Leaseholder & Shared Ownership Handbook
Contents Page 3 Page 4 Page 5 Page 6-7 Page 8 Page 9 Page 10-12 Page 13-14 Page 15 Leaseholder and shared ownership introduction Staircasing Sub-letting, insurance Major works, charges, your responsibility Use of premises, permission Our responsibilities, service charge calculation Paying your service charge Paying for major works Useful contact information 2
Leaseholder & Shared Ownership Homes in Sedgemoor manage Sedgemoor District Council s (SDC) housing stock. When you buy a flat or maisonette, you don t buy the property itself, you buy a lease from SDC, which gives you the right to live in the property for an agreed period of time, usually 125 years. So, if you buy a SDC property under the Right to Buy (RTB) scheme or on the open market, we continue to manage the property on behalf of SDC. However, you will not have to pay rent, apart from a small amount each year known as ground rent. At the end of the lease period, SDC will take over ownership of the flat unless you apply to extend the lease. The lease is a legal agreement between you, (the leaseholder) and SDC, (the freeholder). The lease will explain your rights and responsibilities as well as those of SDC. Under the standard lease agreement, you must pay: Ground rent Your share of the insurance for the block Your share of the estimated costs of maintaining, repairing or improving the block and estate Sinking Fund Our buildings insurance policy covers your flat and the block it is in. You must pay your share of this insurance. You must make your own arrangements to insure the contents of your flat. Shared ownership If you buy a SDC property under the Shared ownership scheme, you will have to pay rent on the share you don t own and some service charges e.g. for buildings insurance and grounds maintenance if your property is part of an estate. Generally, you will be responsible for the maintenance of the property. 3
Staircasing If you own a Shared Ownership property, you can buy further shares in your property. This process is known as staircasing and enables you to own a greater proportion of your home. The greater the share you buy in your home, the less rent you will pay. If you staircase to 100% you become an outright owner and pay no rent but may still pay a service charge especially if your property is part of an estate. For more details about buying further shares in your home, please contact Sedgemoor District Council on 0300 303 7800. Buying the freehold of your block of flats In some cases, if you have a long lease and most of the people who live in the building are leaseholders, you may be able to buy the freehold of your block with the other people who live in it. This is known as the right to enfranchise. Once you have bought the freehold, you can decide how to manage the building. You can get more information about this from the Lease Advice website at www.lease-advice.org, telephone number 020 7832 2500. Extending your lease You can extend your lease for a further 90 years on top of the residue of the original term. The procedure for extending your lease involves obtaining a valuation of the property with the report showing at least three comparable valuations. You will need to instruct a solicitor to prepare and send SDC a Section 42 Notice of claim to extend the Lease. SDC may charge an administration fee upfront for processing the Lease extension request. You will also need to make provision for the premium plus legal costs. For more information on lease extension, please visit the Lease Advice website at http://www.lease-advice.org/calculator/, telephone number 020 7832 2500. 4
Sub-letting your flat As a leaseholder, you are normally entitled to sub-let your flat as long as the company providing your mortgage does not object. But sub-letting your property may affect your buildings insurance, because your premium is normally based on the fact that you are living in the flat. If you sub-let your property, under the terms of your lease, you will be responsible for the actions of your tenant(s) and their visitors. You will also still be responsible for paying the ground rent, service charges, buildings insurance and contributing to the Sinking Fund for the flat. You must ensure that you adhere to your legal responsibilities as landlord to have all gas appliances at the property serviced and maintained annually. We will require you to provide evidence of this. Selling your flat When you have found a buyer for your flat, your solicitor will need to give the buyer s solicitor information about your service charges and other Landlord management information. The cost of providing this information is not covered by your management fee; SDC will charge a separate fee for this service. What building insurance does not cover Building insurance does not cover every situation. For example, faults caused by mechanical breakdown, hidden defects or wear and tear are all treated as normal repairs. Other examples of situations not covered include: Carpets (if there are any), and contents in your home or the communal areas of the block Repairing pipes or replacing heating boilers or radiators that have worn or broken down (although you can claim for damage to the building caused by the sudden escape of water) Maintenance failures such as rain seeping through worn out window seals or through holes in the roof (in these circumstances you may be able to submit a liability claim. Please contact SDC for more advice on 0300 303 7800). Effects of condensation or damp in the block If you sub-let your property, we suggest that you or your tenant consider additional landlord/tenant s liability insurance. This will cover accidents in your property that cause damage to any of your neighbour s properties. For example, you may be liable for the cost of repairs if you have a leaking washing machine, which damages the flat below yours. 5
