The DCLG has released the “Social landlords reduction of service charges: mandatory and discretionary directions 2014“, in force as of today, 12 August 2014.
The upshot of the mandatory directions is that a social landlord which undertakes “repair, maintenance or improvement” wholly or partly funded by
(a) the Decent Homes Backlog Funding provided through the 2013 Spending Round; and
(b) any other assistance for the specific purpose of carrying out works of repair, maintenance or improvement provided by—
(i) any Secretary of State; or
(ii) the Homes and Communities Agency.
is limited in the amount of service charge or major works charge it can levy on its leaseholders for the work.
The limit is as follows:
such service charges and any services charges which the social landlord proposes subsequently to make for costs incurred in respect of such works in any period of five years [shall not] exceed a total sum (“the total sum”) of—
(i) £15 000 for a dwelling situated within a London authority; and
(ii) £10 000 for a dwelling not situated within a London authority;
On some estate wide ‘decent homes’ major works programmes, that cap could amount to a very significant sum. Major works charges of £30,000 or £40,000 are not uncommon. If spread over 100 leaseholders, the difference could be £2 million or so.
The question for social landlords, then, is whether taking Decent Homes (or other Govt/HCA money) is worth it in view of the cap on major works charges that would follow. Who is to subsidise the works, the Government, or its leaseholders? And that is both a financial and a political question.
[From an exchange with the GLA assistant director of housing on twitter, it appears that the Decent Homes Backlog funding in London – devolved to the GLA – will only be caught in 2015/16, as this is when the 2013 Spending Round Backlog funds will come into play. There will clearly be some difficulties over whether the Decent Homes funding being spent by the social landlord is from a tranche predating the 2013 spending round. Joy. Meanwhile, out of London, is Decent Homes backlog funding provided through HCA covered, no matter which Spending Round it originated from? A straight reading says yes ]
Also released are the Discretionary Reduction Directions.
These give a social landlord a power to waive or reduce service charges, having regard to the following criteria:
(a) any estimate of the costs of the works of repair, maintenance or improvement notified to the lessee or any predecessor in title before the purchase of the lease of the dwelling;
(b) whether the purchase price paid by the lessee took account of the costs of the works of repair, maintenance or improvement;
(c) any benefit which the social landlord considers the lessee has received or will receive as a result of the works of repair, maintenance or improvement, including an increase in the value of the lease (including the reduction of a negative value of the lease), an increase in the energy efficiency of the dwelling, an improvement in the security of the dwelling and an improvement in services or facilities;
(d) whether, upon receipt of an application by a lessee, a social landlord, having regard to the criteria set out in paragraph 4, considers that the lessee would suffer exceptional hardship in paying the service charge; and
(e) any other circumstance of the lessee which the social landlord considers relevant.
Additionally, in cases of exceptional hardship, where the leaseholder has made an application, the landlord hold have regard to:
(a) whether the dwelling is the lessee’s only or principal home;
(b) the total amount of the service charges paid or are payable by the lessee since the purchase of the lease of the dwelling;
(c) the amount of the service charge payable in the year in which the lessee applies for the reduction because of exceptional hardship;
(d) the financial resources available to the lessee;
(e) the ability of the lessee to raise funds to pay the service charge;
(f) the ability of the lessee to pay the service charge if the landlord extended the period for payment; and
(g) any other relevant consideration.
These powers can be applied retrospectively to charges already made and/or paid.
But these are discretionary powers. The Landlord therefore has to consider exercising them, but does not have to grant a waiver or reduction.
On the mandatory directions, you also have to be a “qualifying lessee”, i.e. an individual who occupies the property as your only or principal home (Dir.2; so this is no good for buy-to-let or the ‘family’ home that the kids now live in alone). Note also that you have to have been the qualifying lessee when the works works were undertaken (Dir.3(3)), so something to watch out for if you’re buying an ex-RTB flat.
On the discretionary reductions – the problem, surely is one of venue for any dispute. We know from the UT case on the 1997 directions (Craighead v LB Islington [2010] UKUT 47 (LC)) that the FTT can’t deal with challenges of this sort, so it’s a JR claim.
“a “qualifying lessee”, i.e. an individual who occupies the property as your only or principal home” – so will this also exclude young people lured into a right to buy property who have to rent it out and move back in with Mum and Dad, when service charges hit the roof?
