Closing loopholes—impact analysis of the Levelling Up & Regeneration Act 2023

The Levelling Up & Regeneration Act 2023 (The Act), which amends the Building Safety Act 2022 (BSA), received the Royal Assent on 26 October 2023 and came into effect on 26 December 2023. The Act introduced a new section 119A into the BSA which ensures that the statutory protections afforded to lessees take effect where ‘qualifying leases’ are extended, varied or surrendered and re-granted.  

What is a qualifying lease?

A ‘qualifying lease’ is a lease which satisfies criteria to include it being a long lease (granted for a term of more than 21 years), of a single dwelling within a building  of at least 11 meters high or at least five storeys. 

Closing the Building Safety Act loophole for lessees

It resolved a loophole in connection with statutory lease extensions. As the BSA was originally drafted, lessees were only afforded statutory protection in respect of the sums that can be recovered from them for remedial building safety defects, in relation to ‘qualifying’ leases that were granted before 14 February 2022. 

This created a problem for lessees whose statutory lease extension claims were ongoing since their extended leases would have lost their protected status due to having been granted after that date, which was undoubtedly an unintended consequence on the part of the draftsman. 

With a view to overcoming this loophole, lessees were generally advised not to complete unless their leases contained an express clause which would mirror the protections afforded by the BSA. Whilst some freeholders were willing to entertain such a provision, others sought an increased premium by way of leverage.  

The Act is therefore a welcome relief for lessees with the loophole brought about by the BSA effectively closed.