What happens if the major works are not listed on your Section 125 Notice? If we carry out works within the first 5 years (approximately) of your lease, it is considered an un-itemised repair if it is not listed on your Section 125 Notice but will be included in your annual block repair estimate limit, plus inflation. That is, if you have already been charged the maximum allowed for your block repairs (estimate plus inflation) you will not be charged any extra for the major works. What happens if the major works are listed on your Section 125 Notice? If we carry out works within the first 5 years (approximately) of your lease, your charge is limited to the amount shown on your Section 125 Notice, plus an inflation allowance. If we carry out works listed on your Section 125 Notice after the first 5 years of your lease, you will be recharged the full apportioned sum. Charges for your property block and estate We are not responsible for carrying out day-to-day repairs and maintenance on the inside of leased flats, unless it involves drains or other services that affect other flats in the block. If we do carry out the work to the inside of your flat, we will re-charge you for doing so. We will ask you to sign a form saying that you agree to pay for the work before we will carry it out. We may include the charge in your service charges or send you a separate bill. Either way you will also have to pay VAT and an administration charge. If an accident or vandalism caused the damage, you may be able to claim for some of these costs under your insurance policy. 6
Management charge We charge a management fee to cover all administration costs involved in working out charges, managing accounts, dealing with enquiries, supervising contractors and so on. We include a separate administration charge in the cost of any major work we carry out. This charge covers the costs of consulting you, (the leaseholder), as well as paying architects, surveyors and so on. Your lease agreement By signing the lease, you have agreed to pay a share of the cost of maintaining and improving the block and the estate and also take on any debt on the property. It is therefore very important that you ensure the property is debt free or an arrangement is made with the seller before you sign the lease. The lease also sets out your rights and responsibilities and ours. It is important that you understand these. Your responsibility You are responsible for maintaining anything inside your flat and anything that only serves your flat, including: the surface of the floors in the flat above the floor joists or other supporting floor structure the ceiling of your flat up to, but not including, the joists or other supporting floor structure or beams which the ceiling is attached to the surfaces of all walls, windows and doors inside your flat, the glass in your windows and your front door (please refer to your lease) all pipes, cables, that serve only your flat Carry out repairs to the internal plumbing, gas pipes and electrical wiring, and maintain your gas boiler and central heating. You are advised to have a gas safety check every year and provide us with a copy of this. Please note that if there is any loft space above your flat, it belongs to SDC. If you need access to the loft space to make repairs, you must get our permission first. You are not allowed to store anything in the loft space without our permission. 7
Use of premises The property can only be used for residential purposes. You cannot: use it for any illegal or immoral purpose hold any sale by auction in the property run a business from the property display outside or in the windows of the property any nameplate, notice, sign or announcement. Getting our permission You must get our permission in writing before you carry out repairs, maintenance or alterations which we are responsible for, such as replacing windows or painting the outside of your flat. If you do not get our permission, we may tell you to return your home to the condition it was in before you carried out the work. Permission will be refused where the proposed improvement or alteration: Affects the structure of the building for which we are responsible for and therefore our future maintenance liabilities e.g. putting up satellite dishes Would involve changes to the rights of way or communal areas and other residents object to the changes Would reduce the value of the building or invalidate the insurance policy Infringes planning requirements Any other work you carry out should meet both building and health and safety regulations. 8
Our responsibilities Repairs and maintenance Homes in Sedgemoor is responsible for maintaining the outside of the block, the structure and the communal areas such as: The structure of the building, including roofs, foundations, walls, joists, doors, window frames and guttering. Boundary walls and fences. Plumbing and drainage outside your flat, including main sewers and common drains. Controlled entry systems, communal TV aerials, lifts and lighting in communal areas. Service charges Your lease requires you to pay service charges for the maintenance and upkeep of the building such as grounds maintenance, door entry system, caretaking etc. Service charge is calculated using the Gross Internal Areas (GIA) of the flats in the building including all communal areas. Calculations are on the following basis: Specified Proportion = A x C where: B A = Full costs of the Service Provision B = Gross Internal Area of each flat in the Building C = Gross Internal Area of the Premises We will issue an estimated service charge in April of each year and then provide you with the actual costs in August of the following year. If we have over or under estimated the annual costs, your account will be credited or debited with the difference. 9
