As part of Government's response to the Hackitt Review, commissioned in the wake of the Grenfell Tower tragedy in 2017, the Building Safety Act (the "BSA") was passed in 2022, alongside a raft of other changes to fire safety and wider building safety legislation. The BSA, and associated regulations, introduced:
- a comprehensive new building safety regime, applicable to all construction projects, that is intended to promote competence within the construction industry and drive improvement in standards of design, construction and management of buildings in England
- an enhanced building safety regime in relation to the design, construction and occupation of higher-risk buildings i.e. residential buildings over 18 metres in height (“HRBs”)
- a new regulator (the “Regulator”) to oversee the new building safety regimes.
Although passed in 2022, the new building safety regime has been implemented in phases. The majority of the new building safety regime came into force between October 2023 and January 2024, with transitional arrangements in place until 6 April 2024. As of 6 April 2024, all elements of the building safety regime will be live.
Obligations in the BSA
While the new building safety regime has wider application across the entire built environment sector in England, one of the key elements of the new regime relates to HRBs in occupation. Under the BSA a HRB must be registered with the Regulator before it can be legally occupied and thereafter the BSA places ongoing obligations on “Accountable Persons” (i.e. those who either own, or are responsible for the repair of, the HRB) to prevent building safety risks and/or mitigate their severity.
Where it is considered necessary to do so, the BSA also gives the Regulator the right to make a "special measures order" and to appoint a "special measures manager" in respect of an HRB to carry out the functions of the Accountable Person.
How does this affect Funders?
Under the terms of the BSA, any person "who holds a legal estate in possession in any part of the common parts" (which includes the structure and exterior of the HRB) will be an Accountable Person. Although we anticipate that whilst a funder is not mortgagee in possession it would not be an Accountable Person, upon enforcement of a mortgage either the funder, any receiver or purchaser could become liable. Coupled with the potential sanctions - including criminal - for breach by an Accountable Person, the obligations arising out of the BSA should be very much of concern to funders of any HRB.
As of the time of writing, no consistent approach is being taken by funders with respect to managing BSA compliance. It is expected that, in due course, the CLLS will address BSA obligations in the standard form of certificate of title disclosures and reporting requirements. Until then, funders will need to consider what, if anything, they will require; whether that is simply confirmation that obligations have been satisfied, or whether a more granular approach (including, for example, requiring evidence of registrations) is required.
Similarly, whilst many funders are currently content to rely on the standard "compliance with laws" and obligations to have all necessary authorisations and to complete any development in accordance with appliable laws, we expect that many funders will want to specifically address BSA requirements.
We are working with funders advising in connection with protections that may be appropriate throughout a buildings lifecycle across all sectors. If you would like to discuss any part of this please contact Tom Weld or Alistair Rattray.