Leaseholder Management Fee - A Report upon a Qualitative Study

Transcription

1 2010 Leaseholder Management Fee - A Report upon a Qualitative Study prepared for: Norwich City Council prepared by: Peter C. Allan Plus Four Market Research Limited April 2010 PF17484

2 Contents Page Page Introduction... Methodology Main Findings 1. Background Review What the management fee can cover What the management fee cannot cover Proposed Fee Apportionment options Option 1 Flat rate Option 2 Percentage apportionment Comparisons Major Works Appendix

3 Introduction Introduction Plus Four Market Research Limited was commissioned by Norwich City Council to undertake and report upon a qualitative research study concerning how the Leaseholder Management Fee should be charged. A document has been produced by the Council to communicate to Leaseholders the background and to present options to them. Feedback was required from Leaseholders concerning the options for arriving at the Leaseholders Management Fee. Plus Four has undertaken previous qualitative and quantitative research for the Council amongst Tenants and Leaseholders. Past research has involved Knowledge Cafes, focus groups and surveys amongst the Norwich Talkback Panel. Plus Four Market Research Limited is a long established (1970), qualitative and quantitative market research company, with considerable experience (over 17,000 projects). The Local Authority Research Unit at Plus Four has undertaken a wide range of projects for a number of Local Authorities. All research is undertaken to the Code of Conduct of The Market Research Society (for details visit This project has been managed, moderated, content analysed and reported upon by Peter C. Allan, Managing Director at Plus Four Market Research Limited. He is a Full Member of The Market Research Society, a member of the Association for Qualitative Research, and a member of ESOMAR the world association of research professionals. He has over 30 years research experience. Methodology The research was conducted via two focus groups. Plus Four recruited Leaseholders from the Norwich Talkback Panel of Leaseholders. The profile aimed for was a reflection of the profiles concerned (gender, age, working status, disability and geography) and this was achieved. Details can be found in the Appendix. 100% attendance was achieved: at each group the 9 Leaseholders recruited all attended. The focus groups took place on the evening of Thursday, April 15 th 2010 at The Garage, an arts and dance city centre venue, chosen for its relaxed environment. 3

4 1. Background Officers have been working with the Norwich Leaseholders Association (NLA) (1) to review the leaseholder management fee. This report presents proposals from this work, to now consulted with all stakeholders. Each year 2500 leaseholders receive an annual bill that has three main elements. Cost for services received e.g district heating / premises management Recharges for their share of any repairs or major works carried out to their home, block or estate A management fee of 40. The council has charged a flat rate management fee since the Right To Buy came into being. This was originally 25 and increased to 40 in 1995/6 (3). This does not reflect the cost of the services provided (2) and is effectively subsidised by council tenants through the Housing Revenue Account. This needs to be addressed. 1. Inevitably the reference to the Norwich Leaseholders Association (NLA) led to some people pointing out that some doubts surround its current existence. It was explained to them that the discussion referred to had taken place whilst the NLA was in active existence They haven t met for ages When my payment tried to go through it was refused A concern was voiced by one respondent concerning agreements made with the previous NLA Committee: The council isn t going to start back-tracking is it (now there will be a new committee)? Perhaps interestingly one respondent announced that the NLA had their AGM scheduled for May 12 th, with a further meeting due on May 27 th...but nobody at the group concerned knew of this 2. A couple of respondents questioned this and it would be desirable to illustrate the shortfall How do we know that? 4

5 3. Several at one group expressed surprise that the Council has not dealt with this in the past years. They thought that small increases periodically would have avoided the present situation Have they been sleepwalking for the past 15 years that they ve suddenly decided now that we ve got to pay? 5

6 2. Review The costs attributable to leasehold management have been collated and detailed by broad activity and service headings. The percentage of officer time spent on activities (obligations of the lease) has been applied against each cost. These calculations have produced a final management figure, estimated for 08/09 at The council has consulted with the Norwich Leaseholders Association, ensuring agreement on the percentage apportionment for staff and that each cost is valid as a part of the management fee (1). 1. Whilst not questioned by respondents, given the general tone of discussion during both focus groups the author suggests it would be desirable to specifically direct interested Leaseholders to the NLA should they require detailed information on the basis of the percentage apportionment agreement 6

