Schedule 8: Remediation costs under qualifying leases Paragraph 12: Recovery of service charge amounts from landlords Proposed use of power
The power at paragraph 12 will allow all regulations to be made allocating liability that is not recoverable from qualifying leaseholders to all relevant landlords for the building. To which parties the regulations allocate liability will vary according to the circumstances pertaining to that building. The Government’s approach in Schedule 8 sets out a clear hierarchy of liability for costs; the regulations made under this paragraph will give full effect to that hierarchy.
	In the first instance, those responsible for relevant defects will be required to pay for them. Paragraph 2 of Schedule 8 sets out that no service charge is payable under any lease where a relevant landlord was responsible for the defect. Regulations will make clear that it is the relevant landlord who was responsible for the defects that is liable to meet these costs; this provision will be important to make clear who is liable to meet costs where there are multiple relevant landlords for a building, some of whom are not responsible for the defects.
	Paragraph 3 sets out that no service charge is payable under a qualifying lease when the landlord under the lease meets the contribution condition. Similarly, regulations will make clear that it is the landlord that meets the contribution condition that is liable to meet the costs that would otherwise have been attributable to qualifying leaseholders.
	Paragraphs 4 to 7 set out the protections that apply to leaseholders where paragraphs 2 and 3 do not apply. Where paragraphs 4 and 7 apply, regulations will provide that all costs which cannot be recovered from leaseholders will be divided equitably among all relevant landlords for the building. The mechanism for division of costs will be set out in regulations and will provide that relevant landlords’ contributions will be proportionate to their level of interest in the building. For example, a landlord with a superior lease over the entire building will pay a greater proportion of costs than a landlord with a superior lease over just one floor.
Example
A ten-storey block of flats in Leeds has a freeholder, a head lessee, and two further superior landlords; one for the upper five floors and one for the lower five floors. No landlord is linked to the developer or meets the contribution condition. A contribution from each qualifying leaseholder whose property is worth above £175,000 of £10,000 can be recovered, but these costs must be spread over ten years. Any historical building safety costs that cannot be recovered from leaseholders will be allocated to the relevant landlords for the building according to the regulations made under paragraph 12. The freeholder and head lessee, who have an interest in the entire building, will pay a greater contribution than the two other superior landlords, who only have an interest in part of it.