CIH Home Ownership Developments in 2014/15 Justin Bates
Introduction Justin Bates Barrister at Arden Chambers Deputy General Editor of the Encyclopedia of Housing Law Co-author of Leasehold Disputes Vice-chair of Housing Law Practitioners Association 2
The next hour 1) What does the market think of us? What do our tenants think of us? 2) Current issues and case-law update 3) Issues on the horizon? - s.20 with intermediate lease? - Equality Act 2010 and common parts? 3
Part 1 What does the market think of us? What do our tenants think of us? 4
Competition and Markets Authority The successor to the Office of Fair Trading December 2013 Property Management Services: A scoping paper (OFT) - Is the leasehold market working for consumers? - Notes evidence of problems in Scotland, Northern Ireland and London - Wants to examine leaseholders perception of the service they receive and the extent to which service charges represent value for money - Are landlords acting in the best interests of leaseholders when procuring services? - Do leaseholders have sufficient influence? - BUT proposed to exclude registered providers from scope 5
CMA Consultation on Scope Final statement of scope March 2014 - Had over 250 responses to the first paper - Significant representations (over 100 responses!) to the effect that registered providers should also be brought within scope - Accepted that recommendation - Noted that the complaints about registered providers were very similar to private sector - Value for money - High service charges - Ineffective complaint redress - Unnecessary expenditure 6
CMA Update paper (1) August 2014 published Residential Property Management Services: An Update Paper - in effect, this is a current thoughts paper - Leaseholders have no real input into management - Freeholders have no real reason to keep costs down given that most (if not all) will be recoverable as a service charge - No proper competition for management functions - Registered providers cross-subsidise other activities from service charges - RPs have inefficient procurement policies - RPs are not transparent - Inadequate sinking fund provisions 7
CMA Update paper (2) - Market outcome for leaseholders is poor - Poor awareness of obligations of leaseholders - Poor communication by landlords - RP leaseholders noticeably lower satisfaction with price and quality of work - CMA suggested that RP leaseholders expected a social responsibility approach, rather than a property management approach - Not yet sure whether to recommend sinking funds or that the RP should have to undertake periodic tendering of management services 8
CMA Final Market Study December 2014 - Outcomes for leaseholders are poor - Evidence of overcharging, poor quality works or service, poor communication - Desire for a cheap and accessible form of redress - Lack of transparency especially on major works - Much lower satisfaction rates than private sector (26% of LA leaseholders consider service to be very poor / 20% in private sector) - Over 55% of PR leaseholders were dissatisfied with their manager 9
CMA Final Market Study (2) - Leaseholders unaware of the costs implications of being a leaseholder - 47% expected to get the same service as when they were weekly rental tenants - Leaseholders in RP sector often had lower incomes than private sector and so were more price conscious - Evidence of bad practice and poor service provision - Over 50% dissatisfied with information about major works - Long term procurement contracts very unpopular 10
CMA Final Market Study (3) There is.. a climate of mistrust and dissatisfaction, where leaseholders believe they are overpaying for services or crosssubsidising other social housing residents. Recommendations - Share best practice - Identify costs by block and explain allocation/apportionment Government proposed a consultation paper in 2015 no sign yet But interestingly did endorse ICAEW Tech Release 03/11 for PRPs 11
Current issues and case-law update 1) Major works consultation 2) Major works funding 3) Major works repair v improvement 4) Major works grants 5) Apportionment 12
Major works - consultation Royal Borough of Kensington & Chelsea v Lessees of Pond House [2015] UKUT 395 s.20, Landlord and Tenant Act 1985 - Consult in respect of qualifying works or qualifying long term agreements - If no consultation, then capped recovery unless dispensation granted Five possible forms of consultation see Schs 1-4, Service Charges (Consultation Requirements)(England) Regulations 2003 - Matters which one because different arrangements apply, e.g. Sch.3 very limited 13
Major works - consultation RBKC wish to enter into a framework agreement whereby all their repairs for the next six years are done by one of a number of approved contractors - Is it a QLTA? - Implication for consultation process. Would consult on the QLTA itself (but very limited since Public Notice required). Then consult on the works under the QLTA (very limited again, see Sch.3) Yes, it is a QLTA - Lasts for more than a year - Possible that costs will exceed 100 per year for any tenant 14
Major works - consultation Useful clarity previously different FTT cases saying different things But CMA criticised lack of opportunity for leaseholders to be consulted sch.2 (QLTA) and sch.3 (works under a QLTA) are minimal consultation Do leaseholders understand any of this? What about transparency? 15
Major works - funding Social Landlords Mandatory Reduction of Service Charges (England) Directions 2014 Social Landlords Discretionary Reduction of Service Charges (England) Directions 2014 Decent Homes problems - Evidence given to the CLG Select Committee, March 5, 2007-18 London boroughs expected to issue service charge demands in excess of 20,000-6 expected to exceed 50,000 Labour rejected calls for a cap, but amended the loan powers of local 16 authorities (ss.450a-d, Housing Act 1985)
