The Leaseholder Support Scheme – An Update

In November 2022, we wrote an article setting out an overview of the Leaseholder Support Scheme introduced by the Welsh Government on 27 June 2022 (the ‘Scheme’). That article is available to read here.

The Scheme was introduced by the Welsh Government to help those facing significant financial hardship as a direct result of fire safety issues affecting their property.

Subject to the satisfaction of the eligibility criteria, the Scheme affords leaseholders with support and financial advice from an Independent Financial Advisor (‘IFA’) on how best to manage their specific situation.

In certain circumstances, the Scheme may also buy-out the leaseholder from their property at 100% of the property’s open market valuation.

Prior to 23 January 2023, to be eligible for the Scheme a leaseholder was required to:

  • Be the owner of a property in an eligible building;
  • Be an owner-occupier or a displaced resident (this is where there has been a need to move out because the property was unable to meet physical or occupancy needs, and due to an inability to sell due to fire safety concerns the leaseholder is now renting the property out);
  • Pass the Financial Eligibility Assessment (where it is checked whether the leaseholder’s disposable income means falls into the Social Metrics Commissions’ definition of significant financial hardship because of fire safety issues).

Under the Scheme, an ‘eligible building’ is one that is over 11 metres in height and must have recognised or potential fire safety issues that are rendering the leaseholder unable to obtain an accurate valuation for mortgage purposes. In addition, the fire safety issues will have led to an increased service charge that has been passed onto the leaseholder by the building owner (e.g. for removal of unsafe cladding or for interim mitigation measures such as waking watch costs).

What has Changed?
On 23 January 2023, the Minister for Climate Change gave a statement (available here) in which two fundamental changes were made to the eligibility criteria for the Scheme. It is expected that these changes will open up the Scheme to a considerable number of Leaseholders to whom it was previously unavailable.

Firstly, the assessment and calculation used to establish financial hardship now considers the rapidly rising costs of energy. This change, and the recognition of the greatly increased energy price cap, will cause many more leaseholders to satisfy the financial eligibility assessment and grant them access to the Scheme.

Secondly, and perhaps even more significantly, the requirement for the leaseholder to be the owner-occupier or a displaced resident of the relevant property has now also been removed. The removal of this criteria now also opens up the Scheme to leaseholders who may have purchased properties as an investment, rather as their primary place of residence, including those who may have received the leasehold interest through inheritance.

We will produce further updates as this Scheme continues to evolve, but for more information please contact Lee Russell.

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