LKP is seeing a surge in council major works bills, particularly in London, coming through on the leaseholders’ Help Forms. These are wipe-out bills that will in many cases drive stuggling first-time buyers back into the rental market.
It was to avoid precisely this that the Coalition government under housing secretary Eric Pickles introduced Florrie’s Law in 2014, to cap council major works bills at £15,000 in London and £10,000 outside the capital.
But to LKP’s knowledge, the cap has never once been applied because it comes into force only when central government funds are deployed, and these housing grants have stopped.
As a result, private leaseholders are on the hook for the whole amount.
Florrie’s Bill was named after Florence Bourne, 93, whose death was hastened by the stress of a £50,00 bill from Newham council for a new roof, which a professional witness successfully argued was unnecessary.
The latest spate of major works bills have aroused the interest of BBC London TV and radio, which have reported the plight of council leaseholders facing bills up to £44,000 to £98,000 on the Taverner and Peckett Square estates.
London leaseholders face refurbishment bills in thousands despite legal cap
Leaseholders living in former council homes are facing refurbishment bills of thousands of pounds, despite a legal cap introduced nine years ago. Campaigners told the BBC that they were facing bills of up to £65,000, for works they say are not needed.
The Guardian and The Observer have reported the issue here.
Leasehold nightmare: why owning a council flat could land you with a ‘wipeout’ bill
ike many people, teacher Neil Hosken is being careful with money as the cost of living crisis pushes up his food and energy bills, and his low-cost mortgage deal comes to an end. So he was shocked to receive a letter from the council warning of a bill of up to £44,000 for repairs to his home.
What is unclear is why there is a sudden surge in major works bills, ranging from £15,000 to £65,000 that we have seen so far this week (it’s Wednesday).
Wandsworth (bill unknown at this stage)
Islington £44,000 (or £98,000)
The councils may simply be responding to a backlog of major works delayed by the pandemic, or they are spooked by the death of two-year-old Awaab Ishak in Rochdale owing to mould contamination.
We can debate whether it was ever a good idea to allow right to buy in apartment blocks of social housing – which have no reserve funds so the private leaseholders face a huge bill all at once.
We can debate whether right to buy has been much of a success in London, where 40 per cent of private leasehold in council housing now belongs to investors, some of whom are based offshore.
We can debate whether these resources would not be better deployed increasing social housing, of which there is a desperate shortage.
It also needs acknowledging that council blocks do need major works and those owning private assets in them do need to share the responsibilities of home ownership as well as enjoy the gains.
On the other hand, local authorities do need to up their game and get passably decent value for money, and not simply accept the often bogus works schedules that maintenance companies seek to profit from.
These maintenance companies are employed on controversial “long-term qualifying agreements”, which means works don’t go out to tender and leaseholders must take the word of those profiting from the works that the figures are honest. That’s a tall order, in the leasehold property game.
Here’s the head of council housing in Exeter who went to prison taking bribes from one of these outfits:
Former Exeter City Council boss jailed over bribes
Wingrave’s partner Lyn McMayon, 59, of the same address, admitted two counts of converting criminal property; Harold McGirl, of Southbourne Road, St Austell, Cornwall, pleaded guilty to one charge of committing misconduct in public office and Gary Rawlings, 59, of mill Meadow, Biggleswade, admitted fraud.
On the other hand, the Conservatives are the party of home ownership. It has splurged billions to get people on to the property ladder through Help To Buy subsidised loans.
Housebuilders have resorted to ever more complex – sadly, sometimes downright cheating – shared ownership arrangements in order to do the same. This leases are going to be a long-term problem.
In spite of these efforts, and expense, home ownership in the UK is falling, down from 64.3 per cent in 2011 to 62.5 per cent today.
The Times view on the housing crisis: Home Truths
Amid the many reams of census data released this week, one figure stands out above all else as a cause for alarm. Home ownership in England and Wales has fallen to its lowest level in four decades. Some 62.5 per cent of homes in this country are now occupied by their owners, down from 64.3 per cent in 2011.