Yes. It is only for those individual leaseholders occupying as their “only or principal home”, a phrase on which (as you might imagine) there is quite a lot of law
Has anybody seen anything as to how the applications regarding exceptional hardship will actually work?
Will it be a prescribed form, or will it be a case of the leaseholder writing to their landlord setting out how they meet the individual criteria?
There is no prescribed form in the directions, so I’d presume leaseholder writing to ask to be considered.
Has anybody got a link anywhere to the consultation response from DCLG? I’ve tried Googling it in every way I can think of but nothing’s coming up!
Hi I am a 61 year old living in my ex council flat flat, am working, and bought the flat 20 years ago from Brighton council, We have had work done on the outside, ( insulation painting balconys rendered ) by Mears, The council has admitted to neglecting the estate for 25 years but have still taken our maintainance £900__£1000 pound per year, now i have to find £25.000 towards these works, i am one of 24 flats, the council have said,” they spent £600.000 on the block, ( you could build a block for less ) how do i go about finding out about Florries law ? and asking the question, is it law we only pay no more than £10.000 for repairs and major works in a 10 year period? just paid £6.500 for lift £2.000 for new front entrance door plus £1.000 maintainance.
‘Florries law’ is as set out in this post. Only applies if the works are part funded by the Homes and Communities Agency (in your case). And then, if it is, the charges for those particular works are capped at £10,000 in a five year period.
Hi,
We bought our shared ownership property from Thanves Valley Housing Assosciation last August and are now faced with a potential 35k + bill for major structural work to a listed building that forms part of our freehold. The total expenditure is estimated to be 350k. I can see that TVH does/has revived grants from the Home and communities agency but how will I be able to tell if they are using that money for this work? Should I ask them or is that ‘showing our hand’ and alerting them to to this cap and potentially using other funds? Would this cap apply regardless if they receive government funding?
We also seem to qualify for many if the factors raised in the optional reduction law, (moved last year, were told of no major works planned, price didn’t reflect any, work is on a totally separate building and will not affect benefit our property in any way. We were obviously also stretched to our financial limits when buying a shared ownership property 50% stake or we would have been looking for a 100% freehold property!) have you had any evidence/experience that this discretionary reduction is used?
Thanks for any advice!
Hi Jb
I’m afraid we can’t offer advice on people’s particular issues via the blog. We aren’t insured for it and anyway, this is the kind of thing that needs proper advice on the documents.
There is some controversy surrounding fire safety ongoing in my borough. Lewisham. The managing agent is threatening to take out injunctions to introduce an additonal fire safety device inside leaseholder flats – even if they have their own fire alarms. Theirs will detect heat and when it does the presumption is a fire is taking place. The problem is they want to interlink these with other flats. I don’t think the lease allows for it and other things, The council has simply chosen a fire alarm system that allows it 24/7 entry, if it so chooses, in order to servcie or respond to the heat detectors should they malfunction.
What was that about an Englishman’s home I recall… ?
Can’t be sure without seeing the lease, but I would be surprised if it allowed for installations inside the demise.
That said, it might be a very good idea. Unless you are being asked to pay for it.
I’m no expert on leases, but what they are hoping to do is suggest that alarms they have placed in the communal hallway are part of a system (it has chosen) and that the interlinked heat detector is important to the whole system.
But they haven’t really given any thought to whether they have a right to move from demanding flat entrance doors are changed to then demanding the right to go inside the flat and insert unnecessary devices.
The fire safety officer is a zealot. These are Victorian properties with just two flats… the smoke will have got through the ceiling before the heat device sounds.
Surely it’s trespass, creating an an easement after the creation of the lease, or something like that.
I’m obviously not meaning to sound if I’m unconcerned about fire safety, which Lewisham Homes likes to claim, but that ALMO is just interested in sticking it to the leaseholder anyway they can.
My research shows that due to Florrie’s Law, in which London leaseholders have a cap of £15k on any expenditure in 5 years, there is no other way to recoup the shortfall in costs other than… mugging the leaseholders. Fire safety panic buttons, diagrams in a hallway the size of a postage stamp telling you to leave by the front door in the event of a fire, and all controlled by Lewisham Council, it’s a scandal waiting to break.
