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By J
02/03/2012

Service charges: the GLA speaks

You’ll remember that, back in August 2011, the GLA announced that it was conducting a review of service charges in the capital (see our note here) and that the evidence included a panel discussion which was broadcast across the internet (see here). The final report has now been published (available here) and makes for interesting reading. I’ll come to the recommendations in a moment, but, in outline, the major point seems to be that landlords (especially private sector) would be well-advised to engage in a much more detailed consultation process before doing major works, effectively lifting some of the best practices from the social housing sector. They make the (very fair) point that the RICS code does say that the s.20, LTA 1985 should be the minimum, not the entire process.

So, to the recommendations:

1) RICS, ARMA and ARHM should review the guidance which they give on service charge consultation and, if improvements are necessary, should adopt the approach taken in the public sector

[OK, that doesn’t seem too controversial. Lets see what the Supreme Court say when Daejan is argued later this year]

2) The Mayor should, when allocating Decent Homes money, assess the likely financial impact of major works on leaseholders

[Basically, the Decent Homes scheme has led to huge service charges in London – £50K isn’t out of the question; for an example, see here. The problem with this recommendation is, though (i) Decent Homes has nearly finished (ii) leasehold properties aren’t included in the Decent Homes work and (iii) the Gov has already sought to address this by extending the powers of authorities to offer advantageous financial terms to leaseholders in the Housing and Regeneration Act 2008]

3) Where the Mayor grants funding for housing improvement works (e.g. energy efficiency), he should consider the impact on leaseholders

[I can’t imagine that the impact on leaseholders would, however, ever be a major factor – if the works need doing, e.g. to comply with new energy standards, then they need doing]

4) The LVT should review the different levels of legal support used by landlords and tenants and introduce appropriate protocols if leaseholders are found to be disadvantaged

[Hold your horses here. It is generally (but not always) true that landlords have solicitors and counsel, but that can’t be a basis for changing the procedural rules or adopting protocols. A party is entitled to be represented by whomesoever they wish and you can’t punish them for chosing to use counsel and solicitors. The LVT, let us not forget, is a judicial body to determine disputes fairly, not a quasi-audit body that landlords have to jump through hoops for. This is, potentially, a very dangerous suggestion]

5) The LVT and LEASE should expand their mediation and pre-application advice service

[Mediation, fine. Advice is not something the LVT should issue. LEASE can do it, but there is no chance of the gov. providing funding for this]

6) The Gov should look at making mediation compulsory

[Fine. More work for lawyers]

7) The LVT should review how its rulings are enforced and whether there is suitable redress for leaseholders

[Err. This isn’t something the LVT can do. Only Parliament can give the LVT powers to enforce its own decisions and, if it goes that route, it’s going to have to grapple with the thorny question of limitation periods in the LVT. No chance]

8) The Gov should review whether the barriers to achieving the Right to Manage mean that it is less effective in London

[By “barriers” they mean “qualifying criteria”, that is to say, those in s.72, CLRA 2002 (and Sch.6 exceptions). You have to be a self-contained building or part of a building. Properties need at least 75% residential floor space, etc). The only one that would make any difference, in practice, would be to change the definition of “self-contained building” in s.72(3), 2002 Act, so as to provide, perhaps, for some sort of “materiality” provision, a la s.2(2), 1967 Act. Won’t happen]

9) The Law Society should review the standard conveyancing protocol so as to ensure that prospective purchasers get more details about service charges.

[Good idea. But, given that very few leaseholders even bother to read the lease before they buy it, and given the pressure to get conveyancing fees as low as possible by not using solicitors, I can’t see this making any difference. Tesco-law ain’t gonna talk you through the nuances of s.20, LTA 1985]

A worthy report but, I suspect, likely to be ignored by the government. The good landlords/agents will adopt the recommendations, but the bad ones won’t. The real answer is (at least in part) to require managing agents to be properly regulated and to educate leaseholders as to what it is they are buying.

J is a barrister. He considers housing law to be the single greatest kind of law known to humankind and finds it very odd that so few people share this view.

3 Comments

  1. Michael Read

    A “worthy” report? Six months interviewing all and sundry and you come up with a formulation, for the sake of argument, like 2.

    “The Mayor should, when allocating Decent Homes money, assess the likely financial impact of major works on leaseholders.”

    Anyone knows that parliament has been aware of this potential problem for at least two decades, and has failed to act. Such observations have now reached the status of statements of the bleedin’ obvious that one begins to wonder why the “rapporteur” bothered at all.

    Personally, I have found reading this site of more use than 80 pages of no-doubt worthy but useless intentions.

    Reply
  2. J

    Worthy in the sense that they have tried. This isn’t really an area where the GLA can achieve much, but credit for at least giving it a go

    Reply
    • J

      PS – thanks for the kind words

      Reply

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