This is a disastrous situation, and we are very likely to see how this generational unfairness in the property market plays out in the years ahead.
The core point is that the Conservatives introduced right to buy and have passed an utterly useless law to cap major works costs that does not work.
It could be made to work – excluding investors; varying leases to owner occupation only with no or limited letting – and may well prove cheaper than the alternatives.
Doing nothing means a lot of homeowners, primarily young ones, will lose their homes.
Great article. What can we do about it?
Is there a petition of this nature that we can get behind?
Agree. Great article. What can we do about it?
Problem 1 – borough councils and private freeholders simply making money on major works. Our works in Lewisham Borough first were quoted just above £19000 per leaseholder. Now they were revised and come to around £27,000 per leaseholder. 40 flats x £27000 – over £1,000,000. Nothing special – new flat roof 25×25 m sq., new pvc windows, external wall repairs, communal lights changing, some other repairs. When we spoke to people privately, who are involved in repairs and refurbishment business, they were not surprised. They say the costs to leaseholders are charged 3 times more than actual costs. Leasehold system is pure money making business without any shame.
Home oweners who purchased right to buy homes sell them because major works bills are unaffordable. That is why all those RTB homes are sold to those who wont live there but rent them out. Leasehold system has to be changed because at the moment it is a pure criminal business, which affects life of ordinary hardworking people.
Another thing to mention – leaseholders are very very disintegrated. Look from this point, if 10,000 leaseholders get together and form a union with £120/year membership fee. This would be £1,200,000 yearly budget to get proper legal assistance on leaseholders side (if you know GMB Union, similar principle but leaseholders focused). With this yearly budget leaseholders can get justice in courts taking freeholders to face legal actions over and over again until they get bankrupt. Every freeholder possible – council, private. And push for change of law.
Well written, Sebastian.
As you know from our case down here, there is an extreme lack of transparency and accountability in the way that local authorities operate.
The very fact that I had to sue our council, after trying everything else, demonstrates that councils answer to no-one. (You cannot afford to press the case to a higher court – for contempt of court or for full costs – and they know it).
This year, our council is to receive an £11.5 million grant to buy fifty houses to accommodate the homeless. Laudable, but will anyone ensure that the scheme will be operated honestly? District Auditors? Do they still exist, and how would they fathom the intricacies involved? Would they or anyone else bother?
We pay our taxes and hold elections, but what follows seems very much entrusted to the conscience (or whim) of officials, rather than any kind of accountability.
A large block of flats in Greenwich ( part private part council tenants) has just had a massive heat pump system installed which still doesn’t work! So cold flats and no hot water for those on the top floors that the system does not have sufficient oomph to reach. This on top of circa £27K repayment charge for recent refurbishment of entire block – charged only to private owners of course. Surely service charges over the years should have anticipated much of the eventual costs of replacing roof, windows, lifts and painting stairwells? Some flat owners are subsidising the cost of lifts that their own flats have no access to! I agree that a cap would be fair.
So who pays? Are you expecting secure tenants, who own no equity in the property, to foot the bill? Housing Revenue Accounts are self-financing, and have already been hit hard by the expansion of the RTB, several years of rent reduction and the introduction of Universal Credit. Many council blocks are the most expensive type of buildings to maintain – and there is continuing financial pressures, now being added to by the Building Safety Act. Who should pay the costs of ownership?
My point is: many of these owners can’t pay these sorts of bills; that private home ownership is massively (and wrongly) subsidised through Help To Buy and ever more complex (and cheated) alchemy of shared ownership contracts … so rather than let these often young first timers fall at the first hurdle, which will be very expensive, help them out.
But it is not great that social housing blocks have been forced to accommodate privately owned flats, and it is a failure on its own terms that 40% of right to buy belongs to investors. And why weren’t restrictions imposed on these leases to keep them as family homes rather than investment assets?
