The Building Safety Act 2022 and how it impacts commercial properties

The Building Safety Act 2022 (“the Act”), which received Royal Assent on 28 April 2022, is being brought into force in stages. The Act aims to reform building safety legislation and hopefully is another step forward to achieving better building safety following the Grenfell Tower disaster in 2017. Developers, building owners/managers, landlords and contractors are among those to be affected by the changes already in place as well as further awaited secondary legislation and guidance to be passed. Here, we have set out a brief overview of the Act and how it may impact commercial buildings. Please note the focus of the Act in this article is on its application in England, although there are provisions that apply to Wales, Scotland and Northern Ireland.

Does the Act apply to ALL buildings?

The focus of the Act is on higher-risk buildings (“HRBs”), which is separately defined. Part 3 of the Act, which focuses on the design and construction stage of buildings, defines HRBs as those which are at least 18 metres in height or with at least 7 storeys, which contain two or more dwellings. Part 4 of the Act is considered during the occupation stage of a building and sets out a minimum height of 18 metres or at least 7 storeys  and must contain at least two residential units. Although there is a residential element within the definitions, there is no requirement that such buildings must be purely residential and therefore, mixed-use buildings may fall within the scope if they meet the other criterias in the definition of HRBs.  

It is worth noting that care homes and hospitals are included within the definition of HRBs within Part 3 of the Act, however, are excluded from the definition in Part 4 of the Act. This is because such buildings already have high levels of regulations in place relating to their occupation, for example, care homes and hospitals come under the Care Quality Commission and are regulated as workplaces by the Regulatory Reform (Fire Safety) Order 2005. Hotels and secure residential institutions are excluded for similar reasons.

Part 5 of the Act also creates another category of buildings, which is relevant building (“RB”). A RB   is a building at least 11 metres in height or 5 storeys and contains at least two dwellings. Mixed-use buildings also come under this category. Different rules therefore apply to different categories of buildings, however, some parts of the Act apply to all buildings.

The new regulator

The Act established a new Building Safety Regulator (“BSR”), who will be part of the Health and Safety Executive. The BSR will be the new building control body for all HRBs under the Act (removing this function from building control approved inspectors/local authority), and developers will therefore face a more onerous building control regime under the new three-stage “gateway” regime. The aim is to ensure that building safety risks are considered at each stage of a new HRB design and construction and refurbishment stage. 

Gateways

The BSA creates a gateway regime for the design and construction of and major refurbishment to all HRBs. There are three gateways that HRBs must adhere to. In brief, gateway 1 applies at the planning stage and is already in force and forms part of the existing planning application process in the Town and Country Planning Act 1990. Satisfaction of gateway 1 involves a developer submitting a fire statement with the planning application, showing fire safety issues have been considered. Gateway 2 applies before construction or refurbishment works of a HRB begins and the BSR must be satisfied that the design meets building regulations and that safety management requirements for the completed building are realistic. The BSR has a 12-week statutory period to review and determine the application. Gateway 3 relates to completion – the BSR approval must be obtained on completion of the building works in the form of a completion certificate. Again, the BSR has a further 12-week statutory period to review and determine the application. A HRB cannot be occupied unless a completion certificate has been obtained from the BSR and the building has been registered. At each gateway, the approval of the BSR will need to be obtained in order to progress to the next stage of work.

The timing of the gateway approvals is important and will need to be factored into some real estate documents such as, agreements for leases and development agreements particularly if buildings cannot be occupied for up to 12 weeks after completion. Important dates such as completion dates, rent free periods, dates of permitted entry will all be determined by sign off from the BSR and the property being registered.

Which buildings need to be registered?

Once a HRB has been constructed and gateway 3 completion certificate has been provided, the building will need to be registered with the BSR. Existing HRBs must be registered with the BSR by 30 September 2023 and failure to do so is a criminal offence. HRBs completed after 1 October 2023 must be registered before the building is occupied. 

Accountable person/ principle accountable person

Once a HRB is occupied, Part 4 of the Act imposes obligations on the accountable person (“AP”) to monitor and manage building safety risks. The AP is whoever owns or is obliged to repair the common parts. There may be more than one AP for a building, and they can be an individual, a partnership, or a company. Where a building has more than one AP, a principal accountable person (“PAP”) will be identified and have overall responsibility for the safety of the building. The PAP will be the person who either owns or is legally obliged to repair the structure and exterior of the building. The AP or PAP has an overall obligation to maintain a “golden thread” of up-to-date information about HRBs, which evidence compliance with building regulations. This will ensure that each building owner has the information they need to manage building safety properly and that those responsible for design and construction can be identified and remain accountable throughout the lifecycle of the building.

Other provisions 

• Remediation defects

Part 5 of the Act deals with the recovery of remedial costs of historic defects, which applies to a RB. Generally, landlords are required to undertake to pay for remediation works for a “relevant defect” in a RB. A relevant defect is a defect arising out of relevant works, which are works carried out in the last 30 years (i.e between 28 June 1992 and 27 June 2022) or works undertaken on or after 28 June 2022 to remedy a relevant defect), and which puts people’s safety at risk from the spread of fire or the structural collapse of the building.

