Schedule 8: Remediation costs under qualifying leases Paragraph 4: No service charge payable where lease below a certain value Background
This is a new provision.
	Paragraph 8 of Schedule 8 sets out that qualifying leaseholders cannot be charged for costs relating to cladding remediation. Paragraphs 5 to 7 of Schedule 8 set limits on service charge amounts that can be passed to leaseholders in respect of relevant measures relating to relevant defects that are not related to cladding – this includes costs associated with non-cladding defects and interim measures like waking watches. In respect of most leases, the maximum amount that can be ("the permitted maximum") charged for non-cladding defects is £10,000, or £15,000 for leases in Greater London (see the explanatory note to paragraph 6 for further detail).
	Paragraph 4 provides that where the value of the lease is less than a certain amount, no service charge is payable in respect of a relevant measure relating to any relevant defect; this includes cladding and non-cladding costs, and interim measures. This value is set at £175,000, or £325,000 for properties in Greater London.
	The Government has made clear that it is it taking a proportionate approach to the allocation of remediation costs. Where no landlord with an interest in the building was responsible for the defect, and the landlord under the lease does not meet the contribution condition, this approach involves capped contributions from leaseholders in certain circumstances. To increase affordability of these contributions, paragraph 7 provides for the contributions to be spread over ten years.
	The intention of the provision in this paragraph is to ensure that those leaseholders who are least likely to be able to afford to make a capped contribution are protected from all costs. This is achieved by providing that leaseholders living in low-value properties cannot be charged for any non-cladding (or cladding) costs.
	The lease value is calculated according to the method set out in paragraph 6. Paragraph 6 sets out that lease values are calculated by "uprating" the price at which the property was last sold on the open market. "Uprating" means multiplying the most recent sale price by a fixed multiplying factor, which will be set out in regulations. For further detail, see the explanatory note to paragraph 6.
	As discussed in the explanatory note to section 122, where service charges are not payable according to paragraph 4, the provisions apply irrespective of when any service charge demands were issued to leaseholders.
Example 1
A flat in Birmingham was last sold in 2012. The uprated value of the property is £170,000. The leaseholder of the flat cannot be charged anything by their landlord for costs related to historical cladding or non-cladding defects.
Example 2
A flat in London was last sold in 2016 and its uprated value is £300,000. The leaseholder of the flat cannot be charged anything by their landlord for costs related to historical cladding or non-cladding defects.