Social Housing Speed Read – House of Commons briefing paper on major works in social housing leasehold property
22nd July, 2019
In recent years there has been a great deal of adverse publicity and online comment about Leaseholders of Registered Providers receiving substantial bills for the costs of major works carried out.
In order to redress this situation, there has been an increase in statutory and regulatory protection afforded to leaseholders, including the introduction of a cap on certain service charges. This month the House of Commons has published a briefing paper entitled, ‘Leaseholders in social housing: paying for major works’.
This briefing paper sets out the existing options for long leaseholders to challenge service charges, including the use of the First-Tier Tribunal (Property Chamber).
The report refers to the duty of local authority landlords to protect social sector leaseholders to discretionarily reduce service charge bills for major works to no more than £10,000 in any five year period if specified criteria is met. Such criteria includes, assessing whether the leaseholder would face exceptional hardship through their obligation to pay the service charge.
Furthermore, where long leaseholders are struggling to pay the required service charge, upon agreement between the leaseholder and the local authority landlord or RP, the RP is able to buy an equitable interest in the long lease to facilitate the leaseholder meeting their obligations.
Useful reference is made to the findings of the Housing, Communities and Local Government Select Committee on Leasehold Reform. This Committee report provides an insight into the proposed approach to be adopted by the government in this area. Suggestions include requiring landlords’ to adopt standardised forms for the invoicing of service charges, which clearly breakdown the costs that make up the overall charge. This approach, if adopted, would go some way to improving transparency and allow for an evaluative assessment between properties before prospective leaseholders enter into long term leases. Leaseholders would also have a clear form of redress where the charges for major works to exceed those predicted in the invoice, thereby allowing for an assessment of the breakdown of the charge.
The Committee also made a recommendation to introduce a Code of Practice for local authorities and housing associations. The Code, if implemented, would allow local authorities to administer regulated sinking funds for each development to reduce the risk of unexpected bills for major works. The availability of more information to leaseholders about sinking funds and their responsibilities towards contributing to the fund would help leaseholders understanding of the charge due.
The report takes stock of the existing protection to long leaseholders, but recognises that further steps are required to attempt to redress the imbalance of power.
If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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