Section 122 and Schedule 8 of the Act introduces restrictions on recovery of service charge for remedying defects under “qualifying leases”’ A qualifying lease is a lease for a term of 21 years or more, granted before 14 February 2022 and obliges the tenant to pay service charge. The dwelling must be the tenant’s principal home and the tenant must not own more than two dwellings in the UK. Essentially, the Act sets out a number of financial caps and exclusions on service charge payments for defects in relevant buildings, the aim being to provide additional protection for leaseholders in relation to both cladding and non-cladding remediation works.

If there is a relevant defect, section 123 of the Act gives the First-Tier Tribunal ("FTT") powers to issue remediation orders, if it considers it “just and equitable” to do so, to a relevant landlord of a qualifying lease. The remediation order does not offer a right of recovery against a contractor, designer or developer who has disposed of the property. In addition, section 124 of the Act gives the FTT powers to issue remediation contribution orders (“RCOs”), which are concerned with the funding of these remedial works. The FTT can make RCOs if it considers it just and equitable to do so if applied for by an interested person. These include the BSR, the Secretary of State, the local authority, the local fire and rescue authority, any person with a legal or equitable interest in the RB or other persons specified in the regulations. If granted, the RCO require payment to be made to a specified person for the purpose of meeting costs relating to the remediation works. The order can be made against corporate entities or partnerships that are landlords, developers of the building or a person associated with the landlord or developer.

• Building industry schemes  

Section 126-129 of the Act allows the government to introduce building industry scheme(s), in order to “secure the safety of people in or about buildings in relation to risks arising from buildings or improve the standards of buildings”. The first of these schemes is the “responsible actors scheme”, which requires members to comply with the “developer remediation contract”. The scheme is aimed mainly at major housing developers and other larger developers who have developed or refurbished multiple residential buildings known to have “life-critical fire safety defects”. Eligible developers who do not become members may face consequences for example prohibition from carrying out major development. The definition of major development includes residential schemes that provide 10 or more residential units and also includes commercial development creating at least 1,000 square metres of floor space. 

• Building Liability Orders 

These provide a mechanism through which the costs of remedying building safety risks can extend to “associated” entities with the company/companies involved with the original build, making them jointly or severally liable. Section 131 of the Act sets out the criteria for determining whether a corporate body is associated. The definition is wide and is going to be a concern on corporate acquisitions as it includes parent companies, a company which subsequently purchases the party responsible for the defect, as well as sister companies.  In order for the court to make a building liability order, there must be a “relevant liability” under:

• the Defective Premises Act 1972 (“DPA”);
• section 38 of the Building Act 1984 (“BA”), which is a new cause of action relating to a breach of building regulations causing damage including death or personal injury; or
• resulting from a building safety risk, which is defined under section 130 (6) of the Act.

The Act does not provide restrictions on the types of buildings or building works in respect of which building liability orders can be sought. Liability under the DPA attaches only to works in connection with dwellings but if brought into force, section 38 of the BA is wider and allows claims in respect of any works or buildings. Also, section 130(6) BSA doesn’t specify a type of building. 

• The DPA  

Section 1 of the DPA enables claims to be made for defective works concerning the construction of dwellings where the work renders the dwelling unfit for habitation. The Act introduces a new section 2A under the DPA, which extends the right to claim under the DPA for any work carried out to an existing dwelling i.e repairs, extensions and refurbishments. This is providing the works are done in the course of business and not by an individual doing work in their own or anyone else’s home. Previously, the limitation period for claims under this section was six years from the date of completion of works, however, the Act amends the DPA to extend limitation periods for claims brought under both sections 1 and the new 2A (as of 28 June 2022) from:

• six years to 15 years for claims that accrue or for works completed on or after 28 June 2022 under sections 1 and section 2A of the DPA; and
• six to 30 years retrospectively for claims that accrued or for works completed before 28 June 2022 under section 1 of the DPA.  
  
  
• Section 38 of the BA

Part 3 of the Act intends to bring into force section 38 of the BA, which was brought into law in 1984 but never brought into force. This provision allows a claim for compensation to be brought by anyone suffering losses for physical damage (i.e. injury or property damage) caused by a breach of building regulations. Unlike the DPA, the claims are not limited to just dwellings and residential properties and can apply to all buildings in England and Wales. The limitation for these claims is 15 years and there is no 30 year retrospective limit.

Conclusion 

Although there appears to be a particular focus on residential construction, the Act will have a significant impact on all buildings. In addition to the specific HRBs definitions contained in Part 3 and Part 4 of the Act, the BSR is required by Section 3(1) of the Act “to secure the safety of people in or about buildings in relation to risks arising from buildings and improving the standards of buildings”. This is not limited to HRBs. Furthermore, some provisions apply to all properties regardless of height or use, for example, the building industry scheme provision under section 126 of the Act covers buildings in general and the provisions in relation to building liability orders.

Buyers/occupiers of buildings will be concerned to discover how the Act might impact them. CPSEs have been updated to include specific enquiries relating to the Act in CPSE 1 and CPSE 6 and since the Act highlights the importance of ensuring that the property meets certain conditions, conveyancers will need to be more vigilant and obtain more information about the building safety measures, compliance with regulations and any ongoing remediations works that may be necessary. Overall, as the Act is constantly undergoing updates, we are expecting further significant amounts of secondary legislation and guidance to be passed and it may take some time to see how the Act is interpreted in practice. Overall, it will be a challenge for the built environment sector to keep up with the changes and it may take some time to see the lasting effects of the Act as a lot can change over the coming years. Ultimately, the hope is that the Act will help residents and occupiers in buildings feel safer and will change the way buildings are designed, constructed, and managed.