Amendments to Building Safety Act enforced through Leasehold and Freehold Reform Act 2024

Section 117 of the Leasehold and Freehold Reform Act 2024 will mean residents in a ‘right to manage’/resident management company who run their own buildings can apply for a Remediation Contribution Order and split the costs among a wider group of leaseholders (where the lease allows) by permitting these to be passed on via the service charge.

This is a limited exemption to the leaseholder protections enshrined under the Building Safety Act 2022, which otherwise protects qualifying leaseholders from freeholders passing on the costs of litigation.

Section 118 of the Leasehold and Freehold Reform Act 2024 resolves a conflict between insolvency law and Section 125 of the Building Safety Act 2022, which would have allowed amounts recovered through the courts for remediation costs under the Building Safety Act to be distributed to creditors in the first instance.

Legal duty

It’s the legal duty of insolvency practitioners to prioritise paying off creditors under the Insolvency Act. The new Section 118 of the Leasehold and Freehold Reform Act 2024 repeals Section 125 of the Building Safety Act and so prevents the Building Safety Act from being used to secure funds for creditors rather than being used for remediation.

The insolvency of an ‘Accountable Person’ can have implications for the safe management of a building which is subject to the Building Safety Act 2022 regime. The new Section 125A of the Building Safety Act (as amended by Section 119 of the Leasehold and Freehold Reform Act 2024) places a duty on insolvency practitioners who are appointed to the insolvency of the owner or leaseholder of a residential building, which is at least five storeys/11 metres-plus high, to notify local regulators (ie the local authorities and the Fire and Rescue Service).

In the case of higher-risk buildings (ie those buildings which are at least seven storeys or 18 metres-plus in height), the Building Safety Regulator must also be advised. This will ensure that the latter has a route by which to engage with both the insolvency practitioner and/or residents in order to check that the building is being safely managed during insolvency proceedings.