Building Safety Levy – What You Need to Know

Sophie Bennett, Associate Solicitor at Holmes & Hills provides a clear overview on the upcoming Building Safety Levy.

The Building Safety Levy will come into force on 1 October 2026. It forms part of the Government’s ongoing approach to improving building safety and funding the remediation of residential buildings where original developers have not addressed fire safety defects.

When the Levy Applies

The Levy applies to developments that create new or additional residential floorspace, specifically:

• New-build schemes with:
  • 10 or more dwellings, or
  • 30 or more bedspaces in purpose-built student accommodation (PBSA).
• Redevelopment projects that:
  • Increase the number of dwellings by at least 10, or
  • Add 30 or more bedspaces to existing PBSA.

Exemptions

The exemptions largely mirror those used for Higher-Risk Buildings under the Building Safety Act 2023. Developments not subject to the Levy include:

1. Care homes
2. Hospitals
3. Rehabilitation centres

Additionally:

• Social housing and supported housing are exempt.
• The Levy does not apply retrospectively to applications made before the legislation commences.

When is the Levy Paid?

The Levy is paid to the local authority responsible for the area of the development. Payment becomes due when a levy liability notice is issued during the building control process.

Developers must pay the Levy on or before the earlier of:

• The completion notice date for the first phase of works, or
• The date of first occupation.

Failure to pay means the completion or final certificate cannot be issued.

How is the Levy Calculated?

The formula in the legislation can be distilled to:

(chargeable floorspace + chargeable communal floorspace) × area rate

Key points:

• The area rates are fixed within the legislation and vary by location.
• A discounted rate is available for previously developed land, provided at least 75% of the site qualifies as previously developed.

Information Requirements and Timeframes

Applications must now include statutory information required under the Building Regulations 2010 to enable local authorities to calculate the Levy.

Local authorities have five weeks to reject an application if the required information has not been provided.

Impact on Construction Contracts

At this stage, it is unlikely that building contracts will include detailed clauses about the Levy, as payment is the developer’s responsibility. However:

• Parties may include cooperation or information-sharing obligations to ensure the developer can provide the necessary details to the local authority.
• Contractors might consider negotiating extensions of time or loss and expense provisions if the developer’s failure to pay causes delay, but this will depend on commercial leverage.

Impact on Funding and Third‑Party Agreements

Funding agreements may impose contractual obligations requiring prompt payment of the Levy. Developers should ensure they maintain accurate records and have the information needed to comply.

Wider Industry Implications

Although the Levy may cause commercial pressure - particularly due to the risk of delayed certification - it is not expected to feature heavily in construction contracts for now. That said, delays in payment could affect delivery times and, more broadly, the construction sector’s ability to meet housing targets.

Conclusion

The introduction of the Building Safety Levy marks a significant shift in how the UK funds the remediation of unsafe residential buildings. While its financial and procedural obligations fall primarily on developers, the Levy will have knock‑on effects across the construction supply chain, local authorities, and funders. Although it may not feature prominently in construction contracts at this early stage, its impact on project timelines and compliance requirements means all parties involved in residential development should understand how it operates and prepare accordingly. As the commencement date approaches, developers and contractors alike will benefit from early planning, robust information management, and clear contractual responsibilities to avoid delays and ensure compliance.

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