems for anyone who has purchased after this date, as it will mean tracing sellers and asking them to complete a leaseholder deed of certificate.
The leaseholder deed of certificate is a document used to evidence the status of the lease. As the name (which grates on the nerves) implies, it must be executed as a deed. No-one is sure why, perhaps someone thought it would be more substantial, but as it is unregistrable it can be lost as easily as any other document.
Once the leaseholder deed of certificate confirms the lease qualifies, it can then be served on the landlord who must respond with the landlord certificate. However, the landlord must also serve the landlord certificate if they are notified that the property is being sold. Again, clarity is lacking as to what amounts to the landlord being notified. Is requesting a standard leasehold information pack (LPE1) sufficient? Also, what happens if the landlord believes the building is non-relevant? What if the landlord is notified of the sale, but has not yet received the leaseholder deed of certificate – how can they know whether the lease qualifies? Landlords cannot charge for providing the landlord certificate, even though for bigger landlords it will be time consuming, and what are landlords to do if they simply do not have the information to meet the deadline to provide the certificate, for example if they are still investigating safety defects and ascertaining the works/costs required?
The legislation and regulations do not explain what to do if the building or the lease do not qualify. It is clear the property owner will not benefit from the protections against service charges. However, what is the liability and risk for the potential purchaser? The answers would be in the landlord certificate, but of course these certificates are only required for those owning property with qualifying leases. Round and round we go again!
Now, add in the lenders. The UK Finance Mortgage Lenders Handbook was amended in January 2023 with lender-specific requirements added throughout February. The general requirement is widely drafted so that it applies to all leasehold properties. Lenders require conveyancers to obtain the leaseholder deed of certificate, the landlord certificates and details of the remedial works from the seller’s conveyancers. Now we have two baffled conveyancers. One who is forced to ask for documents, even if they suspect it is irrelevant, and one who is being told not to obtain the documents as they’re irrelevant.
The lender-specific requirements are more incomprehensible. Some lenders require conveyancers (who would be acting for the buyers) to verify the information provided by the seller. One lender even going so far as to require a search of the index of proprietors to prove whether the seller owned more than two properties on 14 February 2022 – a search which the Land Registry only allows for those searching their own property, trustees in bankruptcy and personal representatives. This has led many conveyancers to wonder whether acting for these banks or on leasehold transactions, whatsoever, is worthwhile.
All through this the Law Society and other professional bodies remain silent.
In conclusion, dear conveyancers, if you are struggling with the Building Safety Act, you are not alone. Not much comfort I know, but we need to be talking (or shouting) about these problems to get to a practical solution, both for the benefit of our clients and own mental health.
Hayley Bruce is a residential property associate solicitor at Irwin Mitchell
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