The impact of the Building Safety Act 2022 and the Levelling Up and Regeneration Act 2023 on Lease Extensions

The Building Safety Act 2022 (“BSA 2022”) was introduced as a means to improve safety in high-rise buildings by imposing duties on those who manage tall buildings. It also deals with who should pay to remove defective cladding from tall buildings and for other repairs that are needed to remedy historic defects.  Although the legislation’s heart was in the right place, it brought with it some complexities and confusion especially in respect of extending leases. 

The BSA 2022 originally provided that to be a qualifying lease it needed to meet all of the following tests: 

a) It’s granted of a single dwelling;

b) It’s granted for 21 years or more;

c) The tenant is required to pay service charge;

d) It was granted before 14 February 2022;

e) On the 14 February 2022

i) that dwelling was the tenant’s only or principal home; or 

ii) the tenant didn’t own more than two dwellings in the UK in addition to that dwelling

Leases given or extended after February 14, 2022 would not qualify for certain benefits, except for one specific case regarding service charges for defects caused by the landlord. 

A lease extension, as a matter of law, acts as a surrender of the old lease and the grant of a new lease with a later term end date and a brand new title. A fundamental aspect of a Qualifying Lease under the BSA 2022 is that it must have been granted before 14 February 2022. 

Under the BSA 2022 as originally enacted, if a leaseholder of what would have been an qualifying lease, secured an extension of that lease  it would lose its status as a Qualifying Lease, as the extension would be a lease granted after 14 February 2022.  that meant that, the restrictions that only benefitted qualifying leases would fall away on completion of the lease extension.   

That was not something the Government had intended and they said they would legislate to correct that error.  And true to their word, they have done this with the Levelling Up and Regeneration Act 2023 (“LURA 2023”).   The LURA 2023 received Royal Assent on 26 October 2023and inserts a new section 119A into the BSA 2022.

Section 119A(1) LURA 2023 reads

A qualifying lease varied, or subject to any surrender and regrant, remains a qualifying lease.

Section 119A(2) LURA 2023 reads

This section has effect in relation to any qualifying lease varied, or subject to any surrender and regrant, before the coming into force of this section.

The amendments mean that where a qualifying lease is extended (or has already been extended) it will not lose its qualifying lease status.