7 3. What the management fee can cover (1) The council can recover any charges explicitly stated in the lease and any other costs associated with keeping the property in good repair including major works activities such as roof and window replacements. The costs of minor repairs, consultations for major works (which do not proceed following consultation), the production of the annual service charge bills and any subsequent enquiries is also chargeable. CCT (2) charges have not been included as it is not possible to establish the number of enquiries handled by CCT which specifically relate to leasehold issues (3). It has been agreed with the NLA that, until this can be resolved, these costs would not be charged. 1. The content of this section clearly covers more than the management fee mentioned in the section title. The author suggests the title should be Charges the Council can apply 2. CCT did not communicate to respondents, however later in the document customer contact team was recognised as the probable meaning: it should be written in full 3. Some expressed surprise that the balance of Tenant and Leaseholder calls could not be/had not already been easily noted/monitored 7

8 4. What the management fee cannot cover (1) The council is unable to charge for items which are not directly related to delivering the services explicitly stated in the lease. E.g. permission letters for items such as windows and fan installation, changes of address, assignments (change of lessee), notification of charge (change of mortgage company) and other such enquiries. There is a cost to delivering these services and consideration needs to be given to whether these costs should be covered by a separate charging regime and price tariff (2). There are currently charges for solicitors enquiries and assignments and it is proposed to make set charges for items such as breach letters (when a leaseholder breaches their lease), invoice reminders, change of address etc. The income from these can then be offset against the total expenditure, before splitting the costs between all leaseholders. Taking these considerations into account, and combining all costs which relate to leasehold management, the proposed management fee represents a recovery of 35% of leasehold expenditure. NB Costs for activity such as consulting on major work could be made through a separate major works fee (See below) (3). 1. As per item 1 in the previous section the author suggests this title should become Charges the Council cannot apply 2. Although initially respondents struggled to recognise and appreciate the work referred to, once discussion had taken place and it was seen that the income forthcoming would be off-set against expenditure then everyone was quite happy with the planned approach 3. This final sentence relates to a somewhat different subject matter to the rest of the section and the author suggests this should be moved and incorporated into the later Major Works section 8

9 5. Proposed Fee (1) There are five main areas of costs (2) which contribute to the management fee. a) Staffing The home ownership team b) Agency costs (services provided by external organisations such as IT and payroll) c) Central services (recharges for services provided by human resources, customer contact team and communications. These are chargeable on a per employee basis to all services) d) Specific services supplied to home ownership.) i Corporate and professional services ii Office accommodation iii Employee insurance public liability e) Transport/ postages / office consumables etc A percentage (to reflect the share of the cost) has been applied to items identified as rechargeable. Using the actual figures for 2008/2009 leasehold expenditure, and applying the apportionments outlined above, (3) the management fee would be (4). This is in comparison to 40 currently charged as a flat rate fee. 1. The author suggests that this title should become Proposed Management Fee 2. As much discussion surrounded the view that the staff concerned are there anyway the author suggests it would be desirable to include an opening paragraph such as: Both Tenants and Leaseholders need the presence of staff in each of the areas below in order to service enquiries and requirements. It is fair that the associated costs are shared in proportion 3. The actual apportionment is not outlined above, only the headings. Prior to the focus groups taking place it was agreed with the Council that these two words be replaced by agreed with the NLA 4. It is not clear at this particular point how the has been arrived at. A calculation (see Apportionment Options ) would appear to indicate that total leasehold expenditure is 658k (this figure does not appear anywhere): 230, x 100 = 658,211. The author suggests that after the final word ( fee ) in this section the following should be added: is arrived at as follows: total leasehold expenditure of 658,211 x 35% = 230, Leaseholders =

