Angry leaseholders count mounting cost of repairs

Published 03rd Nov 2009

Hundreds of thousands of private homeowners living in blocks of flats or houses owned or managed by local authorities are facing soaring annual charges and hefty bills for improvement works. This is forcing some to consider selling because they cannot cope with the expense.

More than 300,000 leaseholders in the UK own homes that have been bought from local authorities.

Council tenants have been able to buy their flats and houses since 1980 and tens of thousands have changed hands. Estate agents say that first-time buyers looking for a cheap way on to the property ladder favour former local authority homes, particularly in London, as they are less expensive than period and private new- build properties. However, what can seem a cheap option can prove far from it when service charges are included.

Annual service charges have risen considerably in recent years and some leaseholders are expected to hand over up to £4,000 a year in fees to cover the cost of maintenance and cleaning.

Homeowners are angry that they are charged routinely for improvements that are not carried out or overcharged for basic works. Other homeowners complain that they are charged annually for services such as recycling, street lighting or landscaping that other householders receive automatically. As well as hefty service charges, council landlords bill leaseholders for one-off substantial works. In some cases, the bill can come to tens of thousands of pounds.

Karen Buck, Labour MP for Regent’s Park and Kensington North, represents leaseholders living in Westminster City Council who have been handed bills for up to £58,000 for building works. She says: “Our council leaseholders complain that the billing process is flawed and the work is sub-standard. For example, on several occasions new windows have been installed that have had to be removed within a year because they were substandard. One of the biggest problems is sloppy and inaccurate billing which sees leaseholders charged three times for the same items. Poor billing makes it very hard to understand what is happening.”

Southwark, in South London, has recently overhauled the way that leaseholders are charged, after concerns were raised about the way in which calculations are carried out. Leaseholders hope that other councils follow suit.

It is common for local authority houses to be managed by organisations controlled by councils but run independently as charities or businesses. These are known as “arm’s length management organisations” (ALMOs).

Shula Rich, of the Brighton, Hove & District Leaseholders Association, who runs a free drop-in advice service, says: “Often the officials spending the money in ALMOs do not have the experience to manage cash on behalf of leaseholders. The only people to feel the pinch are the leaseholders.”

In recent years many leaseholders have also been hit by huge bills for repairs carried out by councils as part of the Government’s Decent Homes initiative, which demands that local authority homes be improved. Many councils are stepping up the pace of substantial works to meet the Government’s deadline of the end of 2010 for 95 per cent of local authority housing stock to be brought up to a Decent Homes standard.

Private homeowners living in council blocks are billed for their share of the work. Leaseholders must be consulted on major works but in practice there is often little scope to question the scale and cost of a project. Councils argue that they are benefiting from the improvements, but leaseholders complain that they are being hit with hefty bills.

Stephen Holmes, secretary of the Manchester Leaseholders Association, is facing a bill of £16,000 for the cost of external cladding on his shared block in Withington. He bought his two-bedroom flat for £10,500 under the right to buy scheme in 2003. The flat is now valued at £35,000. The block that Mr Holmes lives in is owned by Southway Housing Trust, which took over control of thousands of homes from Manchester City Council in 2007. Mr Holmes is angry that he was not warned of the potential costs involved when he bought his home.

“Leaseholders are not against paying for repairs,” he says. “But we have already been paying into a sinking fund for capital expenditure projects so that we would not be landed with these huge bills.”

There are a number of steps that homeowners can take to challenge the service charges levied by councils.

Ms Rich says: “The advantage of a council freeholder is that they can be embarrassed into changing their behaviour. They have a reputation to protect and are likely to respond if you present officials with evidence.”

It is vital to go through the annual service charges summary and check every expense. The local authority is required to provide receipts for all charges that are listed on the summary. If there are any problems with the service charge, leaseholders should contact their local council’s housing department or the organisation that runs the building. Leaseholders should also speak to their local councillors and inform their MP about any problems.

It is also a good idea to get in contact with other leaseholders in the block or estate and establish a leaseholder association if there is not one already.

Leaseholders can challenge the cost of their service charge at a Leasehold Valuation Tribunal (LVT), which has the power to rule on whether a service charge is “reasonable”. But the rulings apply only to the applicants, rather than to all leaseholders in a certain block or association.

It is also possible to take the council to the small claims court or use the Local Government Ombudsman, but these routes can take time, warns Nicholas Kissen, of Lease, the advisory service.

Owners of former council properties do not have the right to manage offered to homeowners in flats with a private freeholder. However, if there is enough support in your block, homeowners could, in theory, set up a tenants management organisation (TMO).

For more information, visit www.Lease-Advice.org

Can’t pay, won’t pay

Steve Rice, 37, lives in a block owned by Lambeth Council, in South London. Mr Rice bought his home from a previous private leaseholder three and a half years ago. His service charge has risen from £1,200 to £2,400 in the past two years and he is contesting his most recent bill after a number of inaccurate charges were identified.

Last July, residents on his estate were sent an estimate for the service charge for the year 2007-08, but an investigation found that many of the bills were wrong. Mr Rice says: “Residents are getting legal advice and refusing to pay. Even the costs of installing lightbulbs and cleaning on this estate have risen hugely according to our annual bills.”

Mr Rice, who chairs the North Lambeth Area Leasehold Forum, says residents are angry that service charges are rising so quickly and that so many of the bills have been wrong. Many are considering selling up.

The company that manages his block on behalf of the council has also written to Mr Rice warning that he could be expected to pay £13,900 for new building work.

Source: ' Times '

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