Building Safety Act 2022 ‘key information for developers of higher-risk buildings’

1 November 2023
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On 1 October 2023, a host of secondary legislation published under the Act came into force. It created new obligations for developers of Higher-Risk Buildings, which supplement those already in place.

This note gives an overview of the obligations that a developer of a new Higher-Risk Building will now face.

The Responsible Actors Scheme

The Responsible Actors Scheme is intended to ensure that developers remedy any defects in existing buildings for which they are responsible. It works by requiring certain developers to enter into a remediation contract with the government and imposes consequences if they do not.

You will be eligible to apply for the Scheme if:

your principal business (more than 50%) has been residential or mixed-use property
development, you meet the Profits Condition and you have developed or refurbished (excluding work done solely as a contractor) one or more residential buildings over 11 metres in height in England between 5 April 1992 and 4 April 2022;
you are a developer who meets the Profits Condition and have developed or refurbished (excluding work done solely as a contractor) two or more buildings eligible for a relevant government cladding remediation scheme; or
you are a developer who has developed or refurbished (excluding work done solely as a contractor) at least one residential building over 11 metres in height that qualifies for remediation under the terms set out in the developer remediation contract, and you voluntarily choose to join the Scheme.

If you are eligible to become a member of the Scheme, you must:

enter into a developer remediation contract with the government;
in accordance with the contract terms:
- identify residential buildings that are over 11 metres in height developed or refurbished by you over the 30 years ending on 4 April 2022, and any of those buildings known to have life-critical fire safety defects;
- remediate and/or mitigate or pay for the remediation/mitigation of life-critical fire safety defects in those buildings;
- reimburse government schemes for taxpayer-funded work to remediate and/ or mitigate defects in those buildings;
- not undertake restructurings or certain other steps which would mean that you cannot fulfil your obligations under the Scheme;
- meet all other obligations of the developer remediation contract, including keeping building owners, residents and the government updated on the progress of remediation works.
comply with requests for information made by the Secretary of State pursuant to the contract and regulations, to enable the Secretary of State to carry out his monitoring and enforcement functions; and
not take steps to avoid your obligations under the Scheme or defeat its aims.

If you do not do so, the consequences are severe. They include:

Planning prohibitions – You will not be able to carry out major development of land, which includes 10 or more residential units, residential schemes on a site of at least 0.5 hectares in size, commercial development of 1000m or more of floor space, and development sites over 1 hectare in size

Building control prohibitions – You will not be able to give or receive relevant notices (i.e., building commencement notices), certificates, and applications.

The dutyholder roles

The legislation creates new roles and responsibilities. The Building Safety Regulator (BSR) explains that, as a developer, your main duties will be as follows:

to make (and review as necessary) suitable arrangements for planning, managing and monitoring a project, including the allocation of sufficient time and resource, to deliver compliance with building regulations. In practice, this means appointing the right people, with the right competencies (the skills, knowledge, experience and behaviours or organisational capability) for the work and ensuring that they have systems in place to ensure compliance with building regulations;
where there are several firms working on different aspects of the project, to appoint a Principal Designer to be in control of design work and a Principal Contractor to be in control of the building work;
to provide building information to every designer and contractor on the project and ensure that they are aware that the project includes any existing or proposed Higher- Risk Building work; and
to co-operate and share information with other relevant duty holders.

Building control regime for Higher-Risk Buildings

The new building control regime, colloquially known as the ‘Gateway Regime’, commenced on 1 October 2023. There are three ‘gateways’, one during the planning phase, another during the construction phase, and the final gateway at the completion of the project. This section deals with the three ‘gateways’.

Application process

Before building works start on a new Higher- Risk Building a building control application must be secured. The application must be submitted to the BSR, which has 12 weeks to assess the application. As a developer, you will have overall responsibility for the application. The application must contain sufficient information to show how the building when built will:

satisfy all applicable functional requirements; and
demonstrate how the developer intends to manage the construction activity.

If it is determined that the new building will be a Higher-Risk Building, it must include the following documents:

a competence declaration;
a building regulations compliance statement;
a fire and emergency file;
a construction control plan;
a change control plan;
a mandatory occurrence reporting plan; and
a partial completion strategy.

Each of these documents has particular aims and requirements and will need to be considered in detail.

Golden Thread

The “Golden Thread” of information in relation to a building is the information that allows a person to understand a building and the steps needed to keep both the building and people safe, now and in the future. The legislation places requirements for the Golden Thread to be managed throughout the life cycle of a building.

