Landlords who own flats hit by the cladding scandal will be covered by the remediation fund, the government has announced.

But the £4 billion fund, which is being paid for by the building industry, will not pay-out to portfolio landlords who own flats within towers affected by the cladding scandal.

Last month, it was suggested that landlords would not be included in the fund, but in an amendment to the Building Safety Bill, the government now plans to protect leaseholders who live in a property as their principal residence and ‘accidental landlords’.

These are being defined as landlords who do not live in the property but do not own any other residences, or who own only one other property.

Overseas landlords who own one or two properties in the UK will also be covered.

But portfolio landlords make up a significant proportion of a building’s leaseholders in some city centre blocks, which means there will be long delays for works to remedy fire safety defects because leaseholders will be dependent on the freeholder’s ability to pay huge bills.

Also, where a freeholder or the original developer cannot afford to pay for the remediation costs, then flat owners – whether they are landlords or not – will have to cover the cost of works up to a cap of £10,000 outside London and £15,000 within it.

Un-mortgagable

Experts have warned that even though owner-occupiers in buildings with a large share of landlords would be protected from the costs, their flats would therefore remain un-mortgageable, unsellable and devalued until all works were complete.

It could also stop property investors from being able to sell. Under the new legislation a buyer purchasing a flat from an owner-occupier would also be protected from the cladding costs and the non-cladding cap.

But a buyer purchasing a property from a portfolio landlord would take on a lease that had no cladding cap protections attached to it, even if the buyer was purchasing as an owner-occupier.

Read more about the cladding scandal.