Agenda item

(Director of Housing) To consider the attached report and appendices.

The Panel received a report regarding the request for Scrutiny Panel Review – Leaseholder Contributions for Improvements to Common parts of Flat Blocks from the Assistant Director of Housing (Property).

A request for a Scrutiny Panel Review had been received from Councillors Mrs J Hart and K Angold-Stephens, which stated that the difficulty the Council encountered when improvements to communal areas of flat blocks were required and when there were tenants and leaseholders sharing the same building and the same communal areas. There had been specific problems encountered when an attempt was made to request essential improvements to the communal areas of some large flat blocks with similar problems in small flat blocks.

Following the introduction of self financing and subsequently the Council’s new “Modern Homes Standard,” more work was being planned to be undertaken to the Council’s housing stock for which leaseholders were required to pay their proportion of the charges if that work affected components in and around their flat blocks.

(a)          The Lease

The lease was always considered first when planning works to flat blocks. In the past, under Right to Buy, the Council had sold flatted accommodation using two types of lease which were categorised as pre or post 1991 leases. For those prior to 1991 the Council could not charge for improvements without the agreement of the leaseholder. For post 1991 leases, the Council could charge for improvements where identified in the 5 year estimates, if they were not identified, the Council could not charge for the improvements without the consent of the leaseholder. After 5 years they could be charged following a consultation.

(b)          Improvements

The only type of improvement work that the Council had undertaken in the past, other then major improvement schemes, were door entry security installations. As this was a new installation, as opposed to a repair, it was classed as an improvement. In 1997 the Council agreed a door entry policy that allowed the installation of door entry security systems in blocks containing leaseholders subject to installations being undertaken only in blocks of flats having 25% leaseholders or less. The Council could not spend Housing Revenue Account (HRA) funds on homeowners’ properties. Where there were more than 25% leaseholders, their views were taken into consideration. Any leaseholder objecting would defer the works until the circumstances changed. The Council had not installed any systems for the last 4 years due to a lack of support by those with pre-1991 leases.

(c)          Leasehold Legislation and Consultation

In 2002, the Commonhold and Leasehold Reform Act came into effect, outing more onus on landlords to consult with leaseholders on all aspects of repairs where the leaseholder would contribute more than £250.00. At all times, the Council must have regard to any observations received from leaseholders.

(d)          Planning the Works

The increase in major works being undertaken currently, as a result of the increased resources available, the management of leaseholder issues from initial consultations to issuing service charges and reclaiming debts was becoming more difficult. The Council’s Housing Assets Section held a detailed stock condition database highlighting when building components would  reach the end of their useful life. To obtain best value for the Council and leaseholders, works were packaged together and timed to coincide with external repairs. The scale and frequency had increased significantly since the Modern Homes Standard was introduced, effecting leaseholder’s ability and willingness to pay.

(e)          Financial Obligations

The Council had a financial obligation to recover all charges relating to works in flat blocks where a lease existed. However, guidance suggested that leaseholders could be referred to as tenants, as they did not own the freehold to the property. Despite this contradiction, a charge relating to a leasehold property that was irrecoverable could only reasnobly be charged to the HRA as there was no basis for a charge to the General Fund.

(f)           Financial Assistance

The Council had in place a Sundry Income and Debt Policy for helping leaseholders pay for their proportion of the charges. This allowed the cost to be spread over a period of up to 12 months interest free.

(g)          Loans

The Council was required by the Housing (Service Charges Loans) Regulations 1992, to give loans for the major repairs part of any service charge, in any one year, which was more than £2,740. The minimum and maximum loans were £920.00 and £36,270 respectively.

(h)          Capping the Contribution for Leaseholders

The Council had a duty to recover the cost of the works. However, the Council had the option to cap the leaseholder’s contribution for major improvements.

(i)            Placing a Legal Charge on the Property

Where leaseholders were not able to pay for their proportion of the works, the Council could place a legal charge over the property so that the costs could be recovered when the property was sold in the future.

(j)            Buy-Back Option

This option was entirely at the discretion of the Council, and subject to agreement by all parties. There was no current provision within the existing Housing Capital Programme to buy back any leasehold properties. The capital costs of purchasing properties would have to be funded and a valuation would need agreement with leaseholder.

(k)          Sinking Fund

An option the Council could consider, would be to operate a Sinking Fund. This could not be offered to existing leaseholders as it was a requirement that all leases in a block should be similar. A Sinking Fund was where leaseholders paid a regular annual payment each year irrespective of work being carried out.

The Panel supported receiving a further report regarding the operation of a Sinking Fund to new leaseholders, but also felt that no support could be given to the exploration of alternative loan schemes to leaseholders.

RECOMMENDED:

(1)  That the report regarding Request for Scrutiny Panel Review – Leaseholder Contributions for Improvements to Common Parts of Flat Blocks be noted;

(2)  That a further report be brought back to the Panel considering the benefits of operating a “Sinking Fund” for new leaseholders in new or existing flat blocks where there were no leaseholders;

(3)  That the Panel recommend that no alternative loan terms be offered to leaseholders;

(4)  That the Panel recommend to the Finance and Performance Management Cabinet Committee of making provision in the General Fund for the proportion of costs attributed to shops and other associated premises that were transferred from the HRA to the General Fund; and

(5)  That no response be made to the consultation paper issued by DCLG on Protecting Local Authority Leaseholders from Unreasnoble Charges as this is no longer relevant.