Twitter
Google+
LinkedIn
property-solicitors kingston thamesproperty solicitors london
  • Home
  • About Us
  • Services
  • Case Studies
  • Blog
  • Contact

Parliament Closes Qualifying Lease Loophole in Building Safety Act 2022

November 16, 2023Admin

In a significant move to address concerns surrounding leaseholder protection provisions, the government has amended the Building Safety Act 2022 to rectify a critical loophole related to “qualifying leases.” The amendments, included in the Levelling-Up and Regeneration Act 2023, which received Royal Assent on October 26, 2023, marking a decisive step toward streamlining the complex procedures that have hindered the sale of leasehold flats in mid to high rise blocks.

Qualifying Status under the Building Safety Act 2022

Since the Building Safety Act 2022 came into force last summer, criticisms mounted against the convoluted procedures involving landlord’s certificates and leaseholder deeds of certificate. However, exacerbating the situation was an unintended error in the original legislation. This flaw stipulated that a leaseholder would lose the “qualifying status” of their lease merely by extending it, adding another layer of complexity to an already intricate process.

To fall under this category, the lease must be of considerable duration, with the tenant being responsible for a service charge, and it must have been granted before February 14, 2022. Additionally, on that date, the dwelling should have served as the tenant’s primary residence, or the tenant should have owned no more than two other dwellings in the UK.

Issues Arising when Extending Leases

However, the scenario changes when a leaseholder opts to extend their lease, either through informal agreement with the landlord or by exercising statutory rights under the Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA). This extension involves the surrender of the “old lease,” promptly replaced by the newly granted “new lease” for the flat, effectively extending the term. Notably, the extended lease’s date falls beyond February 14, 2022, resulting in the loss of its “qualifying lease” status, despite the original lease meeting the criteria.

This loss of qualifying status opens up the leaseholder to significant service charge expenses for rectifying building safety defects in the block and can adversely affect their ability to sell the flat.

Implementation of a “connected replacement lease” in the Levelling up and Regeneration Act 2023

In May 2023, the government acknowledged the issue and pledged to address it through legislation. Amid concerns about the lack of progress, last-minute amendments were introduced to the Levelling-Up and Regeneration Bill. The resulting amendments, with sections 119(3A) and 119A added to the Building Safety Act 2022, aim to close the qualifying lease loophole.

The amendments introduce the concept of a “connected replacement lease,” specifying conditions for a new lease to qualify. This includes being a new lease for a single dwelling in a relevant building, replacing a qualifying lease, and maintaining continuity in the property let. The definition encompasses both statutory and contractual lease extensions.

The amendments have retrospective effect, treating them as in force since June 28, 2022—the original commencement date of the leaseholder protection provisions. This means that any leases extended during this period will be considered as if the loophole had never existed.

While the new rules might need some thought, they seem to have fixed the lease extension issue. The backdated effect gives confidence to everyone, making lease transactions clearer and more stable.

Previous post Leasehold Reform Update November 2023 following Kings Speech

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recent Case Studies

  • Collective enfranchisement

  • Statutory lease extension

  • Vault acquisition

  • Licence to alter

  • Deed of variation

Blog

  • Parliament Closes Qualifying Lease Loophole in Building Safety Act 2022

  • Leasehold Reform Update November 2023 following Kings Speech

  • Sloane Stanley Estate v Mundy [2016] UKUT 0226 (LC) – the “hedonic regression” case

t. +44 (0)20 8546 6630
e. info@arcadialaw.co.uk

Arcadia Law Ltd, registered in England & Wales, registered company No. 10043933 Registered Office: 15 Approach Road, London, SW20 8BA

Authorised and Regulated by the Solicitors Regulation Authority, No. 629605

About Us
Blog
Privacy Policy
ALEP
© Arcadia Law Ltd. 2016 All Rights Reserved. | EDOT3 Design Newcastle
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
Cookie SettingsAccept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT