Quiz - how well do you understand your lease?
Understand the key things you should know about your lease. If you are a purchaser, this can help make sure your solicitor has covered all of these points and explained them clearly to you.
By Ella Norman – Legal Adviser
July 2020 and then updated in May 2021
In the Budget on 11th March 2020, the Government announced a 1-billion-pound fund, available on a first come, first served basis. The funding was made available for the remediation of unsafe non-ACM cladding systems on residential buildings in England that are 18 metres and over in height. The fund is in addition to the separate funding to remove unsafe ACM cladding systems on High Rise Residential Buildings, identified as a priority for remediation after the Grenfell Tower Fire.
The purpose of the Fund
The purpose of the fund is to make sure residents’ homes are safe. The government expects that building owners remediate unsafe cladding on buildings, without seeking funding from residents or the taxpayer. Where this is not possible the fund is designed to ensure that building owners do not fall back on leaseholders to meet the costs.
A prospectus introducing the fund was released on 26th May 2020. It set out the buildings and non–ACM Cladding Systems, that are eligible for funding [Annex A:]; and invited potential applicants to register expressions of interest.
Registering for and applying to the fund
The registration process opened on 1st June and remained open until 31st July 2020.
Buildings meeting certain technical criteria are then invited to apply to the fund, with full guidance and the process for doing becoming available at the end of July 2020. In the private sector, the full application will be submitted by the responsible entity.
Applicants who have already registered for the fund now have until 30th June 2021 (extended from 31st December 2020) to submit full applications based on tender prices, once invited to do so. The new deadline follows a 6-month extension to the original deadline of 31st December 2020.
To qualify for funding, all projects must start on site by 30th September 2021 ; that is the Applicant must have entered into a signed Works Contract and the Main Contractor must have taken possession of the site and started to deliver the contract by 30th September 2021.
Building owners must continue to work to meet these deadlines wherever possible. The Department for Levelling Up, Housing & Communities recognises, however, that meeting these deadlines may not be possible in all circumstances, for instance where applicants find that they do not have sufficient time to complete a robust and satisfactory procurement process in order to meet the June deadline.
In these cases, if more time is needed to be able to complete the required steps (as set out
in this guidance) then this will be permitted on a case by case basis, providing applicants
continue to provide delivery partners with realistic but ambitious project delivery timetables
and continue to keep delivery partners fully informed about any changes to those
Applicants should be aware that where it is clear that they are making insufficient progress,
the Department for Levelling Up, Housing & Communities will be informed so they can be considered for an enforcement/escalation approach
which may include referral to the local enforcement agencies or public naming.
The Department will keep demand for the Fund under review and will publish regular updates
regarding the allocation of funding against the budget available.
The government has released a step-by-step guide to the Building Safety Fund application process for the remediation of unsafe non-ACM cladding systems.
What can residents do?
A resident should contact the building owner or manager if they believe that they might have unsafe cladding and ask them to confirm what action they are taking.
The registration prospectus sets out the following action that a resident might wish to take:
- Contacting your building owner or managing agent to ask for confirmation that the cladding system on your building is safe. You should ask to see a copy of the most recent fire risk assessment for the building.
- If the cladding on your building is not safe, seek confirmation as to the actions your building owner is taking and how they intend to finance the work. if your building owner cannot meet the costs themselves or intends to charge you for the remediation, you should refer them to this fund.
- If your building owner is not taking action or intending to charge leaseholders for the remediation of a cladding system, you can notify the Department for Levelling Up, Housing & Communities using the Leaseholder feedback form providing basic details of your building, the owner or managing agent, and the type of cladding you believe is present if known to you.
- If you are concerned about a fire safety risk which your building owner or managing agent is not addressing, you should contact your local fire and rescue service or local authority for advice.
The fund is open to mixed-use residential and commercial developments.
If the funds are fully allocated, applicants to it will be notified that no further funding is available.
What is not covered by the fund?
The fund will not meet the cost of waking watch or other interim safety measures, and is not available for:
- Remediation work on buildings with non-ACM cladding systems in scope that had been committed to, or where work had started on site, prior to 11th March 2020.
- Other non-residential buildings, for example, hotels, hospitals and buildings where there are no residential leaseholders.
- Buildings under 18m in height (allowing for a 30cm tolerance)
Subsidy control rules under the UK-EU Trade and Cooperation Agreement (TCA)
From 1 January 2021 following the end of the UK-EU transition period, new subsidy control rules under the UK-EU Trade and Cooperation Agreement (TCA) have come into force.
The revised diligence processes under the Fund are designed to ensure compliance with subsidy control rules under the UK-EU Trade and Cooperation Agreement (TCA). This replaces the previous diligence requirements for provision of state aid, which no longer apply following the end of the UK-EU transition period on 31 December 2020.
For applications where awards of funding are made after 1 January 2021 (as stated in the funding award letter), the state aid declaration will be replaced by a new Subsidy Declaration. Subsidy declarations will be required from leaseholders:
• If they are a leaseholder of commercial premises, OR
• If, as leaseholders of residential premises, they are an economic actor, AND they have previously received any financial support from the state (Subsidy) within the past three years (including any funding from PSCRF or BSF).
An Economic Actor (previously referred to as an Undertaking) for the purposes of remediation funding is a leaseholder who uses their property in the building principally for business or investment purposes (for example letting out a flat or using commercial property as business premises).
Leaseholders who are economic actors will be eligible to receive funding up to the raised threshold under the TCA of 325,000 Special Drawing Rights (SDR) – which at the date of writing equates to approximately £335,000 but exact values will depend on the exchange rate at the time of award – less any previous subsidy received.
Leaseholders who are not Economic Actors (e.g. owner occupiers) do not need to provide a Subsidy declaration, and will not be subject to any limit on their funding amount.
If no declaration is received from a leaseholder of residential premises who is an economic actor, the Department for Levelling Up, Housing & Communities will accept this as confirmation that they have not previously received financial support from the state, and are eligible to benefit from their full allocation of funding, i.e. 325,000 SDRs.
If no declaration is received from a leaseholder of commercial premises than no allocation of funding will be made to that leaseholder. If a declaration is received that leaseholder will be eligible to benefit from funding up to 325,000 SDRs less any prior subsidy.
Prior to submitting a Full Works and Costs Application, applicants will need to ensure they have:
- given leaseholders of residential premises who are economic actors at least 30 days to provide a declaration, detailing any financial support received previously from the state,
- sourced declarations from all leaseholders of commercial premises, and
- taken reasonable steps to identify all leaseholders in their Building who are Economic Actors and to place their details in the Economic Actor Schedule (previously referred to as the ‘Undertakings Summary Schedule’) This should include any leaseholders of residential properties that are Economic Actors but have not provided a declaration (and therefore may or may not have received financial support from the state within the past three years). Where a leaseholder that you did not expect would provide a declaration returns one, then they should also be added to the Schedule.
If no declaration is received from a leaseholder of residential premises within a 30 day timeframe, the Department for Levelling Up, Housing & Communities will accept this as confirmation that they have not previously received financial support from the state, and are eligible to benefit from their full allocation of funding.
If you have started to gather or have submitted State Aid Declarations in the previous format as part of your application, these will continue to be accepted and the new, higher threshold will be applied. You should ensure that you meet the requirements noted above on identifying leaseholders who are economic actors, and sourcing declarations from the required leaseholders, otherwise there is a risk that the Department for Levelling Up, Housing & Communities may have to reduce the amount of grant made available for the building to comply with subsidy rules.