Calling for clarity as industry implements the Building Safety Act 2022
The government has therefore been required to create secondary legislation – regulations - to seek to clarify and untangle various provisions in the BSA.
The Act is reliant on regulations to provide the detail of many of its provisions. These clarifying regulations do, however, make understanding the obligations increasingly challenging for businesses.
Seven sets of additional regulations have come into force so far. These tweak various parts of the Act, including the rules in relation to approval of individuals as ‘approved inspectors’, or confirming how notices should be served under the Architects Act 1997.
Various other regulations are in circulation in draft, awaiting consultation and approval.
One area of the BSA that has attracted scrutiny is leaseholder provisions for the ‘in occupation’ stage of a relevant building’s life.
Under the BSA’s leaseholder protections - as originally drafted - every time landlords and building owners were required to provide a landlord’s certificate to each leaseholder, for example if remediation service charge was demanded or a flat was sold, the landlord would also be required to provide extensive information about its corporate structure. This included the names of all directors of each company in the group, plus various financial details and accounts.
Amendment regulations were published 12 June 2023 in draft, which are expected to come into force in the coming months - The Building Safety (Leaseholder Protections etc.) England (Amendment) Regulations 2023 (the “new draft regulations”).
These amendments confirm that where a landlord admits that it is responsible for a relevant defect, and has a net worth that means it does not meet the contribution condition, it will not have to provide any company information as part of its landlord’s certificate – a common sense approach considering the volume and cost of providing potentially commercially sensitive information.
There is often little consistency across the BSA when it comes to defined terms in different contexts or regulations. Indeed, the new draft regulations have already been criticised for contradictions between the wording of the legislation and its Explanatory Notes.
Reports of defective drafting have also been lodged in relation to a different amendment and failure to provide for consequences where notice is not served by a current landlord on a ‘responsible landlord’ - the party obliged to pay remediation costs.
While fuelling the discussion around further reforms, it is likely that parties looking to understand this new legislation may seek judicial guidance on how the provisions of the BSA should be interpreted.
The Court of Appeal has already considered the provisions of the Defective Premises Act 1972 as amended by the BSA – confirming that developers may be owed a duty under the DPA by consultants and contractors.
1 October 2023 will see critical changes brought in under the BSA – impacting the real estate industry.
From this date, existing higher-risk buildings (HRBs) will need to have registered with the Building Safety Regulator (BSR). The Health and Safety Executive also suggests that from 1 October, the registration obligation will expand to include new HRBs. It will also be an offence to allow residents to occupy a building that has not been registered.
Gateways 2 and 3 are anticipated to come into force from then, meaning that building work cannot start until the BSR approves a building control approval application at gateway 2. Residential units cannot be occupied until the BSR has issued a completion certificate at gateway 3 and the building has been registered, with the ‘golden thread’ of information also given to the accountable person.
The detail of the gateway regime will be set out in further regulations.
The government consulted on the new building control regime in 2022, but has yet to respond to the consultation or publish draft regulations. There is uncertainty as to how this regime may operate and little time for the industry to prepare if the implementation date of 1 October 2023 is to be met.
The consultation does propose that the regime will be subject to a six month transitional period, which could result in the new regime being fully operational by April 2024.
Fire safety defects
Regulations setting out the terms of the Responsible Actors Scheme came into force 4 July 2023.
The scheme is aimed at major housebuilders and other large developers. Members are required to sign Self Remediation Terms - agreeing to identify and remediate, or pay to remediate, life-critical fire safety defects in residential buildings over 11m that they have developed or refurbished.
It is expected that this Scheme will be expanded over time to cover other developers.
A looming issue for the real estate industry is how long it will take implement the remainder of the BSA, and how much notice those operating in the industry will be given.
Further detail is awaited including the new duty holder regime, new homes warranty and government response to the second consultation into the proposed building safety levy that will be payable on all new residential building developments in England.
On a purely logistical level, there is also the question of how the BSR will be sufficiently resourced? This is alongside what steps will be taken to enable the real estate industry to viably insure against increased liability, particularly in a PI Insurance market that has seen a prolonged period of hardening.
Those operating in the real estate industry understand how important the BSA is. Businesses have taken robust steps to ensure they are meeting obligations and preparing for future changes. The successful implementation of the Act and its further phases does, however, hinge on the government providing the real estate industry with the time, certainty and legal guidance it needs to deliver it.
Richard Symonds is a real estate partner and litigation specialist at Shoosmiths
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