My Lords, I rise to introduce the government amendments in this group. This is an important group—equally as important as the previous group—and is about leaseholder protections.
We have been clear that it is fundamentally unfair that innocent leaseholders, most of whom have worked hard and made sacrifices to get a foot on the property ladder, should be landed with bills they cannot afford
for problems they did not cause. That is why I have laid a series of amendments to the Bill to right this wrong. I want to outline these important government amendments and highlight how they will provide much-needed protections to leaseholders from exorbitant costs for remediation of their buildings.
These leaseholder protection provisions will make landlords liable, partially or in full, for the costs of remediating historical building safety defects. Amendments 62 to 64 and Amendment 66 are definition clauses setting out the types of defects, buildings and leases that are in scope of the protections. The new clauses state that leaseholders living in their own home or subletting in a building over 11 metres will be entitled to protections from unjust and unaffordable remediation costs. It will not apply to buildings that have exercised the right to collective enfranchisement or are on commonhold land, as in those buildings the leaseholders together effectively are the freeholders.
Amendment 68 would insert a new schedule into the Bill before Schedule 9, which sets out the circumstances in which service charges relating to historical building safety issues cannot be passed on to leaseholders, and the circumstances where service charges can be passed on to leaseholders are limited. Paragraph 2 of the new schedule provides that, where the landlord is responsible or has links with the developer that is responsible for the defect, they will be required to pay in full for the historical building safety issues. This will ensure that, as far as possible, those who are responsible for creating the defects take on the burden of costs and remove all liabilities for the historical defects from innocent leaseholders.
A definition of an “associated person”, for the purpose of determining which building owners have links to the developers of the building, is set out in Amendment 67. Similarly, where building owners are not linked to the developer but can afford to pay, they will be required to put the money up to do so and pay in full. We intend to table further amendments to provide details of the affordability test on Report. I welcome any suggestions from noble Lords on how this could work.
Paragraphs 5 to 7 of the new schedule provide that, where building owners are not linked to the developer and are not able to afford the remediation, some costs can be passed on to leaseholders. This will be subject in most cases to caps of £10,000, or £15,000 for leases in Greater London. These caps will limit how much leaseholders can be asked to pay for non-cladding costs, after—I repeat, after—building owners and landlords have exhausted all other cost recovery options, such as litigation under the Defective Premises Act or the new construction products causes of action we have just debated.
The amendments also provide that any costs paid out by leaseholders over the past five years will count towards the cap, meaning some leaseholders will pay nothing more. They also provide that cladding costs cannot be passed on at all. Paragraph 6 sets out caps to be applied to very high-value properties. It provides that, for properties with a value of over £1 million but under £2 million, the maximum permitted charge is £50,000 and, for properties with a value of over £2 million, the permitted maximum is £100,000.
Building owners and landlords must comply with the law as set out by Parliament. However, there may be some who attempt to avoid their liabilities. These landlords may be associated with a company with substantial assets. Given the extent of the building safety crisis, it is morally right that these associated companies are asked to shoulder their fair share of the costs. Amendment 69 would give the First-tier Tribunal powers to make a remediation order on the application of an interested person, meaning the regulator, local authority, fire and rescue authority or another person specified in regulations by the Secretary of State. A remediation order will require a landlord to remedy defects in their building, as specified in the order.
Amendment 70 would give the First-tier Tribunal powers to make a remediation contribution order on the application of an interested person if it considers it just and equitable to do so. For the purposes of Amendment 70, interested persons include the new regulator, the local authority and the fire and rescue service, as well as leaseholders and other persons who have a legal or equitable interest in the building. A remediation contribution order will require an associated company to make specified payments, at a specified time or event, to the landlord to remedy relevant fire safety defects in the building.
Where a company needs to be wound up, our provisions enable the liquidator to apply to the court to access the assets of associated companies to contribute to the remediation of building safety defects. All too often, companies let subsidiaries go into liquidation to cut their losses. It is morally wrong that they can just fold a company up and leave leaseholders in unsafe buildings with outstanding building safety defects and the corresponding liabilities. The court’s decision will be based on whether it is just and equitable to do so—in other words, whether it is right for that associated company to help to meet the building safety remediation liability of the failing landlord.
Some unscrupulous companies may try and wind up subsidiaries before these provisions come into force, which is why we have included provisions to enable liquidators to pursue associated companies of those landlords who are currently going through insolvency proceedings. It is unfair that innocent leaseholders have had to pay for remediation of building safety defects while those who caused the fire safety issues are able to exploit company law to escape liabilities that are morally theirs. I ask your Lordships to support this significant and important set of amendments.