Building safety has moved from a due diligence footnote to the first question in most residential refinancings. Here is what lenders expect to see and how to prepare.
Four years after the Building Safety Act 2022 received Royal Assent, building safety has become the first question in almost every residential refinancing we see. Lenders who once accepted a cladding letter and a fire risk assessment now want a full picture of a building's safety status, its remediation position and who is paying for what.
For owners and developers the result is longer timetables and more questions. Most of that delay is avoidable if the information is gathered before the lender asks for it.
Why lenders have changed their approach
The Act changed who bears the cost of historical building safety defects. Qualifying leaseholders are now protected from most remediation costs, which pushes liability back towards building owners, landlords and in some cases developers. A lender taking security over a building is therefore assessing a liability that sits much closer to its borrower than it did before.
At the same time, higher-risk buildings, those at least 18 metres or seven storeys tall with two or more residential units, are subject to a separate regulatory regime. Registration with the Building Safety Regulator, accountable person duties and the golden thread of building information all now form part of a lender's checklist.
The lender is no longer asking whether there is a problem. It is asking who will pay for it and when.
What lenders typically ask for
- Confirmation of whether each building is a higher-risk building and, if so, evidence of registration.
- An external wall system assessment and any remediation reports.
- Details of any developer remediation contract or government funding application.
- The identity of the accountable person and principal accountable person.
- A summary of the leaseholder deed of certificate position across the building.
- Any notices or correspondence from the Building Safety Regulator or local authority.
How to prepare
The most effective step is to build a building safety data room before approaching lenders. It should hold the core documents above, a short narrative of the building's history and a clear statement of who is responsible for any outstanding works. A two-page summary saves weeks of questions.
Owners should also review existing facility terms. Many older facilities contain information undertakings and representations that were not drafted with the Act in mind, and a refinancing is the natural moment to correct them.
Where disputes arise
Where remediation liability is contested, lenders will usually want the dispute resolved, or at least ring-fenced, before they lend. Remediation orders and remediation contribution orders can be powerful tools for owners seeking to recover costs, and starting that process early often unlocks a refinancing that would otherwise stall.
Our real estate, construction and finance teams work on these matters together. If you are planning a refinancing in the next twelve months, we would recommend a short review of the building safety position now rather than when the lender's questions arrive.