Building Safety Act – management obligations and managing agents
New regulations have recently been passed under the Building Safety Act (the Act) regarding the management obligations of the accountable person (AP) and principal accountable person (PAP) when a higher-risk building is "occupied" (occupation of two or more residential units).
These regulations are expected to come into force in Autumn 2023 and will be significant to freeholders, head lessees, and resident management companies which are either an AP or PAP, as:
- although APs and PAPs will want to seek support from managing agents in discharging their obligations, APs and PAPs cannot delegate their ultimate responsibility for such obligations; and
- the consequences of non-compliance with the management obligations in the Act by the AP or PAP are severe and can result in criminal sanctions.
APs and PAPs will nonetheless need to agree with their managing agents how support is going to be provided in respect of these new responsibilities. This may require the extension of the services provided by agents under property management agreements.
Managing agents will also need to understand how the Act impacts upon, amongst other things, the new service charge recovery regime that is already in place under the Act.
The property management agreement
APs and PAPs should review the services under property management agreements in order to understand to what extent their managing agents are required to assist them in discharging their obligations under the Act. There are likely to be areas where the AP or PAP may want to request additional support from their managing agents, such as in relation to required record keeping and submissions to the Building Safety Regulator, as well as dealing with resident engagement requirements under the Act. This scope will need to be discussed and agreed with the managing agents. The services will also need to be kept under review and may need to be amended in order to comply with subsequent legislation and updated government guidance.
A collaborative approach will need to be taken by building owners, responsible persons, other stakeholders, and agents (in particular where there are multiple APs for the higher-risk building) in agreeing the nature and extent of services to be provided by the managing agent. As there are a number of parties involved, the property management agreement will need to clearly set out the services being provided and the agent’s authority. A clear, contractual delineation of responsibilities will be necessary to avoid unintended overlap or gaps in the provision of statutorily required services and mechanisms.
If there are multiple APs, there will need to be increased cooperation and communication regarding building safety management systems which each AP will be obliged to have in place. The PAP will also need to have access and use of all systems to create their safety case report and to support the holistic approach to building safety.
Managing agents and building owners need to be aware of the new requirements under the Act as to what costs can and can’t be put through the service charge. The Act severely curtails costs relating to building and fire safety that can be passed on to tenants, particularly relating to historic defects.
The Act defines “building safety measures” which relate to the new duty holder requirements which can be passed through the service charge, but these are limited in scope. These provisions also only apply to “relevant leases”, so managing agents will need to understand the limitations placed on service charge recovery.
There will be new requirements to separate the costs which directly relate to building safety measures from other services. Agents will need to ensure accurate accounting to evidence this in service charge invoices. Further legislation is awaited which will clarify the detail, but agents will need to start considering changes to their invoicing and accounting procedures.
Guidance for managing agents
Andrew Bulmer, CEO of The Property Institute, acknowledged that the Act is “a clear call for those in the sector – including property managers, developers and landlords – to work together to identify, mitigate and manage risks to residents.” However, aside from the competency standard published by the Health and Safety Executive (HSE) for those managing building safety on higher-risk buildings, to date there has been little in the way of government-led guidance for agents to assist them in supporting APs and PAPs in complying with their obligations.
The Royal Institute of Chartered Surveyors (RICS) have confirmed that they “...anticipate that for those professionals who wish to work on higher-risk buildings, there will need to be an accreditation with demonstrable third-party validation as well as a public register. Training will also be developed to support our professionals through these changes”. This may pave the way for equivalent up-skilling and registry requirements to be forthcoming in the property management sphere.
Managing agents will need to get to grips with the new statutory regime and are likely to need training and further guidance. APs and PAPs will want to understand the steps their managing agents are taking to familiarise themselves with the new regime and update their processes.
As with much of the Act, there is a sea change afoot not only in respect of the new obligations to manage building safety risks but also to the way in which APs and PAPs seek support from their managing agents.
APs and PAPs need to keep up to speed with current legal requirements and guidance, consider how services from their managing agents may need to adapt, and make sure they are aware of how these are being implemented. As referred to in HSE guidance, the AP will be required to act as an "intelligent customer" and will therefore need to engage actively on these issues.
Property ownership structuring, for example if common areas are demised to a managing agent, will also need to be given further thought since such arrangements could result in an agent themselves being an AP for a building. This is likely to mean that the interrelationship between structuring, leasing and standalone property management agreements will need greater thought at an earlier stage in developments that will involve a residential element.