The Leasehold and Freehold Reform Act 2024 introduces changes to the Building Safety Act 2022

What do insolvency practitioners need to know? 

The Building Safety Act 2022 (“BSA”) gained Royal Assent on 28 April 2022 as the official legislative response to the disastrous Grenfell Tower fire. It was introduced to, amongst other things, improve the design, construction, and management of higher-risk buildings.  Since its implementation, BSA has been subject to various changes and amendments and has also been implemented in stages. One of the most recent changes has been introduced by the Leasehold and Freehold Reform Act 2024 (“LFRA”).

Section 119 of LFRA introduces a new section 125A into the BSA. Section 125A applies if an insolvency practitioner is appointed in relation to a ‘Responsible Person’ for either a ‘Higher-Risk Building’ or a ‘Relevant Building’. 

Caution will need to be exercised as what is meant by the term ‘Responsible Person’ as this is language used elsewhere in building and fire safety legislation (principally under the Regulatory Reform (Fire Safety) Order 2005) but is defined differently to that use. 

As of 24 July 2024, an insolvency practitioner appointed on behalf of a ‘Responsible Person’ for a ‘Higher Risk Building’ or a ‘Relevant Building’ will be under a statutory obligation to provide ‘relevant information’ to:

1. the local authority for the area in which the building is situated,
2. the fire and rescue authority for that area, and
3. the Building Safety Regulator (in the case of a Higher Risk Building)

within 14 days of their appointment (that period beginning on the day of appointment). 

What does this all mean?

• A Higher-Risk Building (pursuant to section 65 of BSA) means a building in England that is at least 18 meters in height or has at least 7 storeys; and contains at least 2 residential units (subject to limited exceptions).
• A Relevant Building (pursuant to section 117 of BSA) means a self-contained building or self-contained part of a building in England that is at least 11 metres high or has at least 5 storeys; and contains at least 2 dwellings.
• A Responsible Person (pursuant to section 125A of BSA) means, in relation to a Higher-Risk Building, an accountable person for the building, and, in relation to a Relevant Building that is not a Higher-Risk Building, the person who would be an accountable person for the building if it was a Higher Risk Building.
• An Accountable Person (pursuant to section 72 of BSA) is (subject to certain limited exceptions) a person who holds a legal estate in possession in any part of the common parts of the building or who does not hold such an estate but is under a relevant repairing obligation in relation to any part of the common parts. In practice, this could be any person or organisation who owns or has responsibility for the Higher-Risk Building or a Relevant Building, such as: a freeholder, a leaseholder, a Management Company etc. (but excluding a court appointed managers).

Whenever it is envisaged that an insolvency practitioner will be appointed over an entity or individual who has some responsibility for maintenance of the common parts of a Higher-Risk Building or a Relevant Building, we recommend that the insolvency practitioner(s) take advice regarding what obligations they might owe under BSA an associated legislation. 

To whom does section 125A apply?

Section 125A of BSA applies to officeholders who are appointed in relation to a Responsible Person (as defined above). This will include: administrators, administrative receivers, a receiver appointed by the courts or by a mortgagee, a liquidator, a trustee in bankruptcy or a surveyor. 

What does this mean for Insolvency Practitioners in practice?

Within 14 days of a relevant appointment (beginning with the day on which the insolvency practitioner is appointed), an insolvency practitioner must provide the following information to the local authority and the fire and rescue authority for the area in which the buildings are situated, and in the case of a Higher-Risk Building, the Building Safety Regulator:

1. The name and addresses of the person or persons in relation to whom the insolvency practitioner is appointed;
2. Address of each Higher-Risk and Relevant Building for which that person or persons are a Responsible Person;
3. Provide official copies of the register of title and title plans relating to each registered estate or interest that the person over whom the insolvency practitioner is appointed holds in the said buildings (if any);
4. The nature of the insolvency practitioner’s appointment;
5. The insolvency practitioner’s name, address, telephone number and email address; and
6. Details, so far as they are known to the insolvency practitioner, of the information as is set out in the table in rule 1.6 of the Insolvency (England and Wales) Rules 2016.  

When do the notification requirements take effect?

Section 125A of BSA came into force on 24 July 2024. However, the 14-day period in which an Insolvency Practitioner has to notify the relevant authority begins on the day of appointment. We consider it prudent to assume that, once in force, the provisions of Section 125A apply to officeholders who are appointed in respect of a Responsible Person, irrespective of when that appointment was made. 

Section 125 of BSA is repealed

In addition to the new notification requirements set out above, section 118 of LFRA repeals section 125 of BSA. That means that it is no longer open to insolvency practitioners appointed over a landlord company to seek an order from the court under BSA that a corporate body or partnership associated with the insolvent landlord company pay or contribute towards remediation costs or make such other contribution to the landlord company’s assets.

Section 125 of BSA was intended to allow for the recovery of remediation costs relating to residential (or mixed use) buildings that are 11 metres high or above (or at least 5 storeys) in an insolvency, and for these funds to be used to remediate the building. According to a Government guidance note published on the day the abolition of section 125 came into effect, there was concern that section 125 conflicted with wider insolvency law. Amounts recovered on behalf of insolvent landlords would have been distributed to creditors in the first instance, in accordance with insolvency legislation, instead of being used for remediation. By repealing section 125, the Government has sought to prevent BSA from being used to secure funds for creditors rather than being used for remediation.

For the time being at least, where the conditions exist that section 125 of BSA would have applied to, insolvency practitioners will have to seek advice, on a case by case basis, as to whether the existing remedies of remediation contribution orders (section 124 of BSA) and/or building liability orders (section 130 of BSA) might be available to them.  

Key points to take away  

1. Where, after 24 July 2024, an insolvency practitioner is appointed in respect of a Responsible Person for a Higher Risk Building or Relevant Building, there are only 14 days to comply with the new notification requirements.
2. Where an insolvency practitioner was already so appointed before 24 July 2024, it is prudent to assume the notification requirements still apply.
3. It is no longer open to insolvency practitioners to apply for an order under section 125 of the Building Safety Act 2022 for the recovery of remediation costs; officeholders who may previously have been able to do so, should seek advice as to their remaining options.

Please do not hesitate to contact Carris Peacey, Sylwia Jatczak, or your usual Charles Russell Speechlys contact if you would like to discuss any issues raised by this update.