Agenda Item No
The Vale of Glamorgan Council
Cabinet Meeting: 27 January, 2014
Joint Report of the Leader and Cabinet Member for Housing, Building Maintenance and Community Safety
Leaseholders - WHQS and Major Works Section 20 Obligations
Purpose of the Report
1. To inform Cabinet of the process involved in administering major works to leasehold properties to meet the Welsh Housing Quality Standard (WHQS).
1. That Cabinet notes the statutory requirement to offer loans to leaseholders who meet the qualification criteria.
2. That cabinet approves the process / proposals for loans where major works are required to leaseholder properties as set out in report.
Reasons for the Recommendations
1. To update Members on the legal requirements for statutory loans to leaseholders.
2. To allow leaseholders the opportunity to apply for Council loans.
2. The Council manages 300 leasehold properties across the Vale in which the lease agreement for each property sets out the leaseholder’s responsibilities to pay towards annual service costs and major repair costs.
3. The Council commenced its Housing Improvement Programme to meet the WHQS on the 3 September 2012 following a comprehensive tender process with external contractors. Four external contractors are currently delivering the WHQS programme in addition to the Council’s Building Services department.
4. When a tenant becomes a leaseholder and purchases their flat through the â€œRight to Buyâ€ scheme, they assume certain responsibilities and obligations and this includes the maintenance of their property that they have bought. The terms of the lease issued by the Council includes an obligation on the leaseholder to contribute towards the repair, maintenance and refurbishment of the external structure and communal areas. These are referred to as â€œMajor Worksâ€ where the cost to individual leaseholders is more than £250 and where the Council is legally required to undertake a formal consultation process with all leaseholders. When flats were originally leased, leaseholders were made aware of these obligations.
5. As a result of delivering the Council’s Housing Improvement Programme, to meet the WHQS by April 2017, charges for major works to leaseholder properties will significantly increase.
Relevant Issues and Options
6. The Council has a duty to charge its leaseholders for works and services carried out to the block of flats and communal areas where they live. Such works, where required, can include the following to communal areas i.e.
· Rewiring and lighting.
· External communal doors and windows.
· Internal painting.
7. In addition, other major works may include renewing roofs, renewing fascias and soffits and external painting. The cost for these major repairs could be significant to leaseholders and they will be responsible for their proportion of the works. It should be noted that blocks of flats may contain a mixture of Council tenants and leaseholders. Where this is the case, the Council will be responsible for the major repair costs for its Council tenants. Leaseholders will be billed separately for major work items.
8. The Council has not entered into any previous financial arrangements with leaseholders for major repairs (only annual service charges). It is recognised that some leaseholders may struggle to pay their contribution for these works. The current Business Plan (2013) does include upfront costs to leaseholder properties, but it is assumed that these monies will eventually be recovered.
9. There are a number of different options open to leaseholders to pay for the cost of these major works i.e.
· Payment of the invoice in full by the leaseholder (if affordable).
· Leaseholders make their own loan arrangements from their mortgage lender, bank or building society.
· Add cost of major works to annual service charge (if of a low enough sum).
· Statutory Loan Scheme - see paragraph 10 below.
· Discretionary Loan Scheme - see paragraph 14 below.
· Council loan via a charge against the property.
10. The Council is obliged to provide mandatory loans under the Housing (Service Charges Loans) Regulations, 1992 to leaseholders in certain circumstances where the charge is in excess of £2,330 and where the following eligibility criteria are complied with:-
· The lease is no more than 10 years old.
· The charges made since the start of the lease are at least £2,000 and not more than £20,000.
· The loan is secured against the property.
· The Council can charge a maximum fee of £100 for administration and £50 for land registry.
11. The minimum amount for a loan is £880.
12. If the above criteria are met, the leaseholder is entitled to a loan irrespective of the amount of equity they have in the property or their level of income and expenditure. A formal application process with a legal agreement will be adopted in leaseholders wishing to access these loans. The loans will be secured by registered charges at the Land Registry.
