More than half of conveyancers surveyed by Today’s Conveyancer have stopped working on transactions of leasehold properties affected by the Building Safety Act 2022 (BSA) due to problems with the “car crash” legislation.

CEO of Bold Legal Group, Rob Hailstone said: “One eminent property law trainer called it the worst piece of property law legislation they had seen in 50 years. Another said it was a ‘car crash’ piece of legislation, and I doubt few would disagree,”

Today’s Conveyancer surveyed 196 conveyancers to ask what they thought of the situation. 52% of respondents said they weren’t currently handling sales or purchases of leasehold properties affected by the BSA, while an additional 15% said they were only acting for particular lenders.

“This will have a knock-on effect,” continued Hailstone. “Chain-related transactions will take longer, and leasehold transactions will cost more. I doubt that either of these results is what the Government would have wanted.”

So what is making conveyancers stop leasehold transactions?

Part 2s

Some have raised concerns over the “onerous” Part 2s of the UK Finance Mortgage Lenders’ Handbook question 5.14.17: “Does the lender have any specific instructions about building safety?”

The Part 2s of Barclays and Nationwide in particular are also a concern. Although Barclays has loosened its requirements, Nationwide says: “You must check that, to the best of your knowledge, the Leaseholder Certificate and any Landlord Certificate have been appropriately and accurately executed and populated.”

Consultant Solicitor at Nexa Law, Zahrah Aullybocus commented “Part 2s are onerous and seem to be implying that conveyancers should be verifying the information given in the Landlord’s Certificate…we are not qualified to do this.”

Aullybocus highlighted that if any mistakes are made, conveyancers would be held responsible, with the implications of professional indemnity insurance (PII) being well-known.

Both Senior Vice President at Lockton insurance brokerage, Marc Rowson and Managing Director of Professional Risks at J M Glendinning Brokerage, Gareth Milner stated that most insurers are currently adopting a “wait and see” approach to the Building Safety Act, with Rowson suggesting that clarity on the matter may be expected in 2-4 weeks.

Milner stated that insurers are naturally apprehensive that the BSA could increase conveyancers‘ exposure to risk, although this is yet to happen. In the meantime, he advised firms to adopt a “precautionary approach” to leaseholder work, especially in the case of those affected by the BSA.

Firms should remain prudent in documenting all advice given to the client. The old adage of ‘if it’s not written down, it didn’t happen very much applies in these scenarios.”

Nationwide is currently reviewing its Part 2 requirements, and various groups have expressed concerns to the government and the Law Society regarding this issue within the conveyancing profession.

Lease Extensions

Although lenders have started to withdraw their demanding Part 2 requirements, there are still significant problems with the Building Societies Association (BSA). One of these issues is that if a lease extension is completed, the property may lose its “leaseholder protection” provided by the Act.

If a lease is extended, the existing lease is relinquished and a new lease is granted. However, to be considered a “qualifying leaseholder” and get the protections offered by the Act, the leaseholder must establish that a lease existed on or before February 14th, 2022.

Where a lease is relinquished, the lease technically did not exist before February 14th, 2022, which disqualifies the leaseholder from the Act’s protection. Zahrah Aullybocus remarked that:

“There is nothing in the legislation or the government’s guidance to say that the leaseholder will still be protected if they are ‘extending’ a lease.

It is an awkward situation to be in and unfortunately, this does seem to be a ‘loophole’ that perhaps the government did not intend or foresee.”

She added that leaseholders are facing a difficult situation where they risk losing their leaseholder protection if they extend their lease to make it eligible for mortgage lenders for a future sale. This creates an inconsistency between flats that have leaseholder protections, with potential contributions worked out and capped, and those without these protections, which means that they would be difficult to sell and could result in a significant reduction in price due to the risk of large bills.

Aullybocus also indicated that if a leaseholder sells their flat to a buyer who needs a mortgage and the lender needs the lease to be extended, then the buyer would instantly lose the leaseholder protection anyway. This is having a large impact on shared ownership flats where there are concerns about the affordability of lease extensions.

Discrepancies with the LPE1

Conveyancers are further concerned that there are many inconsistencies within the LPE1 leasehold property enquiries form. For instance, some questions on the form ask about the 18m height, but some ask about the 11m height which is argued may cause confusion between the EWS1 and the BSA.

Fire safety

Another issue for conveyancers is identifying enforcement notices. There isn’t a search facility which means that conveyancers can simply answer the questions on the LPE1 form – instead, they need to carry out a Freedom of Information request or depend on landlords, to be honest, and state them.

Aullybocus also spoke of the practical things she described as “systematic issues in the planning process.” She continued:

Councils are allowing blocks [of flats] to be put up without leaving space for fire brigades to pull up close to the building to put the fires out.

I understand that there are also a lack of hydrants close by for the fire brigades to plug into and even then, the fire authority has to call the water authority to turn the pressure up.”

Overall, Aullybocus said that conveyancers should warn their clients not to rely on being saved and instead they should create an insurance plan as ladders may not reach the higher floors to rescue them in the worst-case scenario.

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