Building Safety Levy – what those involved in residential development need to know

The levy will be integrated into the building control process and will affect developments creating new residential floorspace. It will need to be factored into assessments regarding land acquisitions, scheme viability, funding, procurement and delivery programmes.

When and where will the levy apply?

The levy will apply where a building control application submitted on or after 1 October 2026:

• relates to the creation of additional residential floorspace, whether through new construction, an extension, or a change of use;
• forms part of a major residential development; and
• is made by a client who is not exempt.

A major residential development is broadly one resulting in at least:

• 10 dwellings; or
• 30 bedspaces in purpose-built student accommodation. 

The regime is not limited to high-rise or higher-risk buildings. Developers of qualifying housing, build-to-rent, mixed-use and purpose-built student accommodation schemes may all be affected.

The levy does not apply to existing applications submitted before 1 October 2026, except where the application is rejected and resubmitted on or after that date.

At present, the levy applies to England only.

What exemptions are available?

Some developments, clients, and types of floorspace are exempt. Key exemptions include:

• developments undertaken by non-profit registered providers of social housing and their wholly owned subsidiaries;
• developments below the relevant major development threshold;
• social and supported housing floorspace; and
• certain buildings and uses, including schools, hospitals, hotels, MOD properties, and temporary accommodation for homeless people. 

Care will be needed where a scheme contains a combination of chargeable and exempt floorspace or is being delivered in phases. Breaking a larger development into a series of smaller applications will not necessarily take it outside the regime.

Who is responsible for payment?

Responsibility rests with the “client” named in the building control application. In practice, this will commonly be the developer.

The relevant local authority will collect the levy. Developers will need to provide the required levy information as part of the building control process and keep that information up to date if the scheme changes.

The contractual allocation of responsibility will require careful consideration. Development agreements, building contracts, agreements for lease and funding arrangements should make clear who will provide the relevant information, manage the process and bear the financial consequences of the levy.

How will the levy be calculated?

The amount payable will be calculated by reference to:

• the gross internal area of chargeable residential floorspace, including relevant communal areas;
• the levy rate for the local authority area in which the development is situated; and
• whether the site qualifies for the 50% discount applicable to previously developed (brownfield) land.

Rates vary geographically and are intended to reflect differences in local housing values. This means the impact of the levy may differ considerably between otherwise similar schemes in different locations.

When must the levy be paid?

The levy must be paid in full on or before the earlier of:

• the date of the relevant building regulations completion notice; and
• the first occupation of the development.

It should be treated as part of the project’s critical compliance and delivery planning, rather than simply as a cost to be addressed at the end of the development.

What are the consequences for non-compliance?

Depending on the route used, the relevant local authority has the power to reject the client’s application or refuse to issue the completion certificate until the levy requirements have been satisfied.

Throughout the process, the collecting authority may carry out spot checks to assess the accuracy of the levy information and ensure the correct charge is applied. If the authority considers the information to be accurate, it will use it to calculate the levy and issue a levy liability notice, or a notice of no charge. If the authority considers the information to be inaccurate, it may rely on the information it determines to be correct when calculating the levy.

Can developers appeal the levy?

Yes. If a client receives a levy liability notice (or revised levy notice) and believes that the charge is incorrect, it can request a review of the collecting authority’s decision within 28 days of receiving that notice. If the client is still not satisfied with the outcome of the collecting authority’s review, or the collecting authority does not issue its decision within the prescribed time, the client may appeal the decision to the First-tier Tribunal for final determination.

What does the levy mean for developers, purchasers and funders?

The levy introduces a further financial and administrative consideration and must be factored into development viability. Its impact should be considered throughout the development lifecycle.

Land acquisition and viability
Development appraisals should include an appropriate levy allowance based on the scheme’s proposed floorspace and location. Where land is being acquired under a conditional contract, unconditional contract or option agreement, the parties will need to recognise that the levy will be factored into price calculations and viability assessments. This may need to be reflected in the drafting of any pricing mechanisms.

Funding and cashflow
Funding agreements should reflect when the levy becomes payable and whether payment is to be treated as a development cost. Funders may also require evidence that the levy process has been followed and any amount due has been paid before allowing final drawdown or practical completion.

Procurement and contractual risk
Developers and contractors should avoid assuming that responsibility for the levy follows responsibility for building control compliance more generally. Building contracts and professional appointments should identify who must supply information, notify changes and support any recalculation of liability. Any contractual attempt to pass on the economic cost of the levy needs to be clear and consistent across the project documents.

Acquisitions and disposals
Additional due diligence will be required when acquiring or funding a residential development, including ascertaining whether:

• the relevant building control application was submitted before or after 1 October 2026;
• a levy liability or determination notice has been issued;
• an exemption or reduced rate has been claimed;
• the information supplied remains accurate following changes to the scheme; and
• any levy payment has been made.

Key actions to consider now

Those with residential development interests should consider taking the following steps:

• Review the development pipeline: identify projects where building control applications have been
  submitted on or after 1 October 2026 and check that the initial levy information has been provided. Ensure that the requisite further information is collated prior to submitting the first commencement notice;
• Update development appraisals: include the levy in land bids, feasibility assessments, and cashflow forecasts;
• Check potential exemptions: establish whether the client, development or particular categories of floorspace qualify for an exemption;
• Assess brownfield status: determine whether the development may qualify for the reduced rate applicable to previously developed land;
• Review project documents: consider how levy costs, information requirements and the risk of changes in liability should be allocated;
• Plan for payment: ensure funding and project programmes accommodate payment before completion or first occupation; and
• Enhance record-keeping: retain clear evidence of application dates, floorspace calculations, exemptions, liability notices, payments and levy payment certificates.

How we can help

The Building Safety Levy has implications for land transactions, development structures, project documentation, funding, construction delivery and eventual disposal.
Our Transactional Real Estate and Construction and Engineering teams can work with you to:

• assess whether the levy applies to current and proposed developments;
• review the effect of the levy on site acquisitions, options, promotion agreements and development agreements;
• identify relevant exemptions and reduced rates;
• advise on the allocation of levy costs and responsibilities in project documents;
• support due diligence on acquisitions, disposals and funding transactions; and
• review building contracts, professional appointments and related procurement arrangements.

With the levy now in place, early action will help avoid unexpected costs and minimise the risk of disruption at completion or occupation. Please contact one of our experts if you would like to discuss how the Building Safety Levy may affect your development pipeline or a particular project.