10 6. Apportionment options Assuming charging, the costs (1) will need to be apportioned amongst the leaseholder population. There are currently a total of 2538 leaseholders, which would result in a total recharge of 230K as opposed to 101,360 at present. 230K is the total cost which can be recovered from leaseholders by means of a management fee, based on 08/09 calculations. NB: The actual management fee amount would fluctuate every year to reflect the costs of providing the service. 1. It is worth noting that in the course of discussion of the options, albeit as a digression, many expressed concern over perceived inaccuracies in their service charges. Much mistrust exists This week, two letters to neighbours...but I m part of that block! I don t get these letters but you can bet your bottom dollar I ll be charged for them! One Leaseholder noted he was treated differently from Tenants: Tenants get their garages at a very low price, whereas my garage I am charged every month They (Tenants) pay about 10 a month Several at one group spoke of being charged for work resulting from vandalism which they said the police had advised them was not chargeable. 10

11 Option 1 Flat rate (1) Using the actual figures for 2008/2009 (2), the percentage apportionments agreed with the NLA, the actual management fee per leaseholder would be (2538 leaseholders x = 230,374.) (3) Apply the flat rate of to each leaseholder, regardless of the amount of their annual service charge or the amount of services they receive. 1. A flat rate was seen as helpful for budgeting, however this fee was simply the management fee and not the larger service charge and therefore the benefit is not as great as they may have thought You have a rough idea of what it s going to cost for the next year 2. Include and 3. Add : One option would be to... 11

12 6.2 Option 2 Percentage apportionment The principle of this option is that the management fee will be proportionally higher to those leaseholders who have more services and a greater number of minor repairs during the year. The principle being that more time has been spent on managing and administering these properties. Using the total cost of services for all leaseholders recharged for 2007/2008 (1) as an example and calculating the average service charge per leaseholder figures, a multiplier of 39.19% is derived. (This percentage will vary each year depending on the total costs (2). Total service charges billed in 07/08 were 1.28 million. This consisted of 494K service charges and 686K major works. Of the 494K service charges 191K (39.19%) is rechargeable as a management fee. This can either be charged as a flat rate charge as in option 1, or apportioned on a percentage basis using 39.19% which will recover the full 191K. 1. It was explained to respondents that figures were used in this section due to figures not being available at the time the document was produced 2. Some were easily confused by figures and the author believes it would aid comprehension if an example were to be given explaining how the percentage would change. For example, removing the brackets around this sentence and adding: For example, if the total cost of providing the management remains the same, but the costs of services increases then the result will be a lower percentage management fee. If management costs increase, and the cost of services remain the same then a higher percentage management fee will result 12

13 6.3 Comparisons The table below illustrates the impact of each charging option on the 2 different types of service charge regime (1). Annual and quarterly / monthly. Comparison of costs using 07/08 figures Annual* Q&M** Number of leaseholders 2, Cost of services 279, , Average service charge per annual leaseholder Multiply this by 39.19% management charge (2)= Total service charge with % apportionment = Total service charge with flat rate fee applied = *87% of leaseholders pay their service charges, including management fee and any major works contributions, annually in arrears. **13% of leaseholders pay their service charges including management fee on either a monthly or quarterly basis with an end of year reconciliation. These leaseholders have significantly higher charges, mainly district hearing. 1. The document provided does not reveal what the average management fee would have been. Discussion with the Council prior to the research taking place led to an average figure of being provided. To help Leaseholders see how this figure was arrived at, the following calculation was produced by Plus Four and was shown to them in the course of the focus groups: 279, ,021 = 197 x 39.19% = 77.23* = 2509 *whilst different from the Council provided fee of this is only due to rounded figures being used in the Council s calculation This information allowed respondents to compare the average figure which in the financial year concerned would have been the true flat-rate figure, rather than with the and shown in the document 13

