Clause 120 - Implied terms in leases and recovery of safety related costs

Building Safety Bill – in a Public Bill Committee at 11:30 am on 21st October 2021.

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Question proposed, That the clause stand part of the Bill.

Photo of Peter Dowd Peter Dowd Labour, Bootle

With this it will be convenient to discuss that schedule 7 be the Seventh schedule to the Bill.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

It is a pleasure to have you back in the Chair and to serve under you, Mr Dowd.

The Government are committed to ensuring that leases reflect the duties and obligations placed on landlords and tenants to keep buildings safe, and that the costs associated with the regime are fair and transparent. Clause 120 implies terms relating to building safety into leases, so that both landlord and tenant have obligations associated with the new regime clearly set out in their leases. This cements the duties set out in other parts of the Bill.

Clause 120 also ensures that the landlord passes costs associated with the new regulatory regime, via the building safety charge, to leaseholders with long leases of seven years or more. The overriding principle behind the building safety charge is to give leaseholders further information about what they are paying for to keep the building safe and assurance that the manager of the building is charging reasonably. Without the building safety charge, many of these costs would be charged via a service charge. We are introducing this separate mechanism to deliver greater protection to leaseholders, ensuring that costs are transparent and reasonable. By introducing the building safety charge, the Government are ensuring that costs are clearly set out to leaseholders and that certain costs, such as the cost of enforcement against an accountable person, can never be recovered from leaseholders. In well-run buildings, leaseholders will likely see costs partially offset by a corresponding reduction in service charge costs.

Schedule 7 will enable the Government to set out certain obligations for the landlord to fulfil, including providing details of the building safety charge together with a summary of their rights and obligations to leaseholders. Schedule 7 will also give leaseholders the right to request further information about the charge, and they will be able make a written request for a summary of the relevant building safety costs. Once a summary has been obtained, the leaseholder can request more detailed accounts.

We expect that the protections included around the building safety charge will provide the necessary transparency to drive competition to reduce costs for leaseholders. Leaseholders will be able to challenge the costs associated with keeping a building safe in the same way as they can challenge the costs of unreasonable service charges—that is, through the first-tier tribunal.

Clause 120 is key to ensuring the smooth implementation of the new regulatory regime. Setting out further requirements in respect of the building safety charge in secondary legislation—for example, on the obligations of landlords, consultation requirements and excluded costs—ensures that the provisions remain relevant and responsive to changes in the duties of the accountable person or broader leasehold reform. Leasehold law is a highly technical policy area, and it would be inappropriate and counterproductive to include it in the Bill.

We wish to make it clear that remedial costs are not included in the building safety charge. This clause does not make leaseholders liable for the costs of remedial works. Whether or not leaseholders are liable for works is governed by the terms of their existing leases. Clause 120 is vital to ensure transparency on the costs of the new regime, empowering leaseholders to interrogate bills and hold their building owner to account.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

It is a pleasure to serve once again under your chairmanship, Mr Dowd.

I have a number of questions. The building safety charge has proved to be somewhat controversial among leaseholders, residents, tenants and cladding campaigners—the UK Cladding Action Group, the Leasehold Knowledge Partnership, the National Leasehold Campaign and so on. The Minister has mentioned that charges will be fair and transparent. What is the definition of fair and transparent? What is the Department’s assessment of what will be fair and transparent? Given that on 17, if not 18, occasions a promise was made not to put charges for historical remediation costs, which we will get on to in a moment, on to the shoulders of leaseholders, there is a real fear that there could be considerable interplay between the building safety charge, historical remediation costs, service charges and so forth. I would like the Minister to expand on that. Of course, many leaseholders over the past two weeks have had massive invoices arrive through the door for remedial costs relating to historical building safety defects. Some are going bankrupt, as I know he and Department officials will know.

Photo of Ruth Cadbury Ruth Cadbury Shadow Minister (Housing, Communities and Local Government) (Planning)

Does my hon. Friend agree that the existing service charge system for too many leaseholders is opaque and inconsistent? They never know what they will be charged for and, more important, how much they will be charged in future quarters. Leaseholders need not only an improvement to the current service charge system but to be confident that any new charging system will be far better than the current one.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

My hon. Friend makes a powerful and pertinent point, which I am sure the Minister will respond to. I know that it has been a particular issue in shared ownership properties, particularly in London and the south-east. I look forward to the Minister’s response to the points that I and other Members have raised.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

The point about fairness and transparency is incredibly important, not least given the comments that the hon. Member for Brentford and Isleworth made about the opaqueness or otherwise of the existing service charge system. The reason why we will have two clearly defined separate charging systems is to ensure that everybody—leaseholders, landlords and tenants—understands completely what is being covered within the charging system. We will set out further details in secondary legislation, but it is critical that we know—I am sure the hon. Member for Weaver Vale was not confusing the two—that the charges that will be covered by the system are those that result from the introduction of the Bill, and safety aspects that will be applied going forward. It is not about retrospective remediation. There is a clear delineation between the two, and we will make very clear what is covered.

With regard to what might be considered fair, I genuinely feel that, as the system develops people will be able to see within one building what amount is being charged for a particular service or constituent elements of it, and to make a direct comparison with other buildings, how they are being managed and what charges are being applied. They will then be able to use that as evidence to challenge their own bill in the future. Ensuring that people can challenge their bill and ask for further details will be pivotal to the success of the process.

Photo of Ruth Cadbury Ruth Cadbury Shadow Minister (Housing, Communities and Local Government) (Planning)

With respect, although it is good to know that there may be yet another, possibly complex, mechanism by which leaseholders can challenge, would it not be better if they did not need to challenge, except in exceptional circumstances? If the system were clear, transparent and honest at the outset there would be less need for challenges.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

If there was any ambiguity in what I said, I apologise. The expectation is that this will be clear and transparent from the start. We are not setting out in any way to obfuscate; however, it will be reassuring to know that the safety net of challenge exists should it need to be deployed, which I hope will be a rarity.

Question put and agreed to.

Clause 120 accordingly ordered to stand part of the Bill.

Schedule 7 agreed to.