Paying your service charge Your lease requires you to pay your service charge on demand within 21 days of the date of the invoice. We may allow a longer period to pay your service charge invoice, usually up to 12 months ending on 31 March of each financial year, and it may be subject to a financial assessment. Ways you can pay your service charge invoice and other charges: By Direct Debit Please contact our Customer Services Team on 0800 585 360 who will either send you a DD form or set one up for you over the phone. Online You can pay online using Civica. Simply have your customer account number or invoice reference number handy when you logon at: https://pay.sedgemoor.gov.uk/live/ Webpay_Public/Webpay By phone One of our staff in the Customer Services Team can take a debit or credit card payment over the phone when you ring 0800 585 360. Please quote your invoice number. By Post Please make all cheques and postal orders payable to Sedgemoor District Council quoting your invoice or customer account number. Send all cheques and postal orders to: Homes in Sedgemoor, Bridgwater House, King Square, Bridgwater TA6 3AR At your bank Payment can be made direct to SDC bank account: Sort Code 60 03 27; Account No. 79141684. Please quote your customer account or invoice number to make sure that the payment reaches your service charge account. 10
What happens if I can t or won t pay my service charge? You must pay your service charge when we send you your bill. If you don t pay your service charge when due you are breaking the terms of your lease. We will send you two reminders before we take any further action which may include contacting your mortgage lender and making a court application for judgement. If you disagree with any part of your charge, we will do our best to resolve the problem. If we are satisfied that the services you have been charged for have not been provided to a reasonable standard, we will reduce the charge. If you are having financial difficulties, we may allow you to pay by installments. If we don t think that you have a good enough reason for not paying your full service charge, we may take action in the County Court to get the money from you and take back the lease. If the court agrees that you have broken the conditions of your lease, you must pay the charge plus interest. You will also be liable for our legal costs. If you do not pay within the time allowed by the court, we will apply to repossess your flat and you could be evicted. If you lose your home in this way, we do not have to find you a new home because you will be considered intentionally homeless. First-tier property tribunals If you feel that any of the service charges or major works that we want you to pay is unreasonable, you need to explain this to the Leasehold Team. You must provide all the reasons and evidence why you feel the charge is unreasonable. If we do not agree with you, you have the right to apply to the Property Tribunal, which has the power to decide whether service charges are reasonable or not. To find out more about First-Tier Property Tribunals, write to: Residential Property, 10 Alfred Place, Fitzrovia, London WC1E 7LR Phone: 020 7446 7700 Email: rplondon@hmcts.gsi.gov.uk 11
Housing Ombudsman The Housing Ombudsman Service is set up by law to look at complaints against housing organisations registered with them. Their service is free, independent and impartial. The Housing Ombudsman will consider complaints and mediate between leaseholders, tenants and landlords on matters such as repairs and maintenance, ASB etc. by using their dispute resolution principles. For more details, please visit their website at www.housing-ombudsman.org.uk Section 20 consultation Homes in Sedgemoor is responsible for planned and cyclical works to the structure and communal parts of the building such as external painting, roofs, foundations, communal windows and doors, door entry systems etc. The law says that we must consult all leaseholders and any recognised tenants and Residents Association if any one leaseholder would have to pay more than 250 for Qualifying Works e.g. repairs, maintenance and improvement works or 100 for Qualifying Long Term Agreements such as grounds maintenance contract, Great Estates works and cyclical redecoration works. If consultation is not undertaken, the landlord may not be able to recover costs over 250 and 100 per leaseholder inclusive of VAT and admin charge. For more details about the consultation process and how it affects you, please visit the Lease Advice website at www.lease-advice.org or ring 020 7832 2500. Can a leaseholder nominate a contractor? Depending on the nature of the proposed work a leaseholder can nominate a contractor to carry out the qualifying works. The contractor must meet and fulfil all legal, financial and government regulations before they can be considered. Contracts for which public notice is required, when the sum involved will be of a level where EU procurement rules apply, the proposed contract must be advertised by public notice in the Official Journal of the European Union (OJEU). While the opinions and views of tenants must be invited and considered, tenants or leaseholders do not have the right to nominate a contractor for these types of contracts. 12