Once you have building control approval, you must give the BSR at least 5 days notice before commencing work. The Principal Contractor will then be responsible for managing the Golden Thread. That said, as a developer you must be aware of the Principal Contractor’s responsibilities and appropriately monitor whether they are performing their duties. Furthermore, the practical reality is that the Principal Designer will need to collaborate with the Principal Contractor, so this should be kept at the forefront of your mind. The Golden Thread must be:

kept digitally;
kept securely;
a building’s single source of truth;
available to people who need the information to do a job;
available when the person needs the information; and
presented in a way that the person can use.

Construction phase

There is no doubt that throughout the construction phase of any project, changes occur. There are new processes that must be followed in relation to changes. The process will depend on whether the change is a Major Change or a Notifiable Change. There are detailed provisions regarding what will amount to each, and legal advice should be sought if the position is unclear. The BSR has the power to change the category of any change, where it deems appropriate to do so.

It is essential that any Safety Occurrences during the construction phase are reported to the BSR, via the MOR system. As the developer, you will need to take all reasonable steps to ensure that the Principal Designer and the Principal Contractor have put an effective MOR system in place.

Completion certificates

Higher-Risk Buildings need a completion certificate to enable the building to be registered or occupied.

Developers must now submit a completion certificate application once notifiable building work is complete. Occupation will not be allowed unless the BSR issues a completion certificate, which may take at least 8 weeks.

This application comprises of the following (which will be stored in the Golden Thread):

‘as built’ plans and information;
final versions of all accompanying documents that accompanied the initial application;
any controlled changes and the change control log;
information captured through construction;
information captured through commissioning; and
information captured through final functional inspections.

Upon receipt of the application, the BSR will conduct its final inspections of the building work and, if satisfied, will issue the completion certificate. If not, the BSR must reject the application. Errors can be corrected – but this will no doubt incur unwanted additional time costs and pressures.

Non-compliance and enforcement
Under the new secondary legislation, the BSR’s power to enforce non-compliance is strengthened. The table below identifies the offence of non-compliance and the penalty associated with the offence.

Offence	Scope of power	Penalty	Reference
Providing false or misleading information to BSR	Criminal offence Triable as an either way offence	Unlimited fine 1 year imprisonment (magistrates) 2 years imprisonment (crown)	Section 24 BSA22
Contravention of building regulations	Criminal offence Triable as an either way offence No time limit Compliance notice must be served within 12 months Stop notice	Unlimited fine Fine for each day the contravention continues (£200)	Section 35 BA84
Failure to comply with compliance and stop notice	Criminal Offence	Unlimited fine 1 year imprisonment (upon summary conviction – magistrates) 2 years imprisonment (upon indictment – Crown)	Section 35B BA84 Section 35C BA84
Removal of offending work	Time limit extended to 10 years	Notice to remove contravening work Chargeable work	Section 36 BA 84

It is critical to take note that directors and managers of companies may be found liable for the criminal offences identified above.

Conclusion

In this current post-Grenfell climate, and in the wake of the host of obligations created by the secondary legislation, it is critical that developers of new Higher-Risk Buildings are acutely aware of their obligations and seek legal and other professional advice where necessary. The BSR has the power to enforce penalties against the company as well as directors and managers personally.

Glossary

Act: Building Safety Act 2022.

BSR (Building Safety Regulator): The Health and Safety Executive, in its capacity as Building Safety Regulator.

Higher-Risk Building: A building which is at least 18 metres in height (or has at least seven storeys) and contains at least two residential units, or is a care home or is a hospital. Inc student accommodation. Does not include secure residential institutions; hotels; military barracks and living accommodation for military personnel.

Major Change: A change that would undermine the basis by which building control approval was granted.

MOR: Mandatory Occurrence Reporting.

Notifiable Change: A change that potentially has an impact on compliance with building control approval.

Profits Condition: Your average annual operating profit in the financial years ending 2017, 2018 and 2019 was greater than or equal to £10,000,000.00.

Safety Occurrence: A safety occurrence (structural safety or fire safety) in relation to the design of a building or an incident or situation during construction for which the building, if occupied without the risk being remedied, is likely to present a risk of a significant number of deaths or serious injury to a significant number of people.

The Scheme: Responsible Actors Scheme.

