The Leasehold and Freehold Reform Act 2024 (the LFRA) received Royal Assent on 24 May 2024.
The LFRA includes important amendments to the Building Safety Act 2022 (the BSA). The BSA was introduced in response to the Grenfell Tower fire in 2017. It was designed to give residents and homeowners more rights, powers and protections to reduce unsafe building practices and to ensure better management of buildings during the occupation phase. Since its implementation, the BSA has been subject to various changes and amendments.
This article explores recent changes to the BSA implemented by the LFRA. These changes impact on insolvency practitioners and create new notification requirements.
What are the major changes?
The most important change for insolvency practitioners to be aware of is the repeal of Section 125 of the BSA, which has now been replaced with a new Section 125A.
What did the old Section 125 say?
Under the repealed Section 125 there was an ability for an insolvency practitioner acting in relation to the winding-up of an insolvent landlord company to apply to Court in respect of the company's defect obligations. The insolvency practitioner could seek an order requiring a company associated with the insolvent landlord company to:
make such contributions to the insolvent landlord company’s assets as the court considers to be just and equitable; or
make such payments to a specified person as the court considers to be just and equitable.
This section has now been repealed and replaced with new provisions. This change aligns insolvency procedures with broader legal principles, to make sure that recovered funds benefit creditors as intended.
It should be noted that other remedies contained within the BSA have survived the changes made by the LFRA. For example, Building Liability Orders under section 126 of the BSA remain available in certain circumstances.
The New Section 125A
Key Terms
The LFRA inserts a new Section 125A into the BSA, to replace the previous section 125. Under the new Section 125A the following definitions apply:
Term
Description
Higher-Risk Building
Any building in England over 18 meters tall or with at least 7 storeys and contains at least two residential units.
Our previous article on higher-risk buildings provides a more depth explanation of this definition and can be accessed here.
Relevant Building
A relevant building refers to buildings that meets all three of the following criteria:
it is at least 11 metres in height or has at least five storeys
it contains at least two dwellings
is not a leaseholder-owned building
A relevant building can be either a self-contained building or a self-contained part of a building.
the accountable person (whether an individual or body corporate) for a higher-risk building or;
in the case of a relevant building that is not a higher-risk building, the person would be an accountable person for the building if the building was a higher-risk building
Who falls within the definition of an "Accountable Person" under the BSA is explored in more detail in our earlier insight here.
A responsible person includes those accountable for the building such as freeholders, management companies, housing associations and residents' Right to Manage companies.
Given the importance of whether or not a person or company constitutes a responsible person for the purpose of Section 125A if there is any uncertainty insolvency practitioners should take advice regarding the same as early as possible, to ensure they are aware of and comply with the duties imposed by Section 125A.
What are the new obligations imposed on Insolvency Practitioners under section 125A of the BSA?
Section 125A imposes additional duties on insolvency practitioners. These duties only apply where the insolvency practitioner is appointed over a responsible person (such as a freehold, management company, housing association or residents right to manage company) for a higher-risk building or a relevant building.
Section 125A imposes a new statutory obligation on the office holders after 24 July 2024. Where Section 125A applies, the insolvency practitioner must provide local authorities, fire and rescue services, and the Building Safety Regulator (in the case of Higher-Risk Buildings), with key information about the building within 14 days of their appointment.
The information to be provided is detailed at Section 125A (6) and includes:
the name and address of the person (or company) in relation to whom the insolvency practitioner is appointed
the address of each higher-risk building or relevant building for which the person the insolvency practitioner is appointed over is a responsible person
an official copy of the register of title and title plan relating to each registered estate or interest the person the insolvency practitioner is appointed over holds in such a building
the nature of the practitioner’s appointment (Administrator, Liquidator, Trustee in Bankruptcy etc.)
the insolvency practitioner’s name, address, telephone number and email address
As much of the information set out in detail at Rule 1.6 of the Insolvency (England and Wales) Rules 2016 as possible.
These new obligations aim to ensure critical safety and ownership details are communicated swiftly. They are also designed to promote enhanced building safety and accountability.
Where an insolvency practitioner was already appointed before 24 July 2024 and remains in office after this date, it is prudent to assume the notification requirements now contained in Section 125A will apply.
Summary
The BSA is a complex piece of legislation which has wide-ranging implications. It has reshaped the legal framework in this area and created new obligations for insolvency practitioners. Insolvency Practitioners will need to ensure they comply with the new obligations in Section 125A of the BSA, where applicable. They will also need to take care to ensure they have adequate procedures in place to ensure they can gather the relevant information and notify the relevant parties promptly.
Insolvency practitioners are advised to seek legal advice when dealing with higher risk or relevant buildings given the complexities in this area.
For more information or specific legal advice on how the BSA (as amended) affects insolvency practitioners please contact Rebecca Stratton. For more information about the BSA please visit our dedicated Building Safety hub Building Safety Act 2022 (howardkennedy.com).
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