Paying for major works We understand that most people are not able to pay large bills for major work without adjusting their budgets or arranging loans. The following information covers the main ways you can pay for major works. Pay the full amount If you can, please pay the total invoice amount immediately using your own funds. Sinking fund You must contribute to a sinking fund if your lease says so. This is the most effective way of paying your major works bill without having to find a lump sum. The contribution is held on trust and it s non-refundable. The contribution will be reviewed annually in line with any planned or programmed works. The sinking fund is treated as an asset or liability of the property. The advantage of this is that in the event of you selling your property, you are able to negotiate on the selling price. If your lease does not have a compulsory sinking fund clause, we will encourage and advice you to voluntarily contribute to the fund. You are free to opt out at any time, however you should be aware that any demand for major works bill will be expected to be settled within 21 days in accordance with the terms of your lease. Paying in installments before work is completed If you do not have a sinking fund in place and we have sent you an estimated service charge invoice for major work at the start of a contract, we may accept monthly interest free installments for the length of the contract, until we have agreed a final account with the contractor. When we are sent a breakdown of the final account, we will work out the actual payment for the work and send you a statement showing the difference between the estimated bill and the actual costs. If the estimated bill was too low, we will send you another invoice. You will need to make arrangements for paying the extra invoice and any money still owing from the earlier estimated invoice immediately, using any of the other options shown here. If the estimated bill was too high, we will tell you how much is due to you. We will only give you a refund if your service charge account is fully paid. Please remember that if you miss any of the monthly payments, we will recover the outstanding sums using our recovery procedure. 13
Flexible payment options We recognise that some of our leaseholders may have concerns about the cost and payment options available for major works. We want to help by providing extra support and by making payment terms more flexible and manageable. For more information on this, please contact the Leasehold Services department on 0800 585 360. Service charge loans You may be eligible to apply for either a Mandatory or Discretionary Service Charge Loan for service charges in relation to major repair or replacement works to the building and estate your flat is part of. For more information on this, please contact the Leasehold Services department on 0800 585 360. Remortgaging You could ask your existing mortgage lender for another loan to pay the service charge bill for the work. Usually, this would involve the amount of the loan being added to the amount you already owe on your mortgage. Your mortgage lender would then work out a new rate of repayment on your mortgage. They may also consider extending the mortgage term for example, from 25 to 30 years to keep the repayments affordable. If you want to consider this option, you should contact your existing lender in good time to discuss the matter. Most lenders are prepared to approve or refuse a loan in principle before we send you the details of your share of the cost of the work. Please note that where the bill is not in dispute, or where you have disputed the bill but a court (or arbitration panel) has ruled that you should pay the bill, we are entitled to contact your mortgage lender to ask them to settle the debt on your behalf. We may take a charge on the property If we agree that you cannot afford any of the options described above, with your agreement we could consider taking a charge on the flat to secure the debt. This is similar to a mortgage, but you would not have to make any monthly payments towards the debt. Instead, when the lease of the flat is transferred or sold, you would have to pay the charge in full along with the interest due. This option would be a last resort, and would be considered if the alternative was court action to recover the lease this means repossessing your home. 14
Support from other agencies 1. If you are entitled to benefits such as Universal Credit, Income Support or Job Seeker s Allowance, the DWP can help with interest payments due on loans that you have to take out to pay the service charges for certain types of work undertaken on your building. For more information about help from the DWP, please contact your local DWP office or visit the link: https://www.gov.uk/support-for-mortgage-interest In some circumstances, the agency may pay the full cost of a repair on your behalf, without you having to take out a loan. 2. If you are over 60 or under 60 with disabilities and you are concerned about paying your service charge or major works bills, you may be able to get help from the following organisations: Age UK Advice Tel: 0800 055 6112 www.ageuk.org.uk First Stop Care Advice Tel: 0800 377 70 70 www.firststopcareadvice.org.uk Equity Release:- Better Retirement Tel: 0800 035 59 34 www.brgl.co.uk/main/equityrelease (FSA number 153420) Useful contact Information Homes in Sedgemoor www.homesinsedgemoor.org Email customer.services@homesinsedgemoor.org HomesinSedgemoor @HomesSedgemoor Tel: 0800 585 360 or 01278 552400 Sedgemoor District Council General Enquiries Tel: 0300 303 7800 Email: customer.services@sedgemoor.gov.uk 15
Homes in Sedgemoor www.homesinsedgemoor.org Email: customer.services@homesinsedgemoor.org HomesinSedgemoor @HomesSedgemoor 0800 585 360 / 01278 552400 Bridgwater House King Square Bridgwater Somerset TA6 3AR V: January 2018