Key safety questions when buying a mixed-use building

Archie Campbell, Catriona Berman and James Styles begin a two-part series by running down the first five of 12 things to check when buying a mixed-use building in the light of the Building Safety Act 2022. You are an investor looking to buy a mixed-use property. The property is a large high street block in London, built in the early 2000s. The block has retail on the ground floor, then two floors of offices and finally two small flats at the top. The flats have been sold off on 999-year leases and do not generate any income, so you are not really interested in them. But you have heard that, because of the flats, you might have obligations under the Building Safety Act 2022. Indeed you do. Whenever you have residential units, you need to consider whether the 2022 Act applies – and ask yourself the following questions. How many residential units are there? If there are two or more residential units in any building, as here, then you need to consider carefully whether the 2022 Act applies. There are lots of limitations, but if you think the 2022 Act does not apply, make sure you know why. Getting it wrong could leave you committing criminal offences without knowing it. If there was only one (or no) residential unit, then the rules relating to registration and management and the limits on service charge recovery would not apply. How tall is the building/how many floors does it have? If a building is at least 18m high or has at least seven storeys, generally it will be classed as a “higher-risk building” under the 2022 Act. There are some limited exceptions to that rule, but they are beyond the scope of this article. There are detailed rules and guidance on how you measure the height of a building.  In addition, if the building is at least 11m high or has at least five storeys it will generally be a “relevant building”. Again, there are some limited exceptions to that rule, also beyond the scope of this article. The obligations relating to higher-risk buildings are designed to ensure day-to-day operational safety of the building for users and occupiers. In contrast, the rules relating to relevant buildings are focused on putting right historical issues and the costs of doing so. Any building that is a higher-risk building will usually also be a relevant building, but there are some limited exceptions. This building is 20m high, so we need to look at the rules around both higher-risk buildings and relevant buildings. Who is the current accountable person and principal accountable person? This question (and the following five questions) only arise in the case of higher-risk buildings.  On a purchase of a higher-risk building, you need to establish who the current accountable person and principal accountable person are so you can obtain essential information (prescribed by the 2022 Act) from them and check that, at least up to the date of sale, the relevant obligations have been complied with. Anyone who holds the freehold, or a leasehold interest in the common parts and structure of the property, and who has the principal responsibility for repairing those common parts and the structure, will generally be an accountable person. If there is only one accountable person, as will often be the case once the building has been constructed, that person is also the principal accountable person. Accountable persons may be individuals, partnerships or corporate bodies and there may be more than one accountable person for a building.  In our case, the seller is solely responsible for repairing both the common parts and structure, so is both an accountable person and the principal accountable person. Who is going to be the accountable person and principal accountable person following purchase? Assuming you go ahead and buy the property, you will become an  accountable person and the principal accountable person as you will take over control for the common parts and structure. Note that you cannot contract out of your obligations. You may appoint a managing agent, but, even if they are contractually responsible to you, you remain ultimately liable.  Failure to comply with accountable person or principal accountable person duties generally amounts to a criminal offence, so you should take specialist advice to make sure that you comply with your obligations.  Do you understand your obligations as principal accountable person? The 2022 Act imposes some substantial obligations on accountable persons and principal accountable persons. As an overview of what you will need to do (and check that the seller has done), you must: ■ Assess building safety risks Each accountable person must assess the building safety risks for the part of the building they are responsible for. You will need to carry out an assessment as soon as you buy the building, so make sure that is in hand. Building safety risks are, broadly, risks to the safety of people in or about a building arising from the spread of fire or structural failure. The duty to assess the risks is ongoing and you will need to carry out further assessments at regular intervals and at any time that you suspect that the current assessment is no longer valid. ■ Manage the building safety risks Once the building safety risks have been assessed, you must manage those risks. That means promptly taking all reasonable steps to prevent building safety risks materialising and to reduce the severity of any incident resulting from any risk.  ■ Prepare safety case reports When you buy the property, you must prepare a new “safety case report”. This is the main way that the Building Safety Regulator will check that accountable persons are fulfilling their duties. Once you have prepared the new report you must notify the Building Safety Regulator. The safety case report should contain the assessment of the building safety risks and a brief description of the steps taken to manage those risks, with an explanation of why those measures were chosen.  The safety case report should be revised when necessary and whenever a new assessment is made.  ■ Provide information on “mandatory occurrences” to the Building Safety Regulator You must report certain structural and fire safety occurrences to the Building Safety Regulator and establish a “mandatory occurrence reporting system”. Reporting focuses on occurrences that are of a significant risk to life safety.  ■ Keep and provide “golden thread” information about higher-risk buildings You must keep and update prescribed key safety, or “golden thread”, information about the building. The principles governing how the golden thread should be kept and maintained include provisions that it must be: kept in electronic format; secure and accessible; an interoperable single source of truth; and only changed in accordance with procedures which record the person who made the change and the date of that change. Accountable persons must hand over the golden thread information to successors, so check that you get the relevant information. ■ Engage with residents Principal accountable persons must have a strategy for promoting the participation of residents and flat owners in building safety decisions. The strategy must include information about: the information that each accountable person will provide about decisions relating to the management of the building; decisions that the accountable person will consult residents about; arrangements for obtaining and taking account of the views of residents; and how the effectiveness of the engagement strategy will be measured and reviewed. Each accountable person must give a copy of the strategy to the residents and flat owners in the part of the building they are responsible for as soon as reasonably practicable after it has been prepared and whenever it is revised. The type of information to be made available includes: full current and historical fire risk assessments; planned maintenance and repair schedules; outcomes of building safety inspection checks; information on how the building is managed; details of preventative measures; details of fire protection measures and the fire strategy for the building; information on the maintenance of fire safety systems; structural assessments; and planned and historical changes to the building. ■ Establish a complaints procedure The 2022 Act provides for two complaint procedures, one to be set up and operated by the principal accountable person and the other by the Building Safety Regulator. ■ Consider 2022 Act obligations in conjunction with other fire safety obligations In our scenario, it is likely that, when you buy the property, you will also be the “responsible person” for fire safety legislation, so you will need to ensure that your fire risk assessment tallies and is co-ordinated with your building safety obligations under the 2022 Act. Next time: the remaining seven questions, including the need to check the “Gateway 3” completion certificate, registration with the BSR and Building Assessment Certificates, plus the impact of being a “relevant building” on recovery of remediation-type costs  Archie Campbell and Catriona Berman are partners and James Styles is a consultant at Stephenson Harwood LLP Photo © iStock