Conveyancing firms are refusing to handle transactions involving flats in blocks with five or more storeys because of concerns about their liabilities under the Building Safety Act 2022 (BSA), it has emerged.
Rob Hailstone, chief executive of the Bold Legal Group, said he could “fully understand” why some law firms were refusing the work because there were “far too many unknowns at the moment”.
A ‘relevant building’ under the BSA has at least five storeys or is at least 11 metres tall and conveyancers must now provide mortgage lenders with confirmation that properties adhere to the requirements of the Act, which covers risks such as fire and structural collapse.
Beth Rudolf, director of delivery at the Conveyancing Association, said the main issue was part 1 of the UK Finance Mortgage Lenders’ Handbook.
This requires conveyancers to obtain information from the sellers of leasehold flats relating to the BSA, including copies of the landlords’ certificate and leaseholder deed of certificate, in the forms specified by the regulations to the Act.
Ms Rudolf said: “What it needs to do is be clear that if the flat is in a relevant building, the Building Safety Act applies.
“We and the Conveyancing Task Force [made up of the Law Society, the Society of Licensed Conveyancers, the Conveyancing Association, CILEX and the Bold Legal Group] have been asking them to update this since last year but that seems to be no effort being made on the part of UK Finance to try to correct it.”
As a result conveyancers were “not prepared to enter into the complexities” of the BSA, its regulations and the Fire Safety Regulations.
Chris Barry, director at Gloucester-based Thomas Legal, said “several law firms” he knew were refusing to accept new clients where the building was five storeys or more.
“Professional indemnity insurance providers will be asking law firms how many properties they are transacting that are subject to the Building Safety Act upon renewal.
“However, I don’t think insurance and extended timescales are the only reason for withdrawing from the market. There seems to be a real lack of clarity around what happens in certain scenarios and it is this uncertainty that is encouraging a ‘wait and see’ approach.”
Mr Barry said Thomas Legal was approached by “dozens of clients every week who are struggling to find a firm that can help them with what, in most cases, is their first purchase.”
Jamie Lennox, a director of Dimora Mortgages in Norwich, recounted how one local law firm was refusing to act on a small block of flats and have a set rule that they were not currently dealing with leasehold properties.
“The reason given was that their compliance officer made the decision that they are not qualified to confirm if the property complies with the Building Safety Act 2022.”
Scott Taylor-Barr, an adviser at Carl Summers Financial Services in Newport, added: “The rumblings I have heard on many of the conveyancing forums suggest conveyancers feel overly exposed, with lenders seeming to have passed the responsibility of ensuring a clad property complies with current rules to them, which many conveyancers feel uncomfortable about.
“It is not their area of expertise and many feel the surveyors and lenders have sidestepped making the decision and simply passed it ‘down the line’, in this case right into the lap of conveyancers who are left to explain to the customer the whole sorry mess.
“I’m not at all surprised to hear of some conveyancers turning this sort of work away, or charging a higher fee for the extra risk they are then carrying by doing it.”
Andrew Butler KC, based at property specialists Tanfield Chambers, described part 5 and schedule 8 to the BSA, which deal with tenant liability for service charges, as “a minefield in a labyrinth”.
In an article for his chambers’ website, he said: “I turned up these provisions in the expectation that I would be able to see instantly through the morass and dispense pearls of wisdom which would soothe furrowed solicitor brows.
“How wrong I was. It’s a minefield. A labyrinth. A minefield in a labyrinth. I now fully understand the anxiety.”
Mr Butler said schedule 8 set out “extremely complicated” exceptions and limitations to when a service charge was payable.
In terms of the “end danger” for solicitors, he said: “It is possible that a purchaser who ends up paying lots of service charges which they were not in fact required to pay might wish to know why they were not advised by their conveyancing solicitor that their liability could be limited.”
Mr Butler said law firms could make clear in their retainer letters that they that “simply will not advise on the effect of the BSA 2022”, which would be “safe, but unhelpful”.
Alternatively, it would not be “unduly onerous for a solicitor at least to try to ascertain whether any of the exemptions or limitations in the BSA 2022 are engaged”.
Although it would “probably not be possible to give definitive advice about the impact of the BSA 2022 in the context of a usual conveyancing transaction”, solicitors “might want to consider offering this as a premium service” for an additional fee.
“Particularly where the service charge, and the saving, is potentially high, clients might be prepared to pay for the considerable work this is likely to involve.”
Mr Hailstone said there were “far too many unknowns at the moment”, such as whether the information contained on the landlord and leaseholder deeds of certificate was correct, what questions indemnity insurers “would be asking us in a few months’ time” and whether lenders would change the handbook.
“The good news is that the Department for Levelling Up, Housing and Communities are well aware of the main concerns and will hopefully be taking steps to remedy them soon.”