Guidance on leaseholder contribution caps first published

The Ministry of Housing, Communities and Local Government and the Department for Levelling Up, Housing and Communities published guidance on leaseholder contribution caps on 21 July 2022¹. The guidance sets out how the caps on non-cladding remediation costs for qualifying leaseholders work in practice under the Building Safety Act 2022¹. It applies to England¹.

The Act changes the law so that leaseholders are only required to contribute towards remediation costs in limited circumstances, and where building owners can legally pass on a share of non-cladding remediation costs to qualifying leaseholders, "these contributions must be firmly capped and spread over 10 years"¹. Any costs charged must be spread over a 10 year period, with the maximum charged in one year no greater than one-tenth (10%) of the cap¹.

The caps depend on the location and uprated value of the leasehold property¹:

The guidance states the higher caps in Greater London reflect the proportionately higher property values and building work costs in the region¹. Shared owners have their cap reduced in proportion to their equity; the guidance gives the example that someone owning 50% of a property in Greater London could be charged a maximum of 50% of the contribution cap, that is £7,500 spread over a 10-year period¹.

Any amount paid since 28 June 2017, or since the leaseholder became a tenant under the qualifying lease, towards remediation of building safety defects or interim measures counts towards the capped amount¹. Interim measures include waking watches put in place to patrol the building until historical building safety issues are resolved¹. Costs paid since 28 June 2017 towards these measures must be deducted from the total capped amount¹. The guidance notes no compensation is available if a leaseholder has paid more than their contribution cap¹. Any additional costs required to complete remediation works must come from the building owner¹.

Where a property was not the leaseholder's main home on 14 February 2022 because they had to move or sublet, it is still covered if they owned 3 or fewer UK properties in total on that date, including the leasehold property¹. Leaseholders who bought on or before 31 December 2020 use a formula of purchase price multiplied by a multiplier for the year of sale to determine lease value; the multiplier for 1970 is 72.14 and for 1971 is 64.15¹. Those who bought after 31 December 2020 and before 14 February 2022 use the price paid on the open market as the lease value¹.

Why it matters for households

The caps limit what qualifying leaseholders in England can be charged for non-cladding remediation, and the amounts are spread over 10 years rather than falling due at once¹. Whether a leaseholder is covered depends on their lease qualifying and on the value and location of the property, which determines which cap applies¹. Shared owners are affected proportionately to their equity¹. Because the protections transfer with the lease, buyers of a property that was eligible on 14 February 2022 are also covered¹. Payments already made since 28 June 2017 towards remediation or interim measures reduce the remaining amount that can be charged, and no compensation is available where payments have exceeded the cap¹.

What happens next

The guidance was first published on 21 July 2022 and was last updated on 24 July 2024, when it was updated to reflect amendments to the leaseholder protections now in force¹. No further steps are set out in the guidance.