Leaseholder Deed of Certificate: What You Need to Know

In the wake of building safety reforms introduced over the past few years, the introduction of the Leaseholder Deed of Certificate has fundamentally altered the landscape for residential flat ownership in the UK.

These certificates, along with Landlord Certificates, came into effect on 20th and 21st July 2022 and are aimed at ensuring that leaseholders in buildings over a certain height are protected from excessive costs related to the remediation of building safety risks, such as unsafe cladding.

In this comprehensive guide, we’ll explore the purpose of the Leaseholder Deed of Certificate, why it’s crucial for leaseholders, and how it impacts the buying and selling of flats. We’ll also delve into how this certificate interacts with the protections provided under the Building Safety Act 2022 and offer practical advice for leaseholders and their conveyancers.

What Is a Leaseholder Deed of Certificate?

The Leaseholder Deed of Certificate is a document that has been introduced as part of the Building Safety (Leasehold Protections) (Information etc) Regulations 2022.

Its primary function is to help ground landlords and building managers identify which leases qualify for protections under Schedule 8 of the Building Safety Act 2022. This section of the Act outlines which leaseholders are exempt from being recharged for costs related to certain types of remediation work, especially those addressing defective wall insulation and other building safety issues.

The key to understanding the importance of the Leaseholder Deed of Certificate lies in the concept of "qualifying leases." A lease can only qualify for maximum protection if, on the fixed reference date of 14 February 2022, the flat was either owner-occupied or owned by an individual with no more than three properties in the UK.

The Leaseholder Deed of Certificate formalises this information by acting as a permanent record of how the property was owned or occupied on that date.

The Leaseholder Deed of Certificate is essentially a self-certification document, in which the leaseholder answers several questions that determine whether the lease qualifies for protection under the Building Safety Act.

The certificate must be executed as a deed, making it a legally binding document.

Key Details and Requirements of the Leaseholder Deed of Certificate

To establish whether a lease qualifies for the protections provided under the Building Safety Act, the leaseholder must answer a range of questions and provide documentary evidence. Some of the key questions asked in the certificate include:

• Owner-occupation: Was the flat owner-occupied on 14 February 2022?
• Multiple property ownership: If the flat was not owner-occupied, did the leaseholder own more than two other properties in the UK?
• Price of sale: What was the price at which the flat was last sold before 14 February 2022?
• Shared ownership: If the flat is held under a shared ownership lease, what was the percentage share owned by the leaseholder as of 14 February 2022?

If the current leaseholder was not the owner of the flat on the reference date, they are required to make inquiries with the former leaseholder to gather the necessary information.

This can add complexity to the process, but it is essential for ensuring that the flat’s qualifying status is accurately recorded.

Failure to provide a Leaseholder Deed of Certificate when requested by the landlord could result in the leaseholder losing valuable rights.

Protections Offered by a Qualifying Lease

A significant part of the importance of the Leaseholder Deed of Certificate is the protections that it grants qualifying leaseholders under the Building Safety Act 2022.

These protections ensure that leaseholders are not unfairly burdened with the costs of remediating building safety defects, particularly those related to flammable cladding and other fire risks. Here is an overview of the protections available to qualifying leaseholders:

• Complete protection for cladding remediation costs: A qualifying leaseholder is fully protected from paying for the remediation of dangerous cladding if the defect was a result of the building’s original construction or a refurbishment that took place within the last 30 years. This means that for qualifying leaseholders, these often extremely high costs cannot be passed on.

• Protection from non-cladding fire risk costs: Both qualifying and non-qualifying leaseholders benefit from protections against the costs of remediating non-cladding related fire risks if the landlord was responsible for the building’s construction, refurbishment, or commissioning the defective works within the past 30 years.

• Landlord net worth criteria: Qualifying leaseholders are fully protected from both cladding and non-cladding remediation costs if, as of 14 February 2022, the landlord’s net worth exceeded £2 million per relevant building. This protection provides an additional layer of financial security for leaseholders in buildings owned by wealthier landlords.

• Capped contributions for non-cladding safety defects: In cases where the landlord’s net worth was less than £2 million, qualifying leaseholders may still be required to contribute to the costs of non-cladding safety defects.

However, these contributions are subject to caps depending on the location and value of the property:

• £15,000 in Greater London
• £10,000 elsewhere in the UK

For properties valued below £325,000 in London or £175,000 elsewhere, the contribution cap is set at zero, meaning no contribution is required. Conversely, for properties valued at over £1 million, the cap rises to £50,000, and for properties valued above £2 million, the cap is £100,000.

These costs can be spread over a 10-year period, helping to alleviate the financial burden on leaseholders.

Shared ownership considerations: In shared ownership properties, the contribution cap is apportioned based on the percentage of the property owned by the leaseholder. This ensures that leaseholders only contribute towards remediation costs in line with their ownership stake in the property.

The Role of the Landlord Certificate

While the Leaseholder Deed of Certificate focuses on the leaseholder’s qualifying status, the Landlord Certificate plays an equally important role in the remediation process.

This document, also introduced by the Building Safety Act, is issued by the landlord and contains key information needed to determine how much the landlord can charge for building safety works.

