Written by the Brady Solicitors Litigation Team. Brady Solicitors advises freeholders, managing agents, RTM companies and leaseholders on Building Safety Act compliance, service charge disputes, and remediation proceedings.
The Building Safety Act 2022 created significant new cost protections for leaseholders in multi-storey residential buildings. They do not apply automatically. The building has to qualify, the leaseholder has to qualify, and the defect has to fall within a statutory definition that is narrower than it might appear. Getting those tests right matters for everyone with an interest in the building: for leaseholders understanding what they can and can’t be asked to pay, for freeholders and developers working out what can lawfully be.
Part 5 of the Act sets out the rules and defines the type of building that is covered, based on height or storey count. Within that, only qualifying leaseholders are protected, and the qualifying tests depend on the nature of the lease and on the leaseholder’s position as at February 2022. The defect also has to meet a statutory definition tied specifically to fire spread and structural collapse, not to building defects in general. The cost protection operates as a waterfall: a sequence of tests that determines whether any charge is payable at all, or whether it is capped. This article works through each element in turn.
Does the Act Apply to this Building?
The leaseholder protections in Part 5 of the Act apply only to a ‘relevant building’. Under section 117, a relevant building is a self-contained building, or self-contained part of a building, in England that contains at least two dwellings and is either at least 11 metres high or has at least 5 storeys.
There are exclusions. For example, a building is not a relevant building if the right to collective enfranchisement has been exercised in relation to it, if the freehold estate is leaseholder-owned within the meaning of regulations, or if the building is on commonhold land. The self-contained requirement is also stricter than it might appear: a part of a building is only self-contained if it forms a vertical division of the building and could in principle be redeveloped independently, with its services provided independently of the rest of the building.
If the building does not meet the definition, the Part 5 cost protections simply do not apply. This is the first thing to establish before responding to any service charge challenge based on the Act.
Who is a Qualifying Leaseholder?
Even in a relevant building, not every leaseholder is a ‘qualifying leaseholder’. Section 119 of the Act sets out the test. A lease qualifies if all of the following conditions are met:
First, it must be a long lease of a single dwelling in a relevant building. A long lease means a lease granted for a term exceeding 21 years.
Second, the leaseholder must be liable to pay a service charge.
Third, the lease must have been granted before 14 February 2022.
Fourth, at 14 February 2022 (the qualifying time) at least one of the following must have been true: the dwelling was the relevant leaseholder’s only or principal home; the relevant leaseholder owned no other dwelling in the United Kingdom; or the relevant leaseholder owned no more than two other dwellings in the United Kingdom (not counting their interest under the lease itself).
The fourth condition is a set of alternatives, and a lease qualifies if any one of them is met. A leaseholder who occupied the flat as their only or principal home at the qualifying time qualifies on that basis alone, whatever else they owned. The practical effect is to catch leaseholders who live in their flat and most smaller-scale investors, while excluding a person who did not live in the flat and held more than two other dwellings in the United Kingdom at the qualifying time. That person does not qualify, regardless of the building’s height or the nature of the defect.
There is also a rule about layered leases. Where a dwelling was let under two or more long leases at the qualifying time, only the inferior lease qualifies. The superior lease (the headlease) is excluded. And the test turns on the position at 14 February 2022. Changes in ownership or occupancy since that date do not retrospectively remove qualifying status from a lease that met the test at the time.
What is a ‘Relevant Defect’?
The protections only apply to remediation costs arising from a ‘relevant defect’. Understanding what is defined as a relevant defect is central to any dispute, because it is precisely what excludes many everyday defects from the Act’s protection.
Section 120 defines a relevant defect as a defect that arises from anything done or not done, or anything used or not used, in connection with relevant works, and that causes a building safety risk. A building safety risk for this purpose is narrow: it means a risk to the safety of people in or about the building arising from the spread of fire or the collapse of the building or any part of it. A defect that does not engage fire spread or structural collapse is not a relevant defect, whatever else might be said about it.
Relevant works fall into three categories. The first is works relating to the construction or conversion of the building, where the construction or conversion was completed in the relevant period. The second is works undertaken or commissioned by or on behalf of a relevant freeholder or management company, again where completed in the relevant period. The relevant period is the 30 years ending when the section came into force on 28 June 2022, so it runs from 28 June 1992 to 28 June 2022. The third category sits outside that window: works undertaken after the end of the relevant period to remedy a relevant defect. This means a defect introduced by later remediation works can itself be a relevant defect, even though those works fall outside the 30-year period. A botched repair carried out last year may still engage the Act.
