By Harry Scoffin
Local authority leaseholders in London are still being bounced into settling six-figure bills after a government crackdown on council major works schemes aimed at capping the charges at £15,000 per household.
Seventy-six leaseholders on the Noel Park development in Wood Green, north London, have each been told by Haringey council to find between £56,277 and £118,000 to fund their council-linked landlord’s repairs and improvements.
It was reported in The Guardian last week:
A London council has been accused of “pushing coronavirus victims over the edge” after it told dozens of residents they face unexpected repair bills for up to £118,000. Some say they will be left penniless as a result.
Seven of the leaseholders, several of whom have contacted LKP, are expected to pay over £100,000.
With the average cost of the section 20 notices seen coming in at £86,000, LKP chief executive Sebastian O’Kelly told the newspaper it was a “particularly extreme” case.
LKP is routinely contacted by London local authority leaseholders facing bills of £10,000, £20,000 and even £30,000.
In 2014, the then Communities Secretary Eric Pickles introduced Florrie’s Law, named after pensioner Florence Bourne who was mortified by a £50,000 repairs bill from her local authority landlord and, panicked by the noisy works, which a tribunal later ruled completely unnecessary, died of a heart attack.
But the Florrie’s Law £15,000 cap on major works bills in London (or £10,000 outside) over a five-year period only applies if central government money is involved, which offers no help to Noel Park leaseholders and many others.
The buildings are streets of Edwardian two-flat maisonettes in a conservation area in Haringey which, once improved, may be worth £350,000 to £450,000 each.
A young woman – we won’t give her name – contacted LKP today. She bought her maisonette in 2015 paid £325,000. She was told that major works were planned, but that the cost would be £15,000. Instead, the bill is £110,000, and as a result of the Covid-19 disaster she is out of work.
“How on earth am I supposed to find this money. I don’t have a job any more.”
Michael, who did not want to give his last name and whose story featured in The Guardian, said he knew the prefabricated 1970s-era bathroom “pod” structures at the back would need replacing when he bought in 2015.
He claimed that same year landlord Homes for Haringey, which manages the housing stock on behalf of Haringey Council, had informed leaseholders the work was estimated to cost each flat owner £12,500. As he and his partner Sarah were in the middle of completing on the property, the estimate swelled to £25,000.
Although the couple had already borrowed an additional £12,500 to account for the proposed works, they could not find out why there was a hike in the estimate. The project seemed stalled for five years until an online meeting in July, when other jobs such as roof, window and door replacements were disclosed.
On September 21, the £25,000 estimate came through Michael and Sarah’s door as £108,450.
“We will be ruined. My partner has been on maternity leave and all her freelance work has been cancelled due to the pandemic. I work part time and it is unlikely we can borrow any money from the bank since our income has drastically decreased since we arranged our mortgage, and we’re not due to remortgage for another three years,” he said.
The bill will be a third of what they paid for the home.
Speaking to The Guardian, Ewan MacDonald, another leaseholder, said that the estimated bills have “completely torpedoed our financial future”.
He will need to pay £90,000 to finance his share of the works.
“Kirsten Lowe, a social worker facing an estimate of £107,000 on a property she bought for £211,000 in 2013, sought to remortgage her home but was told it was not worth anything,” continued the report.
Local authority leaseholders have long suspected that the charges they face for major works bills effectively subsidise repairs to the council’s housing stock.
There is also the question of whether these works are repairs, which qualify under the section 20 rules, or improvements which do not. It was on these grounds that 50 local authority leaseholders in Oxford, who faced bills of £50,000 each, won their case.
Oxford Council leaseholders have repair bills slashed from £50,000 to under £4,000 – Leasehold Knowledge Partnership
Oxford Council leaseholders who were each facing bills of £50,000 each have seen the bills slashed today – to just under £4,000. A judge ruled today that the eye-watering bills were “unreasonable”. The council had tried to pass off major refurbishment to five tower blocks as repairs, which would have been paid by the leaseholders.
On other occasions, local authority leaseholders have escaped the section 20 bills because they recently purchased and the huge likely bills were not declared to their solicitors. A couple based in Southwark escaped bills for £22,000 on these grounds.
Here is an example of a woman who escaped £55,000 bills in Hounslow for new windows, which the tribunal regarded as an enhancement.
BBC Radio 4 featured issues concerning leasehold flats in local authority owned blocks. LKP has long been concerned about the issue of major works where huge bills are presented to leaseholders (tenants pay nothing, obviously). So many private leaseholders are wiped out by these huge bills that Southwark has a policy of buying up right-to-buy …
A standard defence to sky-high major works bills is that the project will in fact enhance the value of the leaseholders’ interest in the properties, which was employed by a Homes for Haringey representative at a meeting in August. This is perhaps an uncertain guess, given the economic devastation that is now inevitable with Covid-19.
It is not clear, however, how removing period sash windows for upvc windows, which the conservation area guidelines caution against, will boost values.
To make matters worse, some leaseholders face being charged for works that they have already done.
Ewan and Hannah, who also asked for their full names not to be used, said they had sought Homes for Haringey’s permission to replace rotting windows at their own expense when they first moved into the flat, adding:
“Now [the landlord] wants to undo all our hard work and rip out windows that are barely 3 years old, charging us 150% plus fees of what it actually cost us to do the same work on the open market.”
In another reminder of the second-class rights of local authority owners, the Noel Park leaseholders cannot nominate their own contractors and only have the right to make observations on the plans.
Homes for Haringey are using a qualifying long-term agreement with contractor Engie and are not required by law to find alternative quotations.
The Noel Park leaseholders have questioned where the incentive is for Engie to compete on price if only one tender has been sought and have raised concern that the firm’s own surveyors have determined the scope of works and costings.
With Engie’s fee based on a proportion of the total cost, they worry there is reason to inflate costs and carry out works which are not essential.
For those unable to meet the costs in one full payment, which comes with a 5% discount, Haringey Council and Homes for Haringey are offering loans on terms more generous than LKP has seen from other local authority landlords.
Leaseholders can have up to eight years interest-free and 10 years with interest to clear the major works bills providing they evidence they have been refused by two high-street lenders.