Recovering the Costs of Leasehold Management CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015 The Challenge A New Mindset The Basic Idea Sample Clauses Types of costs Statutory Provisions Conclusion
The Challenge To be cost neutral To recover 100% of costs from the units in the block Note: L pays for flats for secure tenants CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015
A New Mindset To recover a cost incurred unless there is a reason not to CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015 Reasons? - Not charged before - Politics - Unfair - Not practical i.e. Unable to calculate the cost - Fixed percentage management fee
The Basic Idea CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015 Landlord builds a block of 10 flats Grants 10 leases and reserves ground rent and covenants to keep the block in repair (save for the interior of flats) The Landlord does not want to be out of pocket in repairing and managing the flats
The Basic Idea CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015 The lease provides for the lessees to pay a share (1/10 th ) of the costs incurred by L in repairing and managing The basic idea and the imbalance between landlord and lessee has led to parliamentary interventions e.g. S146, S19, S20 Note if a lease fails to make satisfactory provision for the recovery of expenditure to be incurred an application to vary the lease can be made S35 LTA 1987
Sample Clauses A proportion of the costs incurred by the landlord in carrying out its obligations in paragraphs... The Landlord s covenants, e.g. - insuring - repairing and decorating - cleaning CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015
Sample Clauses CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015 A proportion of the costs incurred by the landlord in respect of any other works or matters affecting the demised premises and the building of which the demised premises form part that the Landlord in its discretion considers it reasonable or appropriate to carry out
Sample Clauses All other expenses incurred by the Landlord in and about the maintenance improvement and management of the building of which the demised premises forms part Estate? CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015
Sample Clauses CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015 Management Costs The Landlord shall be entitled to add a reasonable sum for general administration expenses [such sum being 10% of the total of the costs incurred by the Landlord] Major works schemes and management fees? Not a management cost caught by the sample clause above but an indirect cost of the scheme
Sample Clauses CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015 Enforcement Costs All costs charges and expenses which the Landlord may from time to time incur in connection with or in procuring the remedying of any breach by the lessee of the covenants on the part of the lessee contained herein..costs charges and expenses incurred incidental to the preparation and service of a S146 notice
Types of costs CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015 Repair, cleaning and redecoration Improvements 24 hour emergency repair hotline Enforcement Complaints team Anti social behaviour team Training room costs of return to work project Consents to assignment or works
Statutory Provisions S19 costs reasonably incurred S20 re QLTAs S20C Enforcement costs Schedule 11 CLRA 2002 re administration charges CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015
Conclusion Can you recovery all of your costs? Subject to checking the terms of your leases; Yes you can But how do you do it and what are the challenges? CIH HOME OWNERSHIP & LEASEHOLD MANAGEMENT CONFERENCE & EXHIBITION 3 4 FEBRUARY 2015
Recovering Your Costs Mike Edmunds Camden Council
Do you know what it costs to deliver your service?. What is recovered through your annual accounts? Do you know what your management costs are? Does your lease allow you to recover your costs? Management cost of leasehold team Accountancy and admin costs Indirect costs of repairs and services Cost of major works delivery.
Service charge profile Day to day service charges profile Service charge 11.2m Accountancy and admin charge 306k Management fee 1.5 Recovering all costs and not just the service cost is key to maximising income Ensure direct, indirect costs & overheads are added to service cost Services like repairs are very expensive to deliver. Major works costs recovered through an indirect charge, currently 8.27%
Management fee profile Leaseholders services unit cost 120.76 Includes Front line leasehold /collections team Leasehold finance/debtors team % Leasehold compliance team re general advice % Court team dealing with borough wide activity Accounts team recovered through separate accountancy charge via time recording work on services Sales team managing RTB sales, assignments and registrations self financing through fees
Management fee profile Housing management 74.57 Residents Participation Engagements (advice and engage with TRA and groups meetings). Communal Repairs Enforcement of tenancy and lease conditions Antisocial Behaviour & Harassment complaints (tackling and dealing with ASB complaints from L/H and tenants) 58% of time spent on these tasks that benefit all Asset management 10.96 Total charge 2013/14 206.29
Camden cases that assisted recovery FTT case : LON/00AG/LSC/2012/0791 Very detailed 67 pages Covers analysis of leasehold services and housing management services that can be recharged. Clarity on costs associated with major works LRX/10/2011 Palley v London borough of Camden Confirmed direct, indirect costs and overheads rechargeable as well as a management fee, as long as no double counting Also see LRX/105/2011 & LRX/178/2011 London borough of Southwark v Gary Paul and others
Checklist for management cost recovery Time analysis of leasehold teams functions where mixed chargeable and non chargeable costs Time analysis of housing management Pick up costs for all teams Transparency for leaseholders, put costs on your web site. Demonstrate no duplication of costs Clarity on central support costs Understand clauses in all lease types If your lease has a % charge are your real costs less than this figure.
Advantages of FTT application Plus points Seeking a determination at FTT can provide certainty about your methodology Camden had a 30% increase in recoverable costs Negative points from FTT Unhappy with re-charging of central engagement team Costs relating to community safety team not recoverable impact on customer satisfaction.
Income protection Protect income Billing with lease Section 20B Additional income Sale of additional space, basement and roof spaces Lease extensions Disposal of landlords interest Fees true cost managing alterations cases Copies of leases
Partnerships to aid recovery of costs Arrears recovery External contract Debt recovery process that recovers all costs Breach cases FTT determination to recover costs Section 20 cost recovery Working with repairs teams to avoid write offs Work with asset management teams to ensure future works costs are in sales packs
Can you reduce the cost of your service Problems with electronic delivery of service charge accounts and notices Develop a self service portal Camden portal model Payments,Statements, value for money survey Breakdowns of annual service charges and repairs Leaseholders details -Tel nos, email Leaseholders can update contact details and address Registration of subletting on line with automatic updates to housing management teams Electronic Delivery of arrears letters E-Forms with work flow & sales pack requests and payment
Can you reduce the cost of your service Benefits 40% using portal Reduced call centre time Shift to self service Improved customer satisfaction -70% with portal Greater transparency for leaseholders Future Lobbying of ministers Incentives to use portal, Early payment discounts on major works
Good luck with recovering your costs Mike Edmunds Head of Leaseholder Services Camden Council Mike.Edmunds@Camden.gov.uk