Trainee residential conveyancing solicitor, Chloe Canham, takes a look at the changes in qualifying leaseholder status brought in following changes to the Building Safety Act 2022 on October 26th 2023.
This year the Building Safety Act 2022 (BSA) has boggled the best of minds. For months there has been speculation over whether Parliament will amend the shortfalls of section 119 of the BSA. However, on the 26th October, our prayers were finally answered and s.119 was amended. This article explores the shortfalls of the original drafting of s.119 of the BSA and why the 26th October marked a special day for conveyancers and leaseholders across the United Kingdom.
The BSA was intended to enhance leaseholder protection against service charge costs relating to remedial work concerning building safety. However, there were inherent issues with the wording of s.119 which meant that leaseholders proceeding with leasehold extensions did not qualify for protections they would have otherwise had, before completing their lease extensions.
Pursuant to Schedule 8 of the BSA, the legislation offers leaseholder protection for those who hold a '‘'qualifying lease'.
S. 119 of the BSA defined a 'qualifying lease' as one that was ‘granted before the 14th February 2022’. The problem with this definition is that it is time limited. The effect of a lease extension is not just making the length of the lease longer, Instead, the old lease is surrendered and no longer exists and a new one is created for the longer period of time in its place. Consequently, if a leaseholder wants to extend their lease after the 14th February 2022, they lose the protections they would otherwise have had before their lease extension. The practical effect of this wording meant leaseholders completing lease extensions after this date could have become responsible for remediation work costs to their buildings that they were protected from wholly or in part previously, exposing them to significant potential costs in the future.
Very quickly observers started to raise concerns regarding the proposed wording of s.119, which saw specialist organisations such as The Association of Leasehold Enfranchisement Practitioners (ALEP) writing to the Government to point out this catastrophic drafting error.
It was, therefore, unsurprising that Parliament regrouped and on the 18th September the House of Lords debated on the Levelling Up and Regeneration Bill 2023, which sought to address the defective wording of s.119 and offer better protection to leaseholders.
The Levelling Up and Regeneration Bill 2023 inserts s.119A into the BSA, which amends s.119 and states ‘A qualifying lease varied, or subject to any surrender and regrant remains a qualifying lease’. The effect of this is that the Act has retrospective effect meaning extensions of qualifying leases which pre-date the 14th of February 2022, will be protected under the BSA. Consequently, leaseholders with leases that pre-date the 14th of February 2022 will be able to extend their leases without the fear of facing extortionate remediation and service costs.
On the 26th of October, The Levelling Up and Regeneration Bill received Royal Assent and officially became an Act of Parliament. This reform has already been met with positivity and celebration from leaseholders and conveyancers who can now get a better night’s sleep!