14 2. The document clearly states that there are two possible types of service charging regimes, however understandably every Leaseholder took it that the average service charge per...leaseholder meant just that: they would pay an average figure in the case of Annual : This has subsequently transpired to be incorrect: we have discovered from the Council that each individual property would be costed separately, with the management fee being 39.19% of their particular service charge It can be deduced from dialogue in the groups that Leaseholders would like this average approach as they would know from year-to-year, how much to budget for. Unfortunately this option i.e. an average excluding those with higher charges, was not one that had been intended by the Council Respondents also struggled to see how the dividing line between numbers 314 and 315 could be fairly drawn The 314 th person is paying a hell of a lot more than they should do and the 2194 th (they mean the 315 th ) on the list is getting away with an absolute bargain One or two people questioned whether the management fee could reasonably be applied on a percentage basis given that some services, so they believed, would have more/less management implication. (Whilst this is less relevant given the misunderstanding referred to above, it still has some relevance) The problem I have...is we ve got no way of knowing whether these anonymous 13% of people actually take up more management time Although the average approach was liked, it seemed evident from discussion that the fairness associated with individual property calculation would be their preference. From a previous paragraph it will be clear that they could not have known that this was, in fact, the Council s intention This individual calculation conclusion is based upon their desire, ideally to recognise the difference in demands of different blocks or to categorize blocks according to demands. It is but a small step to conclude that individual property calculation would be their preference The lifts in tower blocks need more cleaning How much more difficult is it for them to say your bill was 500 this year, therefore your management fee will be 39.19% of 500? That seems a fair and equitable way of doing it A potentially interesting idea came from one of the groups : this concerned separating the management fee into two parts: - a standing charge to cover management (the basic overhead). This would be equal to all Leaseholders - a percentage charge on the cost of services 14

15 Reassurances need to be given concerning the costs of collating the relevant information for the calculations to be made. There is a concern that bureaucracy adds to their management fee costs Reflecting upon the total cost when compared to the private sector it was recognised that the total Council charges were quite low. A few, however, thought that the private sector delivered better service. The author believes the Council s position would be viewed more positively if private sector examples, with appropriate sources referred to, were included somewhere in this document You d be paying a bloody fortune (private) You (would) get immaculate gardens (private) My sister pays 185 a month for her maintenance (private including heating) In Summary: The document was unclear regarding the true intention of the Council regarding Option 2 The average approach as shown under the Annual heading (see page 13 of this report) had some support, however the new information from the Council concerning individual calculation would have been likely to have been their chosen preference, based upon other dialogue To confirm this conclusion it is recommended that Plus Four design a clear statement of the options, agree it with the Council, and re-contact those attending the two groups for their reaction. This can be undertaken within a few days. Plus Four will liaise with the Council regarding this recommendation 15

16 7. Major Works Outside of the management fee issue, officers are also recommending that the costs of managing capital works (1) such as window replacement and re-roofing are recovered as a percentage of the costs charged to individual leaseholders for the work done (2). This would add an estimated 6% to charges for work. These costs are currently borne by the HRA (Housing Revenue Account.) 1. Initially the associated Council staffing costs were not clear to Leaseholders, however once explained there was a general acceptance. I think that s a fair thing because it s got to be managed, but what gets me is that you cannot trust the costs in the first place they won t tell you or let you see the charge from the people that are doing the work Much as I hate it, it is a fair charge that we have to pick up the tab 2. It would assist comprehension if the document added a further paragraph such as: Council officers and technical staff must be involved at the beginning of capital works e.g. securing and appraising tenders, and during the course of major works e.g. liaising with contractors, checking on progress, dealing with situations that arise. These staffing costs equate to an estimated 6% of the contractor s charges for the work and these staffing costs are currently borne by the HRA (Housing Revenue Account) i.e. by rental income from Tenants. In due course the Council believes the 6% should be recovered from the Leaseholders benefiting from the work in proportion to the Tenants and Leaseholders present in the properties concerned This new paragraph would replace the current final two sentences 16

17 Appendix The profile of those attending the two focus groups was as follows: Gender - male: 9 - female: 9 Age : : : 5-60+: 7 Employment Status - full time: 6 - part time: 2 - self employed: 0 - unemployed: 3 - retired: 6 - other: 1 Disability - yes: 2 - no: 16 NHO Patch - Vauxhall: 1 - Thorpe Hamlet Rouen: 2 - Barrack Mousehold: 2 - City North West: 2 - Angel Mile Cross: 1 - North Lakenham: 2 - Heartsease: 1 - Cloverhill Marlpit: 1 - Central West: 2 - Colman: 2 - Mid Lakenham: 1 - Tuckswood Old Lakenham: 1 17