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Andrew Parker

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Building Safety Act 2022 – key information for leaseholders

1 November 2023
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The Building Safety Act 2022 aims to ensure that works to remedy safety defects in high-rise buildings are carried out and that leaseholders are protected from the costs of the works insofar as possible. The majority of the leaseholder protections came into force on 28 June 2022. If you are a leaseholder of a high-rise building, it is worth understanding how they affect you.

This note provides key information to help you navigate the rules and regulations and sheds light on how the Act is working to protect you and how it may work in future.

Are you a qualifying leaseholder?

The Act seeks to protect leaseholders from landlords passing on the costs of necessary remediation works via the service charge. The level of protection will differ depending on whether or not you are “a Qualifying Leaseholder”.

You will be a Qualifying Leaseholder if your lease meets the following criteria:

it is a long lease (more than 21 years in length) of a single dwelling within a Relevant Building;
you are liable to pay a service charge under the lease;
it was granted before 14 February 2022; and
on 14 February 2022:
- the dwelling was your only or principal home; or
- you did not own more than 3 dwellings in the UK in total.

Are you protected from remediation costs?

Protections for qualifying leaseholders

If you are a Qualifying Leaseholder, the following costs cannot be passed on to you via the service charge:

historical safety remediation costs where the developer responsible for the defect is, or is associated with, your building owner;
historical safety remediation costs where the landlord as at 14 February 2022 met the Contribution Condition;
historical safety remediation costs where your property is worth less than £325,000 in Greater London or £175,000 elsewhere in England;
unsafe cladding remediation costs (i.e., the removal or replacement of something that both a) forms the outer wall of an external wall system of your building and b) is unsafe);
legal or associated professional services costs relating to liability for relevant defects.

Costs that may be passed on to you via the service charge (up to a capped amount and according to the terms of your lease) include:

waking watch costs;
remediation of non-cladding defects, for example:
replacement of a fire door that has prematurely degraded and is no longer safe;
installation of missing fire compartmentation.

Any protections which apply will automatically transfer to any future buyers of the lease. This means that if your property was eligible for the protections on 14 February 2022 and you sell it, your buyer also benefits from those protections (and vice versa).

Protections for non-qualifying leaseholders

If you are a Non-Qualifying Leaseholder, the position is less favourable, although the landlord still won’t be able to pass on historical remediation costs (including the cost of fixing or replacing any unsafe cladding) where the developer responsible for the defect is, or is associated with, your building owner.

If the costs don’t fall in this category then you may be asked to contribute to remediation costs according to the terms of your lease. Before your landlord does pass these costs on to you, it has to try to obtain government funding, and it may also be able to claim some of the costs back from responsible third parties. It is important to note that the costs passed on to you cannot be increased to replace money that Qualifying Leaseholders are not liable for.

Landlord and leaseholders certificates

The legislation introduces a certification procedure, which is intended to ensure that the parties have the information required to understand who is liable for remediation costs.

Leaseholder’s Deed of Certificates

To demonstrate whether you are a Qualifying Leaseholder and to enable your landlord to work out any capped contributions for non-cladding remediation works, you need to provide your landlord with a Deed of Certificate.

You can do this at any time, or when your landlord asks you to provide one.

Landlord’s Certificates

Before it can pass on any remediation costs, your current landlord (defined as a person who is a landlord under a lease of premises in a Relevant Building) must complete a Landlord’s Certificate. It will demonstrate whether the landlord of your lease on 14 February 2022 met the Contribution Condition and whether at that date any of the landlords in the building were, or were associated with, the person responsible for a relevant defect.

There are certain ‘trigger events’ following which your landlord must provide you with a:

Landlord’s certificate:

when they want to pass on remediation costs to you through the service charge;
within 4 weeks of receiving notification from you that you are selling your property;
within 4 weeks of them becoming aware of a relevant defect which was not covered by a previous Landlord’s Certificate;
within 4 weeks of you requesting one;
within 4 weeks of becoming aware of a new leaseholder’s Deed of Certificate which contained information that was not included in a previous Landlord’s Certificate.

If your current landlord does not provide a valid Landlord’s Certificate they will be unable to pass remediation costs on to you.

What protections will be in place for the future?

There are various rules in place to protect occupants of new and existing Higher-Risk Buildings against building safety risks in future, and it is expected that these will be supplemented by additional legislation shortly.

Accountable person(s)

The legislation creates the roles of the Accountable Person(s) and the Principal Accountable Person (PAP). They will together manage the building safety risks in each Higher-Risk Building.

