Leaseholders at Tustin Estate run by Southwark Council have had an estimated major works bill at a staggering £146,257.22p for a two bedroom flat.
This may well be the highest bills ever to have been sent out in the social sector. If anyone has seen a larger bill per flat for a social sector major works project please let us know.
An average family would need to not eat, drink or spend a single penny for more than 6 years to be able to pay this bill of £146,257. Even the chief executive of Southwark Council paid £216,236 a couple of years ago might find the need to scrimp and save to find this much money.
The S20 consultation document landed on the leaseholder’s doorsteps in February but because Southwark has a Qualifying Long Term Agreement in place (QLTA) the leaseholders only right is to make observations rather than submit potentially lower quotations.
The council does not even feel it relevant to inform leaseholders who the contractor might be simply assuring that the council is committed to ensuring “the best price for the work”. The leaseholders are not informed of how long this QLTA has been in place.
LKP spoke at the Southwark leaseholders conference last year. We explained we have never seen any evidence these long term contracts provide benefit to the consumer. The opposite may well be the case. For over 20 years the whole of the social sector and all the experts who advise them seem to have based their purchasing decisions on a set of misunderstandings.
1) The social sector often quotes the European Procurement Rules as requiring certain types of tender which tends to encourage the use of these QLTAs. While this may be true for some providers the government told LKP they do not think the European Procurement rules apply to all providers in the social sector. We are also aware of at least one local authority which has taken legal advice which says they do not need to use QLTA and can, therefore, more easily place smaller contracts which fall outside the European contract rules.
2) The social sector often quotes their obligation to use QLTA under the governments’ value for money obligations. The government tells LKP this is not true their guidance makes no reference to the need to use these QLTA’s.
3) The social sector often quotes “Egan Principles” which supposedly recommend the use of QLTA’s. According to Sir John Egan who wrote the Egan Report on improving construction techniques in the late 1990s his “Egan Principles” simply do not exist. He never spoke to the social sector and never intended his report to be used for buildings maintenance.
A copy of the full s20 can be read here:
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I blame Thatcher.
When RTB came in I probably wasn’t the only public sector minion to wonder what eejit would buy a leasehold title in a council run block.
Certainly not council procurement folk.
Council blocks were built with public funds for social TENANTS.
The concept worked for years. Then Thatcher saw a way to get votes.
How has that property owning democracy faired?
Councils seem to operate in a world were cost is no object.
On the other hand, how many RTBs sell on as buy to let? Old affordable social housing with secure tenure paid for by taxes ends up as private letting for higher rents on six month shortholds.
And you expect this lot to reform leasehold?
Reminds me how councils used to evict council tenants for arrears caused by the housing benefit chaos when councils took over HB, only to end up paying far higher housing benefit for temporary accommodation.
Single folk had no homeless priority, so empty unpopular voids went asking while voluntary sector hostels claimed many times more than the void rent in housing benefit to warehouse the non priority singles.
Be interesting what angst will emerge from government about this bill.
Cheaper to be forfeited?
I agree about the Thatcher comment. Her legacy was a housing disaster, but what’s done is done. Where do we go from here?
First and foremost the leaseholders need to club together and get an independent surveyor in to verify the scope and cost of the proposed works.
I note the intention to build further flats . I wonder how much that intention has influenced the scale of works?
Given the extent of the proposed works, how could it be that as the freeholder, Southwark Council could have allowed this development to decay to this degree? And if it was known that such extensive works were needed did Southwark Council communicate this to purchasers?
A proper consultation to leaseholders complying under Section 20 L& T Act 1985 should provide quotations for the specified work by 3 totally independent contractors.
The quotation based on prices from the Council’s long term contractor partner does not fully comply to the L&T Act 1985 because they are “business partners” and NOT an independent contractor.`
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This was posted on About Firstport this week and is of interest to Leaseholders who follow Firstport Retirement Services Ltd and Proxima GR Properties Ltd.
Administration and Management Charges
In the last financial year, the exterior of my development was repainted. The cost for the whole development was £90k, inclusive of VAT. FirstPort then added a 17% administration fee, which they said was for arranging the repainting. They then added on top of that their standard 17% + VAT management fee, bringing the total bill for the project to over £123k. I’ve challenged them on it, but they have said it is standard practice to charge both an administration fee and a management fee for large projects and that they remain of the position that £33k fees on a £90k bill are reasonable.
Has anyone else experienced this doubling of fees? Is it really standard practice? Does anyone know if it is legal? Many thanks for any advice.
Posted on 16 April 2019
Then in answer to a posting from chas
Thank you very much that’s helpful. I’m in London. Its standard residential block, not retirement property. Our head lessee is Proxima GR Properties Ltd and they appointed FirstPort.
Five companies were approached for this work. Three submitted tenders. The cheapest was appointed and, as far as I can tell, completed the work themselves. Their charges were £75k plus VAT, making £90k. Firstport added a 17% administration charge which they said was for sending out S20 notifications and getting advice about what work needed to be done and to what specifications i.e. the type of paint to be used etc. This made the bill £105,300. They then added their standard 17% + VAT charge (as allowed by my lease) to the combined total.
I’ve raised this right up the chain with FirstPort, but they are saying it is standard practice and they are entitled to charge both administration fees and management fees in major projects.
I guess my next option is either arbitration or a tribunal. Any advice anyone can offer on these two options would be very gratefully received. Thank you.
The Homebuilding magazine suggests 10% -12% for management fee on renovations work .
So if the site work contractor charged £75K + 20%VAT on his work . Nobody can claim the right of management fee on Government 20% VAT tax .
The “supervision of work completion and making payment ” fee by the Managing Agent may charge 12% on the £75K = £9K + 20% VAT = £10800.
The claim of £17000 + VAT is really double charging and should challenged by application to FTT.
Thanks again ollie for someone who knows the leasehold Industry. Do you have my new email address?
If you check the standard agent contract you’ll find they do charge extra for major works and many other things. The management fee is the ‘basic’ charge.
Of course, the leaseholder never sees the agency contract, just the client. Also, I’ve read somewhere that an agent might have no written contract at all with the freeholder. Just a verbal one. Seems that works.
You”d maybe think government would long ago insisted in law that leaseholders see an actual signed agency contract given the powers they wield. Able to check their liability insurances etc too. After all, the ‘landlord’ pays not a penny. And to check that the qualifying long term agreement malarkey is working.
But leaseholders seem to exist merely to pay and shut up. Know their place.
In my opinion, leases that allow leaseholders to be charged unlimited amounts for “improvements” are toxic. They are clearly being abused.
These people are having their right to peaceful enjoyment of their property violated.
Our laws shouldn’t allow this, but with leasehold law, they repeatedly seem to.