The Building Safety Bill 2021-22 was introduced in July 2021 and proposes a safety regime to govern the construction and maintenance of certain buildings, in particular "higher-risk buildings". The regime includes the introduction of financial charges to be used towards maintaining fire safety standards and, with regards to the Levy, the remediation of existing fire safety defects (including, for example, the removal of unsafe cladding).
The Bill introduces 3 stages or "Gateways" at which certain action must be taken by a developer:
Gateway one – at the planning application stage
Gateway two – before building work starts
Gateway three – when building work is completed and before occupation
THE BUILDING SAFETY LEVY – THE "GATEWAY TWO" LEVY
What is it?
The gateway two levy will operate separately, but alongside, the government's UK-wide residential property developer tax (RPDT), which was announced at the same time as the levy. (Further information on RPDT can be found here).
At Gateway two, construction cannot begin until the Building Safety Regulator approves the building control application and such approval will not be given unless the levy has been paid.
Who will have to pay the building safety levy?
The levy will apply to developments of certain high-rise buildings. This includes residential buildings or care homes over 18m or 7 storeys, subject to exclusions to be further defined by the Bill.
How much will the levy cost developers and how will it be calculated?
At the moment, we don't know how the levy will be calculated but it has been proposed that the levy may apply a flat charge per square metre of the internal floor area (subject to exclusions) or per residential unit falling within the scope of the levy.
The levy rate will be set out in regulations and may be varied over time.
How long will the process take?
It is intended that the Building Safety Regulator will need to determine building control applications at Gateway 2 within 12 weeks, and the levy process should take place within that timescale.
When will the Building Safety Levy come into force?
The changes are intended to come into effect 12-18 months after the Building Safety Bill has been passed by Parliament and become law.
BUILDING SAFETY CHARGE
What is it?
In addition to duties relating to construction and development, The Building Safety Bill also introduces various new legal duties for landlords and building owners of high-risk buildings to keep their building safe. Some of the costs associated with these duties can be passed to tenants via a Building Safety Charge which would operate in a similar way to a service charge, albeit could only be charged to tenants of "relevant leases" being leases granted for a fixed term of 7 or more years and where the tenant is liable to pay a service charge.
What does the Building Safety Charge cover?
A prescribed list of charges that may be recovered via the Building Safety Charge are defined in the Bill as ‘relevant building safety measures'. These measures include, for example, appointing a Building Safety Manager or preparing a residents’ engagement strategy.
What about existing leases?
The Building Safety Charge will be implied into all "relevant leases" so existing leases will be caught.
What does this mean for landlords?
Landlords will need to ensure that they familiar with the charges that can and cannot be passed to tenants via the Building Safety Charge. The Building Safety Charge is intended to cover a specifically defined set of safety measures which will not include, for example capital expenditure relating to remediation.
The mechanics of the Building Safety Charge
It is intended that the mechanism for dealing with the Building Safety Charge will be set out in secondary legislation. This will include details of how the Building Safety Charge will be calculated, apportioned, how estimates are dealt with, billing frequency and notice requirements to tenants. Tenants will be entitled to challenge the reasonableness of the Building Safety Charge in the same way as they might with an ordinary service charge so landlords and building owners should ensure they maintain accurate records and audit trails.
How much will the Building Safety Charge cost?
The estimated average monthly cost to a tenant is currently estimated by the Government to be between £9 and £26 via the Building Safety Charge.
What happens if tenants don’t pay the Building Safety Charge?
Unless an individual lease provides otherwise, tenants may be pursued for payment in the same way as they can be pursued for non-payment of their service charge.
When will the Building Safety Charge come into force?
The changes are intended to come into effect after the Building Safety Bill has been passed by Parliament and become law.
This blog is part of a series published by Howard Kennedy LLP on the Building Safety Bill. For more information please contact Sharon Stark or Stuart Duffy.
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