(Don’t get me started on their Indecent Homes programme.)
I’ve had more than enough grief from LH regarding this heat detector and other works that Breyerr is doing that I’m now on blood pressure tablets. It’s harassment, pure and simple. Thy are a bunch of bullies in my opinion and the only way they will ever get to place anything inside my flat is with an injunction. But if you allow them in the door, that’s just the thin end of the wedge.
If they do get an injunction through then i would of course reserve the right to knock on the CEO’s door and ask him where he wantedd me to stick it. See how he likes it in his hallway!
Great blog by the way. Extremely useful.
I’m afraid your understanding of ‘Florrie’s Law’ is mistaken – that cap on leaseholder payments only applies where ‘decent homes’ money is also being spent on the works. So, in practice, rarely there days.
It is all going to be a question of the lease. Can’t tell without knowing the lease, but I’d suspect seeking an injunction would be ‘brave’ on their part.
Giles, thanks for the correction. However, as I understand it my dwelling was amongst those included in the 2010 Decent Homes programme.
Grants were held up, until Lewisham Homes gained its two stars.
I don’t know if you’ve followed the money, but it seems far from certain it did not enter the current phase of improvements.
That said, I then wonder why the current scheme is titled “Decent Homes”.
Perhaps an accountant is needed.
If you want to see the lease happy to forward it. Thanks for all the input.
It doesn’t matter if Decent Homes works have been done in the past. It only matters if decent homes legacy funding was used by the council to part fund related works. And that funding had to be bid for by councils and would have been received in 2015.
Otherwise Florries Law simply doesn;t apply – there is no cap on the amount that can be recovered from leaseholders.
Forgive me. I absolutely abhor the misuse of power. I’m afraid I don’t see anything ‘brave’ about a local authority threatening to use the might of the British legal system – funded by the public purse? – against one of its citizens. Although I fully understand your use of the term brave in this context. But this is simply an act of threatening to punishen – with implied menaces and no comebacks – and its the language of the mugger who has one eye on the law should he be captured. So perhaps foolishly I say: mug me, and suffer the consequences.
But that’s just me.
I meant ‘brave’ in the Yes Minister sense. ‘That would be a courageous decision, Minister.’
“I meant ‘brave’ in the Yes Minster sense.”
It transpires that Lewisham Homes has been characteristically brave. And brazen…
On Saturday I received an emergency call from claiming that the new fire system had introduced into the communal hallway – and its tenant’s flat – had deteced a release of carbon monoxide.
I did not undertand why I was being contacted. As you know I have steadfastly refused to allow access to link up to this system, but LH claimed that there was genuine concen for my tenants’ safety.
In fact, I had been prevented having acsess to the communal area because LH had changed the front door lock back in November. It had howver a week ago forwarded a new key.
Recieiving the emergency call from Lewisham Homes, I immediately headed over to check on my tenants. However at the flat, which is just under three miles away, I had discovered that dust from a nreaby building works had triggered the fire alarms, which were still ringing hours later. Apparently not the only premises to suffer from such false alarms.
Not only that… without my permission Lewisham Homes had inded been ‘brave’ (as you say). Its staff had duped my tenants into believing that I had agreed to the introduction of the heat sensor to be installed in my hallway, despite evidence to the contrary and of which I made you aware, and it had connected this to its system and that of its tenant. This led to you saying they would be very ‘brave’ (foolish) to do such a thing.
Duly placed inside my flat – back in November – after which the communal doorway lock was changed for a “fictitious burglary”. (Lewisham Homes claimed that it changed the lock due to a burglary but would not provide any crime reference number in support of the claim.) So it has, by means of deception, adn without adducing any evidence of any legal right to do so, introduced its damned device.
A truly dreadful ALMO, in my opinion. Surely worthy of the name… Rachman.
Got that Sir Humphrey!
.
As a an owner not in occupation Florrie’s Law doesn’t apply to me anyway.
But the whole DHP funding has lacked oversight. No one seems to know what was spent on what and, more importantly… when.
I will dig further on this. My starting point is the document below.
House of Commons Committee of Public Accounts. The Decent Homes Programme
Twenty-first Report of Session 2009–10
For Florries Law, it was only the Decent Homes legacy funding from the 2013 spending round that counts.