The Building Safety Act 2022 ‘problem’ for new leases solved
7 November 2023
The Levelling Up and Regeneration Act 2023 become law on 26 October 2023 and solves one of the main talking points left over from the Building Safety Act 2022 when it comes to lease extensions.
The Building Safety Act 2022 created the concept of a ‘qualifying lease’ which meant that if you owned one on 14 February 2022, and satisfied other conditions, you were exempt from paying certain categories of service charge relating to cladding works. However, one of the headaches of the Building Safety Act 2022 was that if you needed to extend your lease either voluntarily or under statute, you could lose that protection. This is because a lease extension involves the surrender of the existing lease and the grant of a new lease in its place for the extended term. So even though a leaseholder may be seeking to simply extend their existing lease, the surrender and regrant meant that the ‘new lease’ would not meet the 14 February 2022 rule as it would be dated after then. Therefore, it would no longer be a qualifying lease.
This had the potential to cause serious difficulties in situations where the lease had to be extended because it was being sold or where the term of years left was approaching the 80-year mark. It was an unexpected complication caused by the Building Safety Act and added another layer of time and costs to a client needing to extend their lease.
The Levelling Up and Regeneration Act has now fixed that problem adding the concept of a ‘connected replacement lease’. This means that a previously qualifying lease will be treated as if it were a qualifying lease in its own right without the need to attempt to include wording to ‘get around’ the gap left by the Building Safety Act.
The definition includes situations where the renewal lease involves either the demise of additional land (together with the original grant) or a surrender of part of the original demise. The provision is also retrospective as it takes effect as if it were in force on 28 June 2022, the date s.119 of the Building Safety Act originally came into force.
Whilst many landlords and tenants have managed to agree contractual provisions in leases to try and give effect to the intent of the original Act (even where the wording didn’t say so), this added complication is now removed saving time and costs. Express contractual wording is no longer needed, and its absence is now resolved by the new section.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at November 2023.