This is where one of the most common misconceptions arises. In our experience, leaseholders sometimes assume that any defect in their building is automatically a building safety defect under the Act. That is not correct. For instance, fire doors that need replacing due to age and use are a common example. A leaseholder receiving a service charge demand for fire door replacement may believe that it is a building safety defect that the Act covers, but whether it is depends on whether the condition was caused by relevant works and constitutes a building safety risk within the statutory definition. That analysis requires surveyors and, often, legal advice.
The Waterfall: How Schedule 8 Allocates Liability
Schedule 8 of the Act is where the substance of the cost protection sits. It works as a sequence of tests, commonly called the waterfall, that determine whether any service charge is payable by a qualifying leaseholder for a relevant measure relating to a relevant defect.
The tests are applied in order. The first three are absolute exclusions: if any one is met, no service charge is payable for relevant measures at all. If none applies, the leaseholder remains liable but only up to a capped amount.
The person responsible for the defect was the freeholder or a connected party. No service charge is payable under any lease, qualifying or not, if a relevant freeholder was responsible for the relevant defect. That means they, or a person they were in a joint venture with, undertook or commissioned the works that created it, or was the developer. For this purpose, ‘relevant freeholder’ means the freeholder under the lease at the qualifying time or any superior freeholder at that time.
The freeholder could afford to fund it. No service charge is payable under a qualifying lease if the freeholder who was party to the lease at the qualifying time met the contribution condition. The contribution condition is that the freeholder group’s net worth at the qualifying time was more than N times £2,000,000, where N is the number of relevant buildings in which a member of that group was a freeholder at the qualifying time. The test is about financial capacity at that date, not the cost of the works, and the freeholder group means the relevant freeholder together with anyone associated with them. It does not apply where the relevant freeholder at the qualifying time was a private registered provider of social housing, a local authority, or a prescribed person. Outside those exempt categories, large institutional freeholders will rarely escape it.
The lease was below a certain value. No service charge is payable if the value of the qualifying lease at the qualifying time was less than £325,000 in Greater London or £175,000 elsewhere.
A cap applies to everything else. If none of the exclusions above applies, a qualifying leaseholder is still not exposed to unlimited cost. The total of relevant service charges payable under a qualifying lease for relevant measures is capped at the permitted maximum: £10,000, or £15,000 in Greater London, rising to £50,000 where the lease was valued between £1,000,000 and £2,000,000 at the qualifying time, and £100,000 where it was valued above £2,000,000. Two features make this cap more protective than it first appears. First, it is cumulative and looks backwards: relevant service charges that fell due in the 5 years before the protections commenced on 28 June 2022 count towards the cap, so sums a leaseholder has already paid since mid-2017 reduce what remains recoverable. Second, there is a separate annual limit: no more than one tenth of the permitted maximum can be charged in any 12-month period. A London leaseholder’s non-cladding contribution is therefore capped at £15,000 in total and £1,500 in any year.
There is also a specific zero-cost rule for cladding defects. Paragraph 8 of Schedule 8 provides that no service charge is payable under a qualifying lease in respect of cladding remediation, meaning the removal or replacement of any part of the cladding system of the building. This is absolute for qualifying leaseholders: no cladding remediation costs pass through, no matter the waterfall outcome.
The liability that can’t be recovered from qualifying leaseholders shifts up the chain: to the freeholder, the developer, or persons associated with them.
Landlord Certificates: Getting Them Wrong is Costly
The freeholder who wants to recover remediation costs from leaseholders through the service charge, in cases where the waterfall permits it, has to get a landlord certificate right. This is an area where our team see significant errors in practice.
As Carl Maw of Brady’s Litigation Team explains: ‘In simple terms, if a freeholder has not provided a landlord’s certificate at the relevant time, and containing the correct information, they are probably not going to be able to recover service charges from the leaseholders.’ The certificate requires in-depth knowledge of the freeholder’s own position: their corporate structure, net worth, connections to any developer, and their interest in other relevant buildings. You can’t complete it accurately without that information.
This is one reason why some freeholders who are entitled to recover costs through the waterfall fail to do so in practice. The certificate is genuinely complex. Managing agents have increasingly taken on the task of preparing it, which makes sense for the factual information about the building, but if the freeholder’s legal and corporate position is not accurately reflected in the certificate, the right to recover may be lost.