Landlords are legally required to provide a Landlord Certificate in the following circumstances:

• When they intend to pass on any remediation costs to the leaseholder through the service charge.
• When a leaseholder notifies them of their intent to sell the property.
• When a new building safety defect is discovered that was not covered by a previous Landlord Certificate.
• Upon request by the leaseholder.
• The Landlord Certificate includes critical information such as:
• The name and address of the relevant landlord as of 14 February 2022.
• The current landlord’s details.
• Information about any superior landlords.
• The landlord’s net worth as of 14 February 2022.
• Details of any works already undertaken to remedy safety defects and the costs associated with those works.

This certificate is a crucial document in ensuring transparency and accountability between landlords and leaseholders.

Practical Considerations for Leaseholders and Conveyancers

The Leaseholder Deed of Certificate is more than just a legal formality—it has real, long-term financial and legal implications. Whether you are a leaseholder or a conveyancer involved in the sale or purchase of a flat, understanding the importance of this document is essential.

Here are some practical tips for leaseholders and their conveyancers:

• Complete the certificate early: The Leaseholder Deed of Certificate should be completed as soon as possible to avoid delays or complications during the sale of a flat. Once completed, it serves as a permanent record of the flat’s ownership and occupancy status as of 14 February 2022.

• Seek legal advice: Completing the Leaseholder Deed of Certificate can be complex, especially when gathering the required documentary evidence. It is advisable to seek legal advice to ensure that the certificate is completed accurately and that no rights are forfeited.

• Check for an existing certificate: If you are involved in the sale or purchase of a flat, check whether a Leaseholder Deed of Certificate already exists. If not, it may be necessary to prepare one before the sale can proceed.

• Request a Landlord Certificate: When selling a flat, the seller’s conveyancer should request a Landlord Certificate from the ground landlord. This certificate is a legal requirement and forms part of the permanent record under Schedule 8 of the Building Safety Act.

Another crucial document for leaseholders, especially in light of recent building safety reforms, is the Leaseholder Deed of Certificate. This document plays a key role in determining whether a leaseholder qualifies for protection under the Building Safety Act 2022, particularly when it comes to avoiding costs related to building safety remediation.

If you’re buying or selling a leasehold property in a building affected by safety concerns, this certificate is essential for ensuring that you're not liable for excessive remediation charges. Learn more about the purpose of the Leaseholder Deed of Certificate, how it affects property transactions, and what legal protections it offers.

The Importance of Leasehold Enquiries

When purchasing a leasehold property, your conveyancer will carry out a series of leasehold-specific enquiries to ensure you understand the obligations you’ll be taking on. These enquiries cover crucial matters like ground rent, service charges, any upcoming major works, and administrative fees such as the Notice of Transfer Fee.

Being aware of all the legal responsibilities attached to a leasehold property is key to avoiding future complications or unexpected costs.

Can You Extend a Lease?

If you're purchasing a leasehold property with a shorter lease, you might be concerned about how this will affect your investment in the long term.

Extending a lease can be costly, but it is an essential consideration, especially if the lease is under 80 years. A shorter lease can impact the property’s value and your ability to get a mortgage. Your solicitor can help you negotiate the terms and costs of extending the lease with the freeholder, ensuring the transaction is beneficial for you.

The Role of a Freeholder in Leasehold Transactions

As a leaseholder, the freeholder owns the land on which your property is situated. They have responsibilities like maintaining the building and ensuring repairs are carried out, which are often paid for through service charges.

When a leasehold property is sold, the freeholder must be notified through a formal Notice of Transfer, as well as a Notice of Charge if a mortgage is involved. Failing to notify the freeholder or pay the associated fees can lead to complications, which is why it’s essential to have a solicitor manage these communications and processes.

Common Leasehold Terms Explained

Understanding the terminology in your lease is vital to managing your leasehold obligations. Some common terms include:

• Ground Rent: An annual fee paid to the freeholder for the land on which the property sits.

• Service Charges: Contributions paid by leaseholders for the maintenance and upkeep of communal areas.

• Lease Term: The length of time the lease is valid. Leases typically range from 99 to 999 years but can be shorter.

• Major Works: Large-scale repairs or improvements carried out by the freeholder, often resulting in additional charges to leaseholders.

These terms will be covered in detail during the conveyancing process, ensuring that you fully understand your legal and financial responsibilities as a leaseholder.



Conclusion

The introduction of the Leaseholder Deed of Certificate has brought about a major shift in how leaseholders are protected from the costs of remediating building safety defects. By clearly defining which leases qualify for protection under the Building Safety Act, this document offers a level of financial security that was previously lacking.

For leaseholders, it is critical to understand the importance of this certificate and to ensure that it is completed and submitted when necessary. Failure to do so could result in the loss of valuable rights and protections, leading to significant financial liabilities in the future.

Whether you are a leaseholder, a prospective buyer, or a conveyancer, familiarising yourself with the Leaseholder Deed of Certificate and the associated legal requirements is essential for navigating the evolving landscape of building safety regulations in the UK. If you are ever in doubt, seek legal advice to ensure that your rights are fully protected.