We have created what I believe to be absolutely the worst speculative property market in the world, by allowing our homes to become internationally traded investment assets. A load of entrepreneurial talent – well, and greed – has been wasted on UK housing rather than in genuinely creative businesses. As we can see, this has been socially damaging as well.
Particularly the young and talented must have a material stake in society and if they can’t have one, history demonstrates many examples of them taking it.
The Housing Act 1985 forces local authorities to sell with specific covenants in the lease – one is the right to sub-let. If the RTB lease requires the property to be owner occupied the legislation will override it. Local Authorities cannot choose whether or not to sell, irrespective of whether the tenant (or subsequent purchaser) has sufficient income to cover the costs of ownership. A tenant has the RTB or doesn’t – and the LA has no input into the selling on process. Rather than expect secure tenants to foot the bill for homeownership, why not lobby the government to a) abolish the RTB or at least include an income criteria in the criteria and b) amend the implied covenants and make it retrospective so that LA’s can control subletting – and c) if you want LA homeownership to be subsidised then lobby the government to fund the cost of it to HRAs. Florries Law is and always has been flawed – in particular in respect to decent homes work, as all the grant funding for decent homes was predicated on the cost of work to tenanted properties not sold properties.
Of course nobody is suggesting social rental tenants foot the bill. It is quite common for social landlords to try and disrupt by suggesting one or other groups of tenants gain a benefit from another There are a whole set of rules to controls to stop this. However… the fundamental problem in this part of the social sector seems to be poor cost control. As far as I am aware Wandsworth is one of the few London LA landlords that tends not to use Qualifying Long Term Agreement contracts. These QLTA’s should never exist they have no justification despite the nonsense talked in the past about compliance with EU procurement rules or what turns out to be the fictional “Egan Principles”. To add to problems are 3 other issues. 1) Many social landlords have weak accounting systems that don’t properly allocate individual building costs – so the numbers can be inaccurately high and occasionally low in the way costs allocated to leasehold flats within a block. 2) The LA and ALMO landlords have a habit of letting blocks run down then carrying out major refurbishment on multiple issues in one go – good for them perhaps but it means huge bills individuals cant afford 3) Most leases in this part of market do not allow for a sinking fund to help spread the cost. There are no easy answers but what we have now is wrong.
But that is just what is being suggested by the reference to Florries Law with no corresponding reference to pushing for central government to cover the cost of waiving service charges to local authorities. A modicum of knowledge about how social housing finance works would inform about what the income streams to a statutory ring-fenced housing revenue account are. And that same knowledge would explain why sinking funds cannot work within an HRA (although there is nothing to stop any leaseholder from starting their own savings account for service charges). Local authorities don’t have weak accounting systems – both general funds and HRAs are fully audited each year, and expenditure has to comply with standing orders, and service charges are constructed from costs incurred to individual blocks. Yes – blocks were run down in the eighties and early nineties (and are being again) – but this is because in the eighties and early nineties central government tightened funding to social housing altogether leading to the suspension of capital programmes, and ultimately to the need to invest in the decent homes programmes of the late nineties and early 2000’s. Money is tight again after several years of rent reduction and this year’s capping to 7% when inflation (particularly for fuel) is running much higher, and additional pressures are being added all the time (building safety, damp and mould, climate change). And it is a complete and utter canard to suggest that the Egan Principles are fictional, or that central government never encouraged partnering contracts – unlike the short term memory of central government I have been around for a long time, and remember the government pushing the Egan Principles (which I have read) and partnering as a vehicle for delivering decent homes – they even changed the legislation on statutory consultation to allow for partnering. Where is the outrage at the poor quality of conveyancing in this country that allows so many people to buy properties without an understanding of their obligations under the lease? Again, I would point out that local authorities have no option but to sell a property if a tenant has the Right to Buy – and have no input on subsequent sales other than a pre-assignment pack. So I come back to that inconvenient point of if leaseholders don’t pay their fair proportion of costs who does pay?