Schedule 8: Remediation costs under qualifying leases Paragraph 3: No service charge payable if landlord meets contribution condition Proposed use of power
The contribution condition is based on the "net worth" of the landlord group. In broad terms, the net worth is a measure of the total assets of the group minus its liabilities. The power at sub-paragraph (4)(b) will be used to make regulations setting out how the net worth of the landlord group is to be calculated.
	The contribution condition is that the landlord group’s net worth at the qualifying time was at least £2,000,000 per relevant building. The power at sub-paragraph (5) allows the Secretary of State to change, by regulations, the reference to £2,000,000 to another amount. This power will be used if it becomes apparent that another value for the contribution condition would be more appropriate than £2,000,000.
	Sub-paragraph (6) lists the types of relevant landlord to which the contribution condition does not apply. The power at sub-paragraph (6)(c) allows further categories of persons to whom the contribution condition does not apply. This power will be used to prescribe further categories of persons to be excluded from paragraph 3 where it would not be appropriate for the contribution condition to be applied to that class of persons, or where "net worth" is not a relevant concept to that class of persons.
Example 1
A ten-storey building constructed by a developer in 2010 has been found to have non-cladding fire safety defects which need remediation. The landlord under the lease is the freeholder. The freeholder does not have links to the developer. The freeholder’s group comprises the freeholder and its parent company. The freeholder owns four additional buildings above 11 metres in height, and so owns five relevant buildings in total. The total net worth of the freeholder and its parent company is £12,000,000. This gives a total of £2,400,000 per relevant building, which is higher than the contribution condition of £2,000,000 per relevant building. The freeholder of the building therefore cannot pass any remediation costs onto qualifying leaseholders.
Example 2
An eight-storey building constructed by a developer in 2008 has been found to have non-cladding fire safety defects which need remediation. The landlord under the lease is the freeholder. The freeholder does not have links to the developer. The freeholder is not part of a wider group structure, and it owns one other relevant building. The total net worth of the freeholder is £1,000,000, giving a net worth per relevant building of £500,000. This is less than the contribution condition of £2,000,000 per relevant building. This means that the freeholder does not pass the contribution condition and, subject to the other provisions in the Schedule, may recover some costs from qualifying leaseholders. The freeholder will still have to meet any costs which are not recoverable under qualifying leases.
Example 3
A ten-storey building with non-cladding fire safety defects has two landlords for different parts of the building: one for the top five floors and one for the lower five floors. The landlord for the upper five floors meets the contribution condition; this means that qualifying leaseholders on the top five floors cannot be charged for non-cladding defects. The landlord for the lower five floors does not meet the contribution condition; this means that, subject to the other provisions in the Schedule the landlord is entitled to recover some costs from qualifying leaseholders.