The PAP of an existing Higher-Risk Building was required to register the building with the BSR by 1 October 2023. It is now an offence for the building to be occupied but not registered.

It is expected that further secondary legislation will come into force soon which will add to and define the obligations placed on the Accountable Person(s) and PAP.

Expected Implied Lease Terms

It is also expected that, in due course, legislation will amend various elements of the 1985 Act, by implying terms into leases of dwellings in Higher-Risk Buildings. The amendments are expected to place obligations on both landlords and leaseholders and amend the service charge provisions in some cases.

Expected Implied Terms for Landlords

Where the landlord is an Accountable Person for a Higher-Risk Building, to comply with its building safety duties.
To co-operate with any person in connection with a “relevant person” who is complying with their building safety duties.
Where a special measures order in relation to a Higher-Risk Building is in force, to comply with that order so far as it relates to the landlord.

Where a covenant or agreement purports to exclude or limit these obligations on the landlord, that covenant or agreement will be void. If an agreement seeks to impose a penalty or obligation on the leaseholder for enforcing a landlord’s obligations under the 1985 Act this will also be void.

Expected implied terms for leaseholders

In addition to implied terms for landlords, the Act is also expected to introduce a number of implied terms into a qualifying lease for leaseholders. These include the following:

To allow the landlord, an Accountable Person or a special measures manager (or anyone authorised in writing by them) to enter the premises for a relevant building safety purpose, which includes:
inspecting the premises in connection with their building safety duties;
carrying out works to the premises that are required to comply with building safety duties. “Works” is defined as including alterations, improvements, and installations; and
accessing a part of the building that is not let to a leaseholder to inspect or carry out works to that part of the building.
If the leaseholder is a resident in a Higher- Risk Building, it is expected that the Act will imply various duties on leaseholders aimed at ensuring that their conduct does not result in building safety risks materialising and ensuring co-operation with the Accountable Person(s) and PAP.
To ensure compliance with any special measures order made, insofar as the order relates to that leaseholder.

If any covenant or agreement purports to exclude or limit these obligations, that covenant or agreement will be void.

Implied terms re service charge

The Act also operates to amend the service charge provisions in a relevant lease (being a lease of 7 years or more under which a service charge is payable, and which is not a relevant social housing tenancy) of residential premises in a Higher-Risk Building.

These allow the costs to include the taking of “building safety measures” by, or on behalf of, a landlord or superior landlord who is also the Accountable Person, or a special measures manager. These can include the costs of applying for the building to be registered, and other costs associated with the managerial requirements of the Accountable Person(s) and PAP. Any costs resulting from non-compliance with the rules will not be recoverable.

What can I do if my landlord is not carrying out necessary works?

There are steps which leaseholders can take to ensure that their landlord undertakes any necessary remediation works.
Leaseholders can apply on their own, or as a group, to a Tribunal for a binding remediation order which requires landlords/building owners to remediate building safety defects.
Leaseholders can also apply for a remediation contribution order which will require a company to make payments in connection with the remediation of building safety defects. The application can be made alongside an application for a remediation order or as a standalone application.

Conclusion

The Act has widespread ramifications and is a complex piece of legislation. A central part to understanding the obligations arising from the Act is the correct identification of whether leaseholders have a qualifying lease, or if the building is a Higher-Risk Building. Legal advice is likely to be needed.

The statutory criteria relating to the Accountable Person or PAP is strict so a third party cannot volunteer for those roles. Outsourcing of the role will not absolve the actual Accountable Person or PAP from liability.

