The Building Safety Act 2022 brought in some much-needed protections for owners of leasehold properties in taller buildings from the costs of remediating dangerous historical defects in the construction or refurbishment of those buildings. However, the drafting of the legislation has had some unfortunate (and quite possibly unintended) consequences for flat owners whose leases are running short, or who wish to change the extent of their Property.
The Building Safety Act applies to long leases in existence as at 14 February 2022. Owners of leasehold properties may incorrectly assume that as their lease was granted on or before 14 February 2022 and they are a qualifying leaseholder for the purposes of the Building Safety Act that they will remain so if they extend their lease. However, a lease extension operates at law as a surrender and re-grant. This means that you give up the old lease of the Property in return for a new lease. As a result, the new lease of the flat will have been granted after 14 February 2022 and the Building Safety Act will cease to apply. The Government have confirmed that they are aware of the issue, and there have been reports that a bill is intended to be brought forwards in the next session of parliament in Autumn 2023, but no new legislation has yet been put in place to amend it. Therefore, there is currently a risk that a tenant may inadvertently lose the (potentially quite valuable) protections of the Building Safety Act.
Owners of leasehold properties will therefore need to negotiate the terms of any lease extension to include the protections of the Building Safety Act where applicable, which may mean lengthier timescales to negotiate lease extensions and, consequently, any related sale.