Everything landlords need to know about cladding

There was a massive shift in the UK property management industry with the introduction of the Building Safety Act 2022 (BSA). This was implemented due to the necessity for higher standards in construction following tragedies like Grenfell Tower, and, naturally, began to redefine the relationship between cladding, landlords and leaseholders. 

Here, we’ll outline your responsibilities as a landlord and the essential documentation required to remain compliant with the BSA 2022, as failure to do so will result in significant legal fines. 

Does the act apply to your building?

The first step to take as a landlord is to determine whether or not your property falls in line with the scope of the new protections from the BSA 2022. 

• Relevant buildings: These are residential buildings in England that are at least 11 metres high or have at least 5 storeys. These buildings are subject to the “leaseholder protections” regarding remediation costs.
• Higher-risk buildings (HRBs): Higher-risk buildings are known for being at least 18 metres high or having 7 storeys. Naturally, these types of buildings will receive strict oversight from the BSA 2022 and will need the appointment of a ‘Principal Accountable Person’. 

If your building meets any of these criteria, you need to keep in mind that the rules for who pays for unsafe cladding have changed. 

Who pays for remediation?

One of the most significant changes for landlords and cladding is the introduction of a hierarchy of liability and responsibility, which is designed to ensure that leaseholders are the last resort when it comes to paying for any work that needs to be done. 

Tier 1: The developer

If you or an affiliated company is responsible for developing the building, you are solely responsible for all costs associated with fixtures. This includes both cladding and non-cladding defects. 

Tier 2: The landlord’s net worth test

If the developer is no longer involved with the development, your financial status will be looked at as the landlord. If your net worth exceeds £2 million per relevant building, you will be responsible for all costs involved. 

Tier 3: The leaseholder protections

If you do not meet the threshold with your net worth, the focus will then shift to the leaseholders to pay for the fixtures. But leaseholders who live at the property as their main home or who own more than three properties in the UK will be protected:

• Cladding remediation: leaseholders who qualify will not be required to pay and are legally exempt from all costs associated with fixing unsafe cladding systems.
• Non-cladding defects: any costs associated with non-cladding issues are usually capped at £10,000 in areas outside London and can be repaid over 10 years.

Essential documentation

Being compliant under the BSA 2022 will be heavily dependent on documentation, and you will be required to provide a landlord certificate in some circumstances, for example: 

1. When you demand a service charge for remediation works.
2. Within four weeks of a leaseholder notifying you that they are selling their property.
3. Within four weeks of becoming aware of a relevant defect.
4. Whenever a leaseholder requests one.

A landlord certificate will allow you to be able to confirm your legal status, including your net worth, and whether or not you have been associated with the original developer of the property. If you cannot provide this certificate within the required timeframe, you will not be eligible for a refund. 

Historical defects and the 30-year rule

The BSA 2022 highlights relevant defects, such as any defect that was caused during the construction period or refurbishment, which creates a risk to the safety of tenants from structural collapse.

While many safety protections apply to defects created in the 30 years prior to the Act (going back to 1992), recently, it has been decided that unsafe cladding remediation can’t be subject to the time limit. If the cladding system is deemed unsafe, the responsibility for remedying it falls on independent parties. 

So, what should landlords do now?

There is a lot to consider for landlords with cladding, and you need to be proactive. Here’s how: 

• Review your portfolio: Identify which buildings meet the 11 m/5-storey threshold.
• Audit your assets: Make sure you have all the financial evidence needed for the landlord certificate (net worth statements, corporate structure charts).
• Identify qualifying leases: Find out which tenants are qualifying and exempt from costs by requesting the Leaseholder Deeds of Certificate. 
• Professional assessment: If you haven’t already, commission a specialist external wall assessment (often resulting in an EWS1 form) to identify if remediation is actually required.

Naturally, the BSA 2022 has shifted the financial burden of cladding remediations away from leaseholders and to landlords or developers. While this has created a more complex regulatory environment, it has also provided a clear framework for making the UK’s high-rise housing stock safe.

For cladding landlords, the priority should remain on maintaining detailed records and understanding your tiered responsibility so you can act swiftly to address any cladding issues. This way, you can protect your investment and the health and safety of your tenants. 

As a landlord, you may also be looking for landlord insurance to protect your investment. CIA Landlords has the knowledge needed to find a quote best suited to your needs. For more information on landlord insurance and managing your rental property efficiently, feel free to visit our advice centre. Otherwise, make sure to get in touch with our friendly team of specialists at CIA Landlord Insurance on 01788 818 670.