1985 Act	Landlord and Tenant Act 1985
Accountable Person	1. An owner of any part of the common parts (an estate owner) but not if either: each long lease of which the estate owner is lessor provides that another person (who does not own any part of the building) is under a repairing obligation in relation to the common parts (e.g. a management company); or the repairing obligations in relation to the common parts are functions of an RTM. 2. A person who is not an owner of any part of the building, but who is under a relevant repairing obligation in relation to any part of the common parts.
Act	Building Safety Act 2022.
Contribution Condition	A landlord met this if it had a net worth of more than £2 million per each Relevant Building in their ownership on 14 February 2022.
Higher-Risk Building	A building which is at least 18 metres in height (or has at least seven storeys) and contains at least two residential units. This includes student accommodation. Does not include care homes, hospitals, secure residential institutions, hotels, military barracks and living accommodation for military personnel.
Landlord’s Certificate	A standard form certificate demonstrating whether the landlord of your lease on 14 February 2022 met the Contribution Condition and whether at that date any of the landlords in the building were, or were associated with, the person responsible for a relevant defect.
Non-Qualifying Leaseholder	A leaseholder who is not a Qualifying Leaseholder.
PAP (Principal Accountable Person)	If there is more than one Accountable Person, the PAP is: The Accountable Person who holds a legal estate in possession in the relevant parts of the structure and exterior; or A person who is within the scenario above because of a relevant repairing obligation in relation to the relevant parts of the structure and exterior of the building.
Qualifying Leaseholder	A leaseholder meeting the test set out under the heading “Are you a Qualifying Leaseholder” in the text above.
Relevant Building	A building of above 11 metres or at least 5 storeys.

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Andrew Parker

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Renters’ Reform Bill may introduce new risks for tenants – Anna Mullins comments

22 May 2023
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Property Litigation Partner, Anna Mullins, has been quoted in Property Week and Property Reporter on the long-awaited Renters’ Reform Bill entering Parliament, and the new risks it may pose for both landlords and tenants.

Experts have warned that the Bill, published on 17 May 2023, could make it more difficult for low-income renters to secure tenancies since private landlords could be newly motivated to sell their properties.

Mullins commented: “The removal of section 21 no-fault evictions will provide greater security for tenants in the private rented sector. However, it may also drive landlords out of the market and exacerbate the housing crisis, ultimately driving rents up and making it harder for tenants to find affordable rental properties.

“Even if new grounds for possession are introduced or the current grounds are strengthened as proposed, there is bound to be litigation around the circumstances in which problematic tenants can be evicted.

“For example, the proposed wording for the expanded antisocial behaviour ground will extend to “any behaviour ‘capable’ of causing nuisance or annoyance.”

This is clearly open to interpretation and such uncertainty could be detrimental for both landlords and tenants. Similarly, what will constitute an “unreasonable” refusal for a tenant to keep a pet?“These will be issues left for the courts to decide. For landlords, the procedure for obtaining possession is already time-consuming and costly, with many County Courts understaffed and ill-equipped to deal with the volume of straightforward possession claims.”

These comments were originally published on 17 May and can be read here (behind the Property Week paywall) and here in full in Property Reporter.

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Anna Mullins

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Supreme Court ruling paves way for 5G coverage expansion in the UK – Anna Mullins speaks to City AM

28 June 2022
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Property Litigation Partner, Anna Mullins, spoke to City AM following the Supreme Court’s ruling that makes it easier for telecommunications firms to deploy 5G infrastructure in the UK.

The judgment, which comes as the government pushes ahead with plans to transform the UK into a “global leader in 5G”, stipulates that telecoms firms have the right to upgrade their existing phone masts, even in the cases where landowners do not grant them permission.

Mullins described the ruling as a “triumph for technology.”

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Anna Mullins

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High Court judgment highlights the complexities of refusing consent: Anna Mullins writes for Property Week

8 June 2022
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Property Litigation Partner, Anna Mullins, has written for Property Week on the recent High Court judgment handed down in Davies-Gilbert v Goacher and Chester [2022] EWHC 969 (Ch).

Part of the claimant’s land benefited from a restrictive covenant, which prevented the defendants from constructing any building without the claimant’s consent. The claimant refused consent but the defendants proceeded to commence building anyway, in the belief that the refusal was unreasonable.

The claimant issued proceedings and, although the refusal was eventually held to be reasonable, the judgment emphasises, not only the importance of the decision-making process when refusing consent, but also the many complexities that practitioners and landowners (and by wider implication landlords and tenants) must consider when refusing consent.

Mullins says: “it is important to remember that the burden of proof for proving that the covenantee’s refusal of consent is unreasonable lies upon the covenantor. It is not up to the covenantee to justify their decision as reasonable”.

The article was first published in Property Week on 7 June 2022 and is available to read in full here, behind the paywall.

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Anna Mullins

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Forsters promotes 10 lawyers in record year

1 April 2022
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Forsters, the leading London real estate and private client law firm, announces today that it has promoted six Senior Associates to Partner and four to Counsel. This is the single largest round of promotions that the firm has recorded in in its 24-year history. Forsters now has 66 partners and 420 other members of staff.

