By Harry Phibbs
There has been a welcome announcement by Sajid Javid, the Communities and Local Government Secretary, regarding certain “unfair charges” on private sector leaseholders.
Javid says: Enough is enough. These practices are unjust, unnecessary and need to stop.
However in championing the homeowner I hope that some consideration will also be given to the plight of leaseholders in the social housing sector – with either housing associations or local authorities as freeholder.
There are many ways they are penalised at present. Often those who undertake shared ownership get charged 100 per cent of the leaseholder charges rather than the proportionate sum. That is iniquitous and must be prohibited.
It should be easier for council leaseholders to buy the freehold. At present this right applies only when they own two thirds of the flats in a block – it should be reduced to half.
But broader reforms are also needed to benefit the majority of leaseholders in social housing. The armchair auditors’ recent checks into Lambeth Council offer an example of the huge overcharging which may well be all too typical.
Local government operates above the law as it applies to private landlords. To give an example, suppose a private freeholder chased for money that the leaseholder didn’t owe – or was currently disputing – for instance sending threatening letters or sending in bailiffs. This would be classified as harassment and illegal. When the council does it, there is not the same legal protection.
Another example concerns the requirement to give a detailed breakdown of proposed charges. Dominic Pearson, a solicitor, says in an account of his personal experience, that he sought to pursue his rights under section 21 of the Landlord and Tenant Act 1985 which “obliges the freeholder, on written request by the leasehold owner, to provide a summary of the costs incurred in connection with the services recovered through your service charge.” He adds:
“Once you obtain this summary, you become entitled under section 22 of the same Act to make a more detailed inspection of the accounts, receipts and other documents supporting the summary.
“This was the right I looked to first after the shock of my service charge bill had sunk in…
“The government at the time felt so strongly about leasehold owners having this right that they made it a criminal offence for your freeholder to fail to comply within the specified period … except if your freeholder is a local authority, in which case there is currently no sanction in the Act for non-compliance.
“So what happens, as happened to me, if your local authority freeholder ignores your section 21 request, or responds to it but does not supply the information it is meant to supply?
“Your solicitor, if you have one, may advise you that you could have a civil remedy against the council for breach of statutory duty, but that route is not only time consuming and costly, but it may be fruitless: damages are not the remedy you want because you haven’t really suffered a tangible loss.
“Instead, you want some way to compel the local authority to provide with the summary. The threat to the freeholder and its directors of being personally criminalised is usually enough to ensure that you get your summary. But as a leasehold owner of a local authority flat you are denied that disincentive.
“Why are local authorities exempt from the criminal sanctions for non-compliance? It is because that same local authority is charged with the job of prosecuting private freeholders who break this same law.
“You can see the government’s logic: you cannot go about prosecuting yourself, can you?”
The law should be applied equally. Council leaseholders should be entitled to full estimated costings in the “Section 125 notices” – rather than just a total figure and a vague reference to what the work is for.
In other respects council leaseholders are treated as second class citizens compared to council tenants. For example, my local council of Hammersmith and Fulham had an (ill-judged and now abandoned) stock transfer proposal. It would have been legally obliged to give tenants a vote on this but it refused to guarantee this for leaseholders.
There should also be fairness about what the council leaseholders are charged for. Over ten years ago a Government Working Party submitted a report, “Major works charges for social sector leaseholders”. Among other issues:
“The report argues for “public works” costs, such as upkeep of footpaths and play areas on estates which are generally used by the public, to be charged to the General Fund and not to authorities’ Housing Revenue Accounts (HRAs). Were this to happen the cost of this work could not be recharged to lessees.”
That change should be implemented.
More transparency and independence is needed.
Leasehold Valuation Tribunals should have the power to require councils to provide the information needed to see if excessive payments have been made. Another problem is that councils sometimes justify paying vast sums for shoddy work by “benchmarking” with other councils who do the same. If a council leaseholder is charged twice as much for a new window as a freeholder spent on an identical (or superior) window in a house round the corner that is not acceptable. If Haringey Council says that Hackney Council charges the same that should not be accepted as sufficient justification.
All social housing landlords should have independent ombudsman to address leaseholder complaints when they are not resolved within a specific time period. One of the problems with the LVTs is that they only function once the Council has responded – giving the Council a perverse incentive to delay and be as obstructive as possible.
The conflict of interest with the Council paying for its own auditor must be addressed so that the audit is independent and robust.
One final reform which should apply to the public sector generally but would be especially helpful to council leaseholders is to end the absurd excuse of “commercial confidentiality” used by the state to escape scrutiny over its spending. This is among the many eminently reasonable points raised by Douglas Carswell in his fascinating book Rebel. Of the objections to spending transparency he says:
” ‘But what about commercial confidentiality?’ some will argue. ‘Businesses would not like it.’ Just think that through. Why might we be afraid of a business, contracted to provide services paid for with public money, revealing how much it is getting? Because another business might come along and offer to do the job for less? When commercial confidentiality is invoked, what it means is that the two parties behind the payments want them kept secret and are nervous of others seeing the numbers. Why? Because it would become apparent that the deal is duff. Far from being a bad thing, forcing public-sector organizations to reveal who they pay to do what would help ensure better value for money.”
Reviving home ownership is a strong theme in the Conservative Party at present. If we are serious about making it more affordable then we need to end the excessive and unfair penalties for leaseholders in social housing.