Two Further Complications: Section 20 Consultations and Legal Costs
Two practical complications sit alongside the Schedule 8 analysis and are worth understanding before any remediation project gets under way.
If the freeholder is going to recover remediation costs through the service charge, even partially as permitted by the waterfall, section 20 of the Landlord and Tenant Act 1985 still applies. Major works require consultation with leaseholders before the contract is placed and before costs are committed, if those costs are to be recoverable. The Building Safety Act does not remove that requirement. In practice, this creates real tension where the works are urgent: a building with an active fire risk and a waking watch in place, at around £4,000 a day, may need works to start quickly. The FTT can grant dispensation from the consultation requirement under section 20ZA of the 1985 Act, but obtaining it urgently is not straightforward. Applications that were once treated as urgent have been taking months in some cases.
The second complication concerns legal costs. Paragraph 9 of Schedule 8 bars recovery through the service charge, under any qualifying lease, of the cost of legal or other professional services relating to any person’s liability or potential liability arising from a relevant defect. This covers legal advice, court or tribunal proceedings, arbitration, and mediation. The restriction is not limited to freeholders. It applies to the service charge under any qualifying lease, whoever the freeholder is. It has led some freeholders to proceed without taking advice first and to put costs through the service charge and wait to see whether a challenge materialises. The risks of that approach are real: an incomplete certificate, service charge demands that can’t be justified, and costs that the FTT later disallows. There is a carve-out inserted by the Leasehold and Freehold Reform Act 2024 for RTM companies and resident management companies pursuing remediation contribution orders; that is covered in our article on remediation orders here.
When it is Disputed: The FTT and the Limits of Litigation
The claims that succeed are the ones with an organised lead leaseholder. Someone who keeps a list of who is in and who is out. Someone who follows up. Someone who makes the effort to explain what is happening at each stage, in language that their neighbours understand, because not everyone processes legal terminology the same way. Most Building Safety Act service charge disputes do not reach the First-tier Tribunal. Proceedings can run for 18 months or more, with significant legal costs on both sides, and settlement is usually the more rational outcome for a freeholder with an arguable case. The cases that do reach the FTT tend to be either those where the outcome will have implications for other leaseholders in the same block, or those where a leaseholder is determined to have the matter decided.
Where the dispute can’t be resolved, the FTT has jurisdiction over service charge challenges under the Act. Under section 123, the FTT also has jurisdiction to make remediation orders requiring a freeholder to carry out specified works by a specified time, or to take specified relevant steps. Remediation contribution orders, which require a freeholder or developer to fund the works, are a more significant remedy and have been used in a small number of cases, though they remain relatively rare.
In either direction, getting specialist legal advice before issuing proceedings or before defending a challenge at the FTT is essential. The Act is unusually complex, the interaction with existing freeholder and leaseholder legislation is not always clear, and the case law, while growing, still leaves significant areas unsettled. As Carl Maw puts it: ‘Every time I deal with one of these, it’s going back and starting from scratch. You can’t assume the answer is the same as the last one.’
In Practice: The Questions to Ask First
Whether you are a freeholder assessing whether you can recover remediation costs, a managing agent responding to a leaseholder challenge, or a leaseholder who has received a demand and wants to know your position, the analysis follows the same sequence:
Is this a relevant building?
11 metres or 5 storeys, self-contained, not excluded by enfranchisement or commonhold.
Is this a relevant defect?
A defect arising from relevant works within the statutory categories that creates a building safety risk, meaning fire spread or structural collapse. Not routine wear and tear.
Is the leaseholder a qualifying leaseholder?
Long lease, service charge liability, granted before 14 February 2022, and at least one limb of the condition four test met at that date.
Where does the waterfall land?
Was the freeholder responsible for the defect? Did the freeholder group’s net worth exceed the threshold? Was the lease below the value floor? If none of those exclusions applies, what is the permitted maximum, and how much has already been counted against it since mid-2017?
Is cladding remediation involved?
If so, qualifying leaseholders pay nothing regardless of the waterfall outcome.
Has the landlord certificate been prepared correctly?
If the freeholder is seeking recovery and the certificate is wrong or missing, the right to recover may not be enforceable.
None of this is formulaic. No two buildings, no two freeholder structures, and no two defects are the same. The law rewards those who understand it precisely and punishes those who assume. We suggest taking specialist advice before committing to a course of action, whether that means proceeding with a service charge recovery, challenging a demand, or exploring the remediation order route.