Emily Exton, Managing Partner at Forsters, commented: “We have promoted 10 talented lawyers from across our practice areas, reflecting the fantastic talent pool we have at Forsters and the strength of the firm’s business. Each of these exceptional individuals has already established a strong market profile and has a track record of providing technically excellent advice to our growing client base while also contributing to our positive working culture. I look forward to working with them as they continue to develop in their new roles.”

The promotions to Partner are as follows:

James Brockhurst – Private Wealth
Jade Capper – Commercial Real Estate
Amy France – Commercial Real Estate
Anthony Goodmaker – Commercial Real Estate
Caroline Harbord – Dispute Resolution
Anna Mullins – Property Litigation

The promotions to Counsel are as follows:

Michael Armstrong – Private Wealth
Polly Reeve – Rural Property
Amanda Sandys – Family
Bryan Shacklady – Dispute Resolution

James Brockhurst, new Partner in our Private Client team, commented: “Forsters is an extremely powerful player in my sector, private wealth, so I am delighted to be joining the partnership. I will be working with clients and intermediaries in the offshore market, and especially look forward to promoting our business in the Middle East. Alongside this, I will continue to work on a deep level in the cryptoassets space, as that industry grows rapidly.”

Jade Capper, new Partner in our Commercial Real Estate team, commented: “I am delighted to have been promoted to Partner during my 10th year at Forsters. Having trained at Forsters, I am excited to be embarking on this new role at the firm and to continue working with our brilliant Commercial Real Estate team and fantastic clients on a broad range of investment and development work. I look forward to further contributing to the team and the firm as a whole, and helping to grow our already formidable network of industrial and logistics clients and advising them on complex and interesting high value deals.”

Amy France, new Partner in our Commercial Real Estate team, commented: “I am delighted to have been promoted to Partner. Having trained at Forsters it is a very special opportunity for me to join the next generation of Partners who will help to steer the firm forward. I am looking forward to leading the Later Living practice within the Commercial Real Estate team and advising our clients who are investing in this exciting growth sector. I will be working alongside the other real estate partners to ensure that our clients receive the fantastic Forsters’ service that we are rightly recognised for.”

Anthony Goodmaker, new Partner in our Commercial Real Estate team, commented: “Having trained at the firm, to become a Partner at Forsters really means a lot to me. I am incredibly proud and excited to be making this step up at such an interesting time for the real estate industry. I am keen to build on our existing network of fantastic clients across the spectrum of investment and development work, with a particular focus on the industrial and logistics sector. As a Partner, I look forward to further contributing to our team and the firm as a whole.”

Caroline Harbord, new Partner in our Dispute Resolution team, commented: “I feel so proud to now count myself among the partners here at Forsters. In addition to being home to fantastic lawyers, the firm is a trail blazer on gender equality and has fostered a culture which really promotes thought leadership. As a partner in the Dispute Resolution team, I look forward to continuing to build my commercial litigation practice, and in particular helping trustees and other parties recover offshore investment losses.”

Anna Mullins, new Partner in our Property Litigation team, commented: “I am delighted to have been promoted to partner in our highly-regarded property litigation team. This promotion reflects the success and growth of our team. I look forward to working strategically with the partners in our award-winning commercial real estate and residential practices to ensure that we continue to grow and deliver a first-class service to our clients.”

Michael Armstrong, new Counsel in our Private Client team, commented: “Having trained at Forsters, I am delighted to have been promoted to Counsel in our award-winning Private Client group. This promotion confirms the firm’s commitment to mental capacity work, and I am looking forward to the chance to develop my practice advising and supporting vulnerable clients and their families.”

Polly Reeve, new Counsel in our Rural Property team, commented: “Having been with Forsters since 2010, I am delighted to be moving to this next phase of my career with the support of such an excellent team around me – our top ranked Rural Property practice provides a strong platform for this to happen. This promotion reflects the expertise we have built and continue to build in the rural sector and in my particular case, in rural transactions, complex and high value residential and mixed-use developments and renewables. My expertise in rural housing development and green energy projects, particularly solar, battery storage facilities and wind farms in rural areas are key issues for our clients and I will developing a broader practice in this demanding area of law.”

Amanda Sandys, new Counsel in our Family team, commented:
“In my new role as Counsel I will be further developing my expertise in advising and supporting clients who are part of a growing network of modern families, with a focus on the financial and parenting issues that can arise on separation particularly amongst cohabitants. Working closely with the wider team, and building on our strong market reputation, I look forward to contributing to the ongoing success of our practice.”

