Building Safety Levy 2025: Legal Considerations for English Developers

4 Mar

Introduction

Building safety has become a central concern in England following high profile failures which have exposed weaknesses in construction regulation. In response, the government has implemented the Building Safety Levy, a mandatory financial contribution from developers intended to fund the rectification of unsafe buildings. This Levy, to take effect from September 2025, forms part of the Building Safety Act 2022 and is a fundamental shift in how the construction industry bears responsibility for past and future building safety issues.

By requiring developers to finance safety improvements rather than leaving the financial burden on leaseholders and taxpayers, the Levy marks a turning point in regulatory oversight. It is critical that developers understand its structure, legal implications, and enforcement mechanisms to avoid delays, financial penalties, and non-compliance risks.

Purpose and Structure of the Levy

The Levy applies to new residential developments requiring building control approval. Developers must pay a charge based on the Gross Internal Area (GIA) of a project, with varying rates based on location and property values. There is a 50% reduction for brownfield sites, acknowledging the additional costs and risks associated with such developments.

The Levy is incorporated in the Building Safety Act 2022 and gives local authorities the power to collect and enforce payments. A portion of the funds raised will be retained to cover administrative costs, while the remainder will finance essential safety remediation work, such as cladding replacement and structural reinforcement in at-risk buildings.

Unlike the previously voluntary contributions from developers, this statutory requirement ensures that all applicable parties contribute in a way that the government considers to be fair and consistent to improving safety standards in the built environment.

Rationale Behind the Levy

The introduction of the Levy is rooted in the perceived need for systemic change within the construction sector. In the aftermath of the Grenfell Tower disaster, investigations revealed widespread safety deficiencies in residential buildings, highlighting the potential need for a robust and sustainable funding mechanism to address these issues.

Historically, leaseholders and taxpayers have shouldered the financial burden of rectifying unsafe cladding and structural failures, an approach that has been widely criticised as inequitable. The Levy directly addresses this concern by ensuring that developers, as the primary beneficiaries of property development, contribute proportionally to safety improvements.

Additionally, voluntary contributions from developers were inconsistent and insufficient. By implementing a mandatory charge, the government guarantees a steady and predictable stream of funding, reinforcing accountability within the sector and helping to prevent future safety crises.

Impact on Developers

The Levy imposes a new financial obligation on developers, requiring them to adjust their budgeting and financial planning accordingly. Larger developers with higher value projects may be able to absorb these costs more easily, while small and medium sized firms could face greater financial strain. Some developers may need to reassess project viability, revise pricing strategies, or secure additional funding to cover the Levy’s impact.

While critics argue that the Levy could slow down development, particularly for projects with tight profit margins, the government maintains that the priority remains ensuring higher safety standards and better protection for residents. In the long term, compliance with improved safety regulations is expected to enhance consumer confidence in new developments while reducing the risk of costly litigation and reputational damage for developers.

Beyond financial considerations, developers must integrate Levy obligations into their project planning and approval processes, ensuring that payments are completed in a timely manner to avoid regulatory delays.

Enforcement and Compliance

To ensure compliance, the Levy will be directly linked to building control approval. Developers must pay before they can obtain a building completion certificate.

Failure to comply with Levy requirements could result in severe consequences, including:

the withholding of building control approvals, effectively preventing projects from advancing;
construction delays, as incomplete Levy payments could lead to legal and administrative hurdles; and
denial of completion certificates, preventing the sale, occupation, or refinancing of the development.

Developers who dispute their Levy assessment can request an initial review by the local authority. If the dispute is not resolved, an appeal can be made to the Department for Levelling Up, Housing and Communities (DLUHC). Formal legal challenges may also be pursued through administrative and building control tribunals if necessary.

Administration and Allocation of Funds

The Levy will be managed primarily by local authorities, ensuring that funds are allocated efficiently and in accordance with government priorities. To seek to prevent mismanagement, collection and allocation mechanisms will be closely monitored and subject to regular review.

Authorities will coordinate with regulatory bodies to direct funding towards high risk buildings and urgent safety interventions. Additionally, the government has committed to adjusting Levy rates and policies as necessary, seeking to ensure that the system remains effective and responsive to industry developments.

Conclusion

The introduction of the Building Safety Levy 2025 is a defining moment for building regulation and financial responsibility in the English construction industry. By mandating developer contributions to remediation efforts, the government seeks to rectify past failures, enforce higher safety standards, and create a more transparent and accountable development framework.

While the Levy introduces new financial and compliance challenges, it also aims to restore public trust in building safety and prevent future crises. Developers must now take proactive steps to ensure they meet these new obligations, adapting their financial planning and compliance strategies well before the September 2025 implementation date.

For tailored legal advice on the Building Safety Levy and its impact on your developments, contact our specialist construction law team.

This article is intended for information purposes only and provides a general overview of the relevant legal topic. It does not constitute legal advice and should not be relied upon as such. While we strive for accuracy, the law is subject to change, and we cannot guarantee that the information is current or applicable to specific circumstances. Costigan King accepts no liability for any reliance placed on this material. For further details concerning the subject of the article or for specific advice, please contact a member of our team.