Para 2, Schedule 8, Building Safety Act 2022 No service charge payable for defect for which landlord or associate responsible

(1) This paragraph applies in relation to a lease of any premises in a relevant building.

(2) No service charge is payable under the lease in respect of a relevant measure relating to a relevant defect if a relevant landlord—

(a) is responsible for the relevant defect, or

(b) is associated with a person responsible for a relevant defect.

(3) For the purposes of this paragraph a person is “responsible for” a relevant defect if—

(a) in the case of an initial defect, the person was, or was in a joint venture with, the developer or undertook or commissioned works relating to the defect;

(b) in any other case, the person undertook or commissioned works relating to the defect. 

(4) In this paragraph—

“developer” means a person who undertook or commissioned the construction or conversion of the building (or part of the building) with a view to granting or disposing of interests in the building or parts of it;

“initial defect” means a defect which is a relevant defect by virtue of section 120(3)(a);

“relevant landlord” means the landlord under the lease at the qualifying time or any superior landlord at that time.

Comes into force on 28 June 2022.

Applies to England and Wales. 

Schedule 8 is all about leaseholders’ liability to pay service charges. Paragraph 2 of Schedule 8 is our first meaningful encounter with a “leaseholder protection”.

It is the first step of what has been described as a statutory waterfall, whereby – to continue the watery figure of speech – certain leaseholders are sheltered from what would otherwise be the service charge equivalent of a monsoon.

I have to say that the metaphor does not strike me as particularly apposite, particularly for those leaseholders who do not attract any protections and are therefore exposed to the full force of the cataract.

Schedule 8 is more like a Matryoshka doll: every definition seems to involve a further definition.  

Enough poetry. On with the law.

The importance and detail of the definitions in Part 5 of the Act really come into their own here.

At first blush, this paragraph appears to apply broadly: it applies “in relation to a lease of any premises in a relevant building”.

There is no requirement even for the lease to be of a residential unit or a dwelling: it must simply be “a lease of any premises”.

The limitation strikes however at the end of the subparagraph: the lease must be of premises in a “relevant building”.

“Relevant building” is defined in section 117. In brief summary, it is that fiddly definition that requires a building or part of a building to:

• Be self-contained
• Be in England
• Contain at least two dwellings
• Be at least 11m or five storeys high
• Not be leaseholder-owned.

The effect of that paragraph therefore is that a leaseholder of a commercial unit in a relevant building will fall within the scope of paragraph 2, but a leaseholder of a flat in a building that cannot bring itself into the scope of “relevant building” will not.

This paragraph is the most financially liberating. It frees those leaseholders over whom it casts its wing from the obligation to contribute towards certain costs that would normally form part of the service charge.

I’m going to take it in stages.

My instinct is to start with the activity that incurs costs.

Therefore the first imperative is to establish whether any of the activities constitute a “relevant measure relating to a relevant defect”.

“Relevant measure” in this context is defined in paragraph 1 of Schedule 8.

At this stage, we turn to the lease. Does it oblige the leaseholder to contribute towards the costs of that activity by way of service charge?

The answer to that question will depend on the wording of each lease.

If the answer to stages 1 and 2 is “yes”, the third question is whether the landlord who would be entitled to demand a contribution from the leaseholder is a “relevant landlord”.

“Relevant landlord” is relatively simply defined.

Subparagraph 4 provides that a relevant landlord is one of two creatures, both of which are assessed at the “qualifying time”, ie at the beginning of 14 February 2022.

The first is the landlord “under the lease”.

The second, alternative, is “any superior landlord” at that time. Where there is a chain of leases, a superior landlord is one who is further up the chain.

The paradigm example is a shared ownership arrangement where the freeholder has granted a lease to a housing provider, who in turn has granted a lease of a flat to the shared ownership leaseholder. In that chain, the freeholder is a “superior landlord” because it is not the leaseholder’s immediate landlord, but the landlord of the leaseholder’s landlord.

Subparagraph 2 details the link that must exist between a “relevant defect” and a “relevant landlord”. The latter must be either:

• “responsible for” the relevant defect, or
• “associated with” a person who is “responsible for” the relevant defect.

Subparagraph 4 differentiates between two types of “relevant defect“:

• “An initial defect”, and
• “Any other case”.

“Initial defect” directs us specifically to section 120(3)(a), which is unhelpful, given that section 120(3)(a) refers to section 120(2).

Inserting section 120(3)(a) into section 120(2), we have this definition of an “initial defect”:

“Initial defect”, in relation to a building, means a defect as regards the building that—

• arises as a result of anything done (or not done), or anything used (or not used), in connection with works relating to the construction or conversion of the building, if the construction or conversion was completed in the relevant period, and
• causes a building safety risk.

Bear in mind that “conversion” and “relevant period” themselves have technical meanings.

“Any other case” appears simply to be any other defect that is not an “initial defect”.

We have beaten a path through all the definitions – or at least nearly all of them and are ready to test whether whether there is a connection between the “relevant landlord” and the “initial defect”.

Subparagraph 2 sets out the conditions that must be satisfied.

There are a number of possibilities, the strands of which I have separated and set out below:

A relevant landlord is responsible for an initial defect if:

• They were the developer, or
• They were in a joint venture with the developer or
• They undertook or commissioned works relating to the

“Developer” is defined in subparagraph 4. We met an identical definition of developer in section 124.

The rather unhelpful news is that – so far as I have been able to ascertain – “joint venture” is not defined in any of the statutes.

There are fewer options for establishing a connection between the “relevant landlord” and “any other case”:

A relevant landlord is responsible in any other case if they undertook or commissioned works relating to the “any other case” defect.

Where a relevant landlord is “associated with” a person responsible for a relevant defect, no service charge is payable either.

Section 121 contains a detailed definition of the phrase “associated with”.