Bryan Shacklady, new Counsel in our Dispute Resolution team, commented: “I am looking forward to developing further our market leading dispute resolution practice, which is unique in combining highly effective commercial litigation with other practice areas for which Forsters is justifiably renowned.”

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James Brockhurst

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Much Ado About Service Charges

30 July 2021
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A recent case (Criterion Buildings Ltd v McKinsey and Co Inc [2021] EWHC 216 (Ch)) has clarified the proper approach to the calculation of service charges in relation to commercial premises. In particular, the apportionment of the service charge between the tenants and the demands for sinking fund contributions was considered.

Apportionment

The issues

Under the terms of the lease, the tenant covenanted to pay a “due proportion” of the total costs of the services and expenses. “Due proportion” was defined as “a fair proportion to be determined by the landlord or the landlord’s surveyors, taking into account the use made of and the benefit received from the services and expenses”.

The tenant argued that the “due proportion” charged by the landlord was not “fair”. The apportionment was based upon the internal floor areas of each lettable unit save for a theatre, in respect of which an 80% discount was applied. This reflected the more limited use of the space demised because, although the theatre was laid out over four levels, most of this was the auditorium and stage area, which were only fully occupied at the bottom level.

Accordingly, the theatre discount increased the burden on the other tenants beyond the proportions that would be produced by using the actual floor areas demised.

The judgment

The judge determined that, whilst the landlord bears the legal burden, the evidential burden was on the tenant to prove that the service charge had been apportioned in an unreasonable manner.

The judge further found that the landlord was entitled to make a subjective (albeit rational) decision as to the division of the service charge. It was not for the court to determine. The landlord could be trusted to make such a decision in this case as it had “no axe to grind”. That is to say, it did not make a financial difference to the landlord as to how the service charge was divided.

Sinking Fund

The tenant failed on the other points it raised relating to set-off, costs relating to a goods lift and a dispute about the sinking fund.

The Issues

In relation to the sinking fund, the lease provided that the landlord shall be entitled to include in the service charge an amount which the landlord reasonably determined was appropriate to build up and maintain a sinking fund and a reserve fund.

The tenant claimed that the landlord had failed to identify the accumulating liabilities and what would be proper for the tenant to contribute, bearing in mind its interest under the lease. As a result, it argued that it did not have to pay.

Further to this, the tenant also claimed that the landlord could not make demands for the tenant to pay into the sinking or reserve fund in the same year as the expenditure took place.

The judgment

The judge stated that there was no requirement for the landlord to give details of how the contributions required for a sinking fund or a reserve fund have been calculated; it simply had to state the amount.

Similarly, the judge found nothing in the terms of the lease which prevented the landlord from making demands for the tenant to pay into the sinking/reserve fund in the same year as the expenditure took place.

Conclusion

This is a favourable judgement for landlords because, in cases where the apportionment of the service charge has no direct bearing on the landlord, they are entitled to apportion the service charge subjectively. However, it is a salutary reminder to tenants to always make enquiries as to the apportionment of the service charge prior to entering into a new lease or taking an assignment of an existing lease.

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Anna Mullins

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Anna Mullins writes for the Property Law Journal on the Telecommunications Infrastructure consultation

26 July 2021
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Property Litigation Senior Associate, Anna Mullins, writes for the Property Law Journal examining the governments recent consultation on the Telecommunications Infrastructure (Leasehold Property) Act.

Anna considers the proposals in the article entitled Telecommunications infrastructure: Further consultation’.

This article was first published in Property Law Journal and is also available at lawjournals.co.uk.

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Anna Mullins

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What the business interruption case means for clients: Anna Mullins writes for FT Adviser

3 February 2021
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Property Litigation Senior Associate, Anna Mullins’s article entitled ‘What the business interruption case means for clients’ has been published in the FT Adviser.

In her article, Anna describes the consequences of the Supreme Court ruling over business interruption policies, which was handed down last month. Anna also explains some of the situations where a client might be able to claim for losses.

The article was first published on 02 February 2021 by FT Adviser and can be found here.

Disease Clauses

There will be cover under Disease Clauses provided there was at least one occurrence of COVID-19 within the relevant geographical radius by the date of any government measure. These clauses do not, however, cover interruption caused by cases of illness resulting from Covid-19 that occur outside that area.
It is no defence for insurers to claim that it was not this local occurrence but the pandemic across the UK and world that caused the loss.

