There has been much discussion in the market about the rather burdensome requirements in the Building Safety Act 2022 (“Act”) to divulge extensive and potentially sensitive corporate and financial information for the landlord group, as part of the process of issuing landlord certificates. For landlords with complex corporate structures, this information can be difficult to gather, voluminous and difficult for leaseholders to understand. Many leaseholders will only really interested in whether they are able to sell their flat and/or whether they are going to be charged for remediation works.

Information currently required under the regulations

The current regulations require landlords to provide a suite of information dealing with the company’s corporate structure, financial status and involvement with the development of the building every time a landlord’s certificate is required (see Part 1 [link] of this series).

The list of documents that must be provided is a long one and includes details of the landlord group’s corporate structure, lists of directors for each company in the group, details of trust structures, financial accounts and statements of net worth for each company in the landlord group.

These requirements apply irrespective of whether the landlord intends to recover service charge for remediation works or whether landlord has already accepted that it satisfies one of the tests (the “net worth test” or “developer test”) which prevents it from doing so.

Changes to the regulations

The government appears to have taken notice of market concerns around these issues and, on 12 June 2023, put new draft regulations before parliament in the form of the Building Safety (Leaseholder Protections)(England)(Amendment) Regulations 2022. This will be the second amendment to these regulations this year, which shows the extent of the quirks and complexities which have emerged as landlords try to put them into practice.

It is not yet clear when these amendment regulations will come into force, but the explanatory guidance flags that they are intended to clarify what was always meant by the regulations and remove any confusion, rather than changing the process or imposing a new one.

The new regulations reiterate that a landlord’s certificate must be served when any of the trigger events occur (see Part 1 [link] of this series). A new trigger event has been added which requires landlords to provide a landlord’s certificate within 4 weeks of becoming aware of a new leaseholder certificate being served.

The new regulations include a new form of landlord’s certificate, which is separated into sections dealing with the developer test, the net worth test, and whether or not the leaseholder’s lease is a “qualifying lease”.

Reduced supporting information required

The effect of the regulations is to break the long list of documents to be provided with landlords certificates down into categories. This means that landlords do not have to provide certain financial information where they accept that they satisfy the net worth test and therefore cannot charge leaseholders in any event. Similarly, landlords do not have to provide such extensive detail on the corporate structure where they admit they are responsible for the defect in question.

There are several other circumstances where reduced information can be provided, depending on the landlord’s circumstances.

No Supporting information required

The most crucial change is that landlords will not be required to provide any supporting information with the landlord’s certificate where:

• they either meet the net worth test, or the lease is not a qualifying lease; and
• the landlord was either responsible for the defect, or does not believe at the time they complete the certificate that there is a relevant defect.

In that scenario, there are no circumstances in which the landlord could recover service charge and so the landlord is not required to provide any further information to justify their position. This will substantially ease the burden for many corporate landlords who are likely to meet the net worth test.

Are the changes good news for landlords?

Generally, lawyers will welcome the clarification and landlords, particularly large institutional landlords, will be pleased to see a shorter list of documents that must be collated and served with landlord certificates.

It is also worth bearing in mind that, even where information is required, landlords need only collate information which relates to the position as at 14 February 2022. This frozen point in time means that, once the landlord has established what information must be provided in relation to a particular building, it can roll out the same documents time and time again. It may however also mean that landlords who have sold their interest since 14 February 2022 may be faced with requests for information from the current landlord going forwards.

Whilst the burden may not be as onerous as first feared, landlord certificates will remain a headache for while yet. Landlords must still grapple with how many relevant buildings they have in the group, whether they are tenanted by qualifying leaseholders and whether those buildings have relevant defects. Landlord certificates now form part of standard pre-sale enquiries so landlords may find themselves dealing with large numbers of requests as leaseholders, who were previously unable to sell their flats, seek to move on from the legacy of cladding issues uncovered following the Grenfell tragedy.

How we can help

This article sets out some general guidance on the current position and the coming changes but, as always with the Building Safety Act, the devil is in the detail. We are monitoring the new regulations very closely and we are happy to advise you on the specific circumstances that are applicable for your particular building. If the new regulations are passed, the requirements may not be quite as burdensome as they first appeared.