Major works - funding The Secretary of State considered this was too limited and has introduced new caps (and powers to cap) service charges which are applicable to all social landlords 17
Major works - funding Mandatory reductions - Cap of 15,000 (London) or 10,000 (elsewhere) in respect of costs payable for works by a qualifying leaseholder (i.e. one occupying as his only or principal home) if the work was funded (in whole or part) by Decent Homes backlog funding, the Secretary of State or the HCA - Applies over a rolling 5 year period Discretionary reductions - Regardless of the source of funds, have a discretion to reduce any works costs as you think reasonable, having regard, inter alia, to the benefit the leaseholder received and their personal financial circumstances 18
Major works - funding Utility of these changes? - Mandatory reductions linked to funding streams which are either (i) over or (ii) easily avoided - Discretionary schemes cannot be challenged in FTT by only by judicial review - Craighead v Homes for Islington Ltd & Anor [2010] UKUT 47 (LC) - False hope? - Wales? 19
Major works repairs v improvements Hounslow LBC v Waaler [2015] UKUT 17 Is there a different approach to reasonableness (s.19, Landlord and Tenant Act 1985) depending on whether the works are repairs or improvements? Yes, said UT - External major works to an estate - Focus on windows - Evidence was that defects with existing wooden windows were relatively minor and could be repaired quite cheaply - Windows replaced - Leaseholder challenged costs ( 55,000 or so in total) 20
Major works repairs v improvements Repairs - Landlord given a wide discretion as to how works carried out, whether to do all in one year, etc - Reason is that repairs are usually mandatory under the terms of the lease Improvements - These are unlikely to be mandatory - Therefore discretionary decision of landlord - Need to take particular account of needs of leaseholders, including desire for work, timing, costings, etc Implications? Permission granted for appeal to Court of Appeal 21
Major works grants Sheffield CC v Oliver [2015] UKUT 229 (LC) - Major works across the city - Contribution from commercial energy company as part of the Community Energy Savings Programme - Not all blocks had works done - 15 of 24 on this estate had works - Total cost of about 44,000 for her block - Grant money not apportioned to the specific works but across all stock - UT held not permissible. Where funding has been provided from a third party and the purpose of the funding is specifically intended to meet the cost of certain works, it is impermissible to calculate the amount a leaseholder must pay under a service charge without reference to the receipt of that money. 22
Major works grants Edozie v Barnet LBC [2015] UKUT 348 (LC) - 7.1 million grant towards 9.4 million works to three blocks - UT held terms of grant left Barnet free to allocate that money as it wished, so long as spent at those blocks - Some but not all applied to reduce service charge demands - Sheffield distinguished as this grant was not for a specific purpose Sheffield is off to the CA 23
Apportionment Apportionment - the next battle ground s.27a(6), LTA 1985 An agreement by the tenant of a dwelling is void in so far as it purports to provide for a determination: (a) in a particular manner, or (b) on particular evidence, of any question which may be the subject of an application [to the FTT]. Two important UT cases - Windermere Marina Village v Wild [2014] UKUT 163 (LC) - Gater v Wellington Real Estate Ltd [2015] UKUT 561 (LC) 24
Part 3 s.20 consultation and intermediate landlords Equality Act 2010 25
s.20 consultation and intermediate landlord Freeholder with repairing obligations - charges a service charge to his tenant Headlease of the whole held by social landlord - passes the service charge on to its sub-tenants Occupational lease held by individual tenants Freeholder consults who under s.20? 26
s.20 consultation and intermediate landlord Freeholder consults only his tenant - Privity of contract and estate only with his tenant - His tenant is entitled to the protections of s.20 (Oakfern v Ruddy) - At a practical level, he is unlikely to have the details of the occupational tenants. Does intermediate landlord then sub-consult its occupiers? - How can it do this and comply with the time requirements in the regulations? - It never actually has an intention to do any works, as required by stage 1 notice - What observations could you usefully make? 27
s.20 consultation and intermediate landlord But what about the occupational tenants? By s.20(1), 1985 Act, the relevant contributions of tenants are capped unless the consultation requirements have been either complied with or dispensed with. Tenants includes sub-tenants (s.30, 1985 Act). Whole focus of scheme is on the paying party and their rights Daejan v Benson Possible forthcoming UT case 28
Equality Act 2010 Duty to make reasonable adjustments A controller of let premises, or a controller of premises to let, has a duty to make reasonable adjustments: s.36(1). This applies to persons who either let or manage premises: ss.36(2),(3). Premises are defined as the whole or part of the premises : s.38(2).the duty does not extend to a person responsible for the common parts that relate to premises that are let: s.36(5-6), as this provision has not been brought into force. House of Lords enquiry into this at the moment. 29
The end! Questions? 30