Prevention of Access and Hybrid Clauses

The action taken by the government or public authority was sufficient to trigger cover under Prevention of Access clauses, even though it was not backed by legislation, that is, it was guidance only.
By way of example, when the prime minister (on 20 March 2020) instructed named businesses to close “tonight”, that was a clear, mandatory instruction given on behalf of the UK Government. It was an instruction that both the named businesses and the public would have reasonably understood had to be complied with without inquiring into the legal basis or anticipated legal basis for the instruction. The Supreme Court found that such an instruction is capable of being a “restriction imposed”, regardless of whether it was legally capable of being enforced. The Supreme Court did not, however, rule on whether each of the government announcements and regulations were “restrictions imposed”. It directed that this should be left over for agreement or further argument.
Altering the decision of the High Court, the Supreme Court also decided that “inability to use” premises may still be satisfied where a policyholder is unable to use the premises for a discrete business activity or is unable to use a discrete part of the premises for its business activities. An example was given by way of a department store. If the store had to close all parts of the premises except its pharmacy, this would potentially be a case of inability to use a discrete part of its business premises.
Similarly, “prevention of access” may include prevention of access to a discrete part of the premises or to the whole or part of the premises for the purpose of carrying on a discrete part of the policyholder’s business activities.
However, policyholders can only claim for losses relating to that part of the business for which the premises cannot be used/accessed.

Trends clauses and pre-trigger losses

In relation to Trends Clauses, the Supreme Court reminded parties that such clauses were to be construed consistently with the insuring clauses in the policy and, to do so, they should be construed so as not to take away the cover provided by the insuring clauses; to do so would transform the quantification machinery into a form of exclusion.
Adjustments to the amount to be paid out to policyholders should only be made to reflect market circumstances affecting the business that are unconnected with the pandemic, that is, would have happened to the particular business regardless of Covid-19. Any pre-trigger losses caused by the pandemic should not be considered.

Orient-Express Hotels Ltd v Assicurazioni Generali SpA

The Supreme Court found that this case authority was wrongly decided and should be overturned. Cover under an insurance policy is not subject to whether the loss would have been suffered anyway by the overall impact of the event in question.

Next steps

This decision is good news for businesses and anyone affected should take a pro-active approach to review their policies and reassess previously rejected claims.

While we understand that the Supreme Court will shortly issue its declarations and the FCA is due to publish a set of questions and answers for policyholders, next steps for businesses include considering:

If any part of the decision is directly (or indirectly) applicable to your policy wording. We understand that the FCA will soon publish a list of policy types that potentially respond to the pandemic based on data that they are gathering from insurers. Contact your insurance broker as soon as possible and they may be able to give some preliminary advice.
What additional factual evidence will need to be gathered to establish and prove a valid claim. The FCA has published draft guidance for policyholders on how to prove the presence of coronavirus. The consultation period closed on 22 January and we anticipate finalised guidance coming shortly from the FCA. However, for now, policyholders might want to collate any relevant government guidance that was relied on and start gathering accounting information to demonstrate the losses suffered. Further, to assist in proving that Covid-19 existed within the relevant radius (and at the relevant time), policyholders should consider finding details of reported cases of the virus in and around your area, death statistics published by the NHS or publicly available data published by the Office of National Statistics.

There will still inevitably be disputes even after the Supreme Court has offered such clarity on matters. For example, the trends clauses still have to be applied to take into account unrelated trends and query how government financial assistance is to be taken into consideration when losses are calculated. In that regard, the FCA has produced a “Dear CEO” Letter that calls for insurers to consider the appropriateness of deducting such sums from claims.

Policyholders should also be asking for interim payment on policies where the claim has been accepted but elements of the calculation or agreement on the final settlement remain outstanding. Query whether policyholders can also pursue insurers for potential damages for late payment. Whether such claims will be successful remains to be seen.

In any event, the decision will be welcomed by many policyholders and, as there is no right to appeal from the Supreme Court, the question now is what further cases will be brought by the FCA, action groups, or policyholders in relation to other types of policies, such as wedding insurance or building insurance policies covering loss of rent where there is a Notifiable Disease within a certain radius of the premises. It will also be interesting to see whether any current policy wording gets amended on renewal. Watch this space.

Anna Mullins is a Senior Associate in the Property Litigation team.

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Anna Mullins

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