13. The regulations set an upper time limit the loan can be repaid of between 3 and 10 years dependent on the value of the works. Interest is payable at the Council’s lending rate (currently 5.83%).
14. If leaseholders do not meet the criteria of the Statutory Loan Scheme they will be able to apply for the Discretionary Loan Scheme, the details of which will be developed in consultation with Finance and Legal services officers.
15. It is possible that leaseholders can obtain a lower rate of interest from external lenders than the Council’s standard mortgage rate and leaseholders will be advised of this. It is not proposed to make Council loans available to non resident leaseholders as a number are letting their properties and should be able to make their own financial arrangements.
16. If there are leaseholders who are not able to afford repayments on a loan but who have sufficient equity in their property the Council is able to enter into an equity share arrangement whereby the Council will purchase a share in the equity of the property, with the Council realising that share on an ultimate sale .
Resource Implications (Financial and Employment)
17. The Council has a duty to collect charges from leaseholders. If charges are not recovered, and they relate to the structure and communal areas, the financial loss will be borne by the Housing Revenue account (HRA). If they relate to the leaseholders flat i.e. external windows, the financial loss will be borne by the General Fund as required by HRA accounting guidance.
Sustainability and Climate Change Implications
18. All Council and leaseholder properties across the Vale are required to meet the requirements of the Welsh Housing Quality Standard which will assist in minimising the impact of climate change. The Council is committed to meeting this standard by April 2017. In addition, carbon reduction and energy improvement provides tenants and leaseholders with modern, energy efficient sustainable homes.
Legal Implications (to Include Human Rights Implications)
19. The Council has the power to recover charges in respect of major works to the external structure and communal areas of flats under the terms of the Council lease granted to leaseholders following the right to buy.
20. The Council is legally required to offer service charge loans to those leaseholders who meet the laid down criteria. The preparation of legal documentation for granting loan/mortgages under the Council scheme will need to be undertaken by Legal Services.
21. The Council is legally required to consult with all leaseholders in respect of major works that may affect their properties under the Services Charges (Consultation Requirements)(Wales) Regulations 2004.
22. Two formal notices have been served on all leaseholders in the Vale i.e. the first to indicate that the Council is entering into a long-term agreement with external contractors to carry out the works and the second to confirm the appointment of those contractors and that leaseholders will be responsible for a proportion of the costs attributable to them. On both occasions, leaseholders were able to respond formally with their comments. The third and final notice confirms the actual cost to the individual leaseholder concerned based on the survey of the property and the full extent of works required. It should be noted, that although all leaseholders have received the two formal notices, not all leasehold properties will required major works to them.
Crime and Disorder Implications
23. Many of the requirements of the WHQS contribution to the Crime and Disorder agenda, in particular, the requirements of safe and secure dwellings located in safe and attractive environments.
Equal Opportunities Implications (to include Welsh Language issues)
24. Council loans would be a measure to ensure all leaseholders have access to loans to meet their service charges for major repairs in meeting the Council's requirement to meet the WHQS.
25. Meeting the WHQS and the Housing Improvement Programme contributes to the Council's corporate priority that Vale of Glamorgan residents have access to affordable, good quality suitable housing and housing advice and support.
Policy Framework and Budget
26. This report is a matter for Executive decision by Cabinet.
Consultation (including Ward Member Consultation)
27. There has been no individual Ward Member consultation as this is a Vale wide issue.
Relevant Scrutiny Committee
28. Corporate Resources.
Right to Buy Scheme
Housing Business Plan 2012
Housing (Service Charge Loans) Regulations, 1992
Service Charges (Consultation Requirements) (Wales) Regulations 2014
Hayley Selway - Head of Housing and Building Services - Tel No. 02920 673117.
Head of Financial Services
Operational Manager Property
Operational Manager - Finance Systems
Accountant - Housing and Building
Miles Punter - Director of Visible Services and Housing