BSA reality check part one: The ‘hotel exemption’ and the hidden risks

Many hotel owners and investors still rely on the perceived comfort of the ‘hotel exemption’ under the Building Safety Act 2022 (BSA). Yet, in a sector increasingly shaped by mixed‑use developments, serviced accommodation and hybrid operating models, that comfort may be unwittingly misplaced. Many hospitality venues still fall within the higher-risk building (HRB) framework because the exemption is narrow and specific. For an industry built on reputation, guest safety, and operational reliability, understanding the real impact of the BSA is not just prudent – it’s a strategic necessity.

Scenario one: Hospitality premises within or connected to a residential HRB

A building becomes an HRB if it’s at least 18m or seven storeys and contains two or more residential units. While standalone hotels are excluded from HRB duties during occupation, mixed‑use buildings are not. A detailed analysis must be carried out to determine if the hotel is part of the HRB and therefore caught by the BSA. For example, a seven-storey hotel (Tower A) has a walkway access on the first floor to another section (Tower B) within the overall structure which contains residential units. The walkway attaching Tower A and Tower B will not be considered a separate section if it does not have its own egress outside. The overall structure is likely to be considered a building under the HRB regime and must comply with BSA obligations, including:

• Appointment of an Accountable Person (AP) and, where applicable, a Principal Accountable Person (PAP).
• Maintaining the ‘golden thread’ of building safety information.
• Ensuring fire and structural risks are continually assessed and managed, engaging residents via a resident engagement strategy, maintaining safety-related documents and operating systems for reporting safety occurrences and complaints.

For owners and investors, the commercial implications are significant, from insurance and operating costs to service charge models and even marketability during sale or refinance.

Scenario two: Serviced apartments hidden in plain sight

Another increasingly common model is hotels offering luxury serviced suites, aparthotel units, or extended stay accommodation. These spaces look and feel like part of the hospitality offer, but legally they may count as residential units. Just two such units, combined with the required height, may trigger HRB status for the hotel, along with the heightened obligations as set out above.

Some operators question whether an aparthotel should be categorised as ‘serviced apartments’ rather than a hotel in the context of whether an operator might hold Accountable Person’s duties for common parts used by aparthotel guests. Operational features such as nightly bookings with no deposit against damages, 24/7 reception, hotel‑standard fire‑safety signage and evacuation fire strategy, may suggest a hotel model. However, these factors are indicative rather than determinative and have not yet been tested in the first tier tribunal.

The real challenge lies in the ambiguity of what amounts to a ‘residential unit’ – a term left undefined in the BSA. Crucially, it’s the nature of the services offered that can ultimately tip the scales, leaving operators vulnerable to falling on one side or the other of the regulatory divide. In practical terms, this uncertainty means that a building’s compliance status could turn on subtle distinctions in its service model, with far-reaching consequences for owners and occupiers alike.

How many operators truly understand whether the accommodation models they have embraced for competitive advantage now open the door to BSA duties that were never anticipated?

When the building is in occupation, if there are latent structural or fire safety defects,  those with legal or equitable rights over the units have the right to apply for a Remediation Contribution Order and a Building Liability Order to compel developers and their associated companies to pay for fixing structural or fire safety defects, regardless of whether the costs arose before or after the BSA took effect on 22 June 2022. The scope and significance of Remediation Contribution Orders and Building Liability Orders are extensive and merit a separate dedicated discussion in another article.

What should the sector do next?

The BSA is shifting the hospitality landscape in ways the sector is only beginning to grasp. It is not merely a regulatory framework; it is reshaping commercial risk, influencing how assets are valued, operated and protected in the hospitality sector.

The strongest performers will treat building safety as a strategic opportunity rather than a compliance burden:

• Audit your estate for mixed use connections where hotels sit beneath, beside or within residential towers.
• Review serviced apartments and extended-stay suites that may be ‘residential units’.
• Review older assets where historic defects may give rise to new rights and liabilities under the BSA.
• How much of your portfolio sits within buildings that might meet HRB criteria?
• Scrutinise contracts to ensure they reflect post-BSA rights and obligations.

As buildings become more vertically integrated and guest expectations push hotels toward hybrid models, it is unsurprising that more assets will inevitably fall within the HRB regime.

Li Yen Lim is a construction and engineering specialist at law firm Freeths