Leaseholder Protections
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On 23 November 2023, DLUHC announced that deadline for applications to the Waking Watch Replacement Fund were extended to midnight 31 March 2024.
The purpose of the fund is to help leaseholders by covering the cost of installing a common alarm system in accordance with the recommendations of BS 5839-1 for a Category L5 system, on a building of any size, where a waking watch is in place.
This fund was designed to build on the original £35M Waking Watch Relief Fund (WWRF) that was brought into place for high rise buildings above 17.7m in height, due to unsafe cladding.
Read more about the Waking Watch Replacement Fund here.
- Building Safety Act
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The Property Institute was one of a number of stakeholders who flagged what appeared to be a rather obvious error with section 119 of the Building Safety Act 2022. As agents will know, where a lease is extended, by operation of law the original lease is surrendered and a new lease is then granted. The original drafting of section 119 explained that a qualifying lease had to be held at the qualifying time, i.e. 14th February 2022. This meant that if a qualifying leaseholder extended their lease, that they surrendered their existing lease and were granted a new lease. As the new lease will not have been granted before 14 February 2022, the statutory leaseholder protections in the Building Safety Act 2022 could not apply.
DLUHC proceeded to update their guidance, indicating that they were “..looking to legislate to resolve this issue as soon as Parliamentary time allows”. We now have the legislation in the form of the Levelling-up and Regeneration Act 2023, which received Royal Assent on 26th October.
Section 243 of the Levelling-up and Regeneration Act 2023 inserts a new section 119A into the Building Safety Act. It introduces the concept of a “connected replacement lease”. A connected replacement lease will also be a qualifying lease where the new lease replaces a qualifying lease.
This new provision will have retrospective effect. This means that any losses of qualifying status will be reversed.
The new provision will come into force at the end of the period of two months beginning with the day on which the Act is passed (i.e. 26th December 2023).
- Building Remediation
- Leaseholder Protections
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Today (26th October 2023), the Levelling-Up and Regeneration Bill received Royal Assent.
The measures in the Levelling-Up and Regeneration Act will support communities and local authorities to transform their local areas, complementing government investment in projects that will help regenerate left behind areas, and seeks to speed up the planning system, hold developers to account, cut bureaucracy, and encourage more councils to put in place plans to enable the building of new homes.
The Act also contains two amendment to the Building Safety Act, under the Leaseholder Protections legislation, dealing with circumstances where leaseholders may partly-own other properties, and for leaseholder who have extended their lease and no longer satisfying the criteria for a qualifying lease at the qualifying time (before 14th February 2022). The Lords amendments put forward are:
- Lords Amendment to insert a new clause after Clause 214: Nonqualifying leases under the Building Safety Act 2022
Amendment 242 seeks to secure parity between qualifying and non-qualifying leaseholders
under the Building Safety Act 2022, extending protection to three properties for all
leaseholders and excluding from the calculation of the number of properties those where 50%
or less is owned by an individual.
Lords Amendment to insert a new clause after Clause 214: Qualifying leases under the Building Safety Act 2022
Amendment 243 seeks to address the issue whereby a lease which qualifies for the
leaseholder protections under the Building Safety Act 2022 ceases to qualify where it is
‘extended’ (because a ‘lease extension’ is actually a surrender of the existing lease and the
grant of a new one) or, in certain cases, varied. The new section is intended to apply to a
qualifying lease whenever the variation, surrender or regrant occurred and notwithstanding
any agreement that would disapply the section to a particular qualifying lease.
- Building Safety Act
- Lords Amendment to insert a new clause after Clause 214: Nonqualifying leases under the Building Safety Act 2022
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The FCA has confirmed new measures to support leaseholders in the multi-occupancy buildings insurance market.
The Financial Conduct Authority (FCA) has today (29th September) issued a press release confirming leasehold buildings insurance reforms.
The FCA’s action follows its review of the multi-occupancy buildings insurance market, which found that leasehold buildings insurance premiums had risen significantly since the Grenfell tragedy and building safety crisis, with leaseholders facing substantially higher costs and poor value, althoug unfhortunately, the evidence gathered wasn’t sufficient to assess whether the relatively recent increase in premium rates is fair and appropriate for the risks being underwritten, due to the complexity of underwriting and risk models within the residential property insurance market
From 31st December 2023, insurance firms will be forced to act in leaseholders’ best interests, treat leaseholders as customers when designing products and will be banned from recommending an insurance policy based on commission or remuneration levels, announced in a statement published this morning.
The FCA’s action follows its review of the multi-occupancy buildings insurance market and its aims to ensure better outcomes for leaseholders in the multi-occupancy building insurance market, and other policy stakeholders in a similar position to leaseholders. The new rules will do this by:
• Increasing transparency for leaseholders. This will make it easier for them to identify and challenge poor practices and incentivising firms to deliver better outcomes.
• Requiring firms to ensure their products are consistent with the needs and interests of leaseholders and other policy stakeholders, are priced in a way that provides fair value and that remuneration practices do not lead to poor outcomes.
Insurers will also be required to ensure that their insurance policies provide fair value to leaseholders and provide important information about their policy and its pricing, including the detail of any commission paid for leaseholders.
Although the FCA is pushing ahead with the rules and guidance broadly as they were in the consultation paper, it has made some amendments to them. These amendments are:
• Clarifying the ‘leaseholder’ definition to set out more clearly that it covers residential leaseholders. This means that the disclosure rules only apply to multioccupancy building insurance policies for residential leaseholders. Firms will not need to provide disclosures intended for commercial leaseholders.
• Including an additional part to the definition of ‘policy stakeholder’ so that it only captures natural persons who are acting outside of their trade or profession. This is to clarify that commercial entities (including commercial leaseholders) will not be considered policy stakeholders.
• Introducing guidance to make clear that the required remuneration disclosure for leaseholders must include all forms of remuneration or financial incentive, including contingent remuneration (payment that depends on a policy being taken out) and other remuneration earned post-contract.
• Making provision in the disclosure rules to allow firms to estimate the premium breakdown at building or dwelling level if they are unable to identify an exact figure.
Following a review into broker remuneration practices, the FCA expects brokers to immediately stop paying commissions to third parties (including property managing agents and freeholders) where they do not have appropriate justification and evidence for doing so in line with FCA rules on fair value.
The FCA will undertake further reviews across various products and will consider the full range of regulatory tools available to it as this work is progressed.
- Building Safety Act
- Leaseholder Protections