Leasehold handbook – Consultation and major works

by The Gateshead Housing Company & filed under Owning your home - leaseholder - leasehold handbook, Owning your home - leaseholders.

Major works

Hard hatMajor works are large one-off works of repair, improvement or redecoration to the structure, external or communal areas of a block.

This may include works such as renewing doors and windows, repairing or renewing roofs, lift replacements or renewal of fascia and guttering.

Major repairs are usually planned except where the work is of an urgent nature and cannot be delayed.

They are required as major elements of the building naturally deteriorate over time and need repair, renewal or redecoration.

The Gateshead Housing Company has a rolling programme of redecoration for all its properties.

Under the terms of your lease you must pay towards the cost of these works.

Your share is calculated by dividing the total cost by the number of flats in your block.

For example, if you live in a multi-storey block with 100 flats and the cost of installing a new lift is £100,000, your charge would be £100,000 divided by 100, which is £1,000.

Those people who bought their flat under the Right to Buy scheme less than five years before the works are due to start, may not be charged the full amount.

We can only charge for any works set out in your offer notice, up to the amounts stated, plus inflation.

We will check your offer notice prior to consulting you and will advise you if your contribution has been adjusted as a result of any restrictions.

You will be sent an invoice for your share of the cost of any Major Works.

Consultation

We are committed to consulting all residents when we enter ‘Long term Agreements’ or carry out major repair works/improvements.

Under the Commonhold and Leasehold Reform Act 2002 (the Act), we have a duty to consult with you about:

Long-term agreements

We must consult you if we enter into a contract for more than 12 months and the cost to you, or any one leaseholder is going to be more than £100 in any one year, for the work, goods or services provided under that contract.

You will receive two separate formal notices, and in some cases three:

  1. “Notice of intention” informs you of our intention to enter into an agreement and details a description of the works or services to be provided, asks for your observations and invites you to nominate a contractor. We will only include nominated contractors on the tender list providing they comply with our requirements and have adequate insurance and financial references
  2. “Provision of estimates” sets out the results of the tenders and your contribution towards the You will again be asked for your observations before we award the contact.
  3. “Award of contract” confirms which contractor has been appointed and the reasons for.

As these documents can be complex, we will provide the following information with the notice:

  • A covering letter explaining the notice and it’s contents
  • Details of your payment options
  • Details of when you will be billed for the works.

Where a residents’ association is recognised for the purpose of service charges under the Landlord and Tenant Act 1985, they have the right to be consulted about the specification for the works and in some circumstances will be asked to nominate a contractor to be added to the tender list.

Qualifying works carried out under long-term agreements

We will consult you prior to the commencement of any repair works and improvements carried out under an existing long-term agreement, where any one leaseholder’s contribution is going to be more than £250.

The consultation takes place on the works only as the contractor is already in place. It will detail a description of the works, our reasons for carrying out the works and your estimated contribution.

The work will usually be carried out under the rates set out in the contract.

At each stage of consultation you will be given 30 days to provide us with your written observations.

We will carefully consider your comments and provide a formal written response within 21 days.

You cannot refuse permission for the works to go ahead as we have a responsibility under the terms of the lease to repair and maintain the building.

If we fail to carry out the required consultation we limit our ability to recover the full cost of the works or services provided.

European Union implications to consultation on qualifying works and long-term agreements

Where the proposed works require public advertisement within the European Community, the consultation requirements differ in that leaseholders and recognised tenants and residents associations are not invited to nominate a contractor.

However, we still have a requirement to consult with you on any proposals for such work.

Urgent works

In cases where works are considered urgent, for example a leaking roof or a dangerous structure, we may apply to the First Tier Tribunal (Property Chamber) formerly the Leasehold Valuation Tribunal for an order to go ahead with the works without prior consultation.

This is known as ‘dispensation’. If we do not apply for dispensation we are unable to recover the full costs of the works and are limited to charging a maximum of £250 per leaseholder.

Transfer of ownership during works

Where a lease is sold on or transferred, unless formally requested, we will not provide copies of consultation addressed to the previous leaseholder(s) prior to the sale.

It is the responsibility of the incoming leaseholder’s solicitors to protect their client’s interests and request this information from us.

If this is not requested we will write to the new leaseholders Solicitor, following completion of the sale, advising them of any consultation which has been issued to the previous leaseholder but not yet billed.

Methods of payment and assistance

Major works charges are payable within 21 days however, if this is not possible we offer various payment options and assistance.

You are advised to seek independent financial and legal advice before taking up any payment options. You may be able to find cheaper or more appropriate finance through your high street bank or mortgage lender.

Payment Options available from The Gateshead Housing Company.

Interest free payments

If the invoice is under £1,000, payment can be made over a maximum of 12 monthly instalments. If charges are more than £1,000 then up to 60 monthly instalments are available at a collection rate of £1,000 per year.

For example, an invoice of £3,000 would be repayable over 36 monthly instalments of £83.33

All payments must be made by direct debit. Any default of payment under this arrangement will incur interest.

Extended interest free payments

If you are unable to afford to pay the full charge within 60 months, you can ask to extend your payments beyond this period.

Please note: This option will only be offered to leaseholders facing extreme hardship and is subject to an income and expenditure assessment.

One-off discounted payment

If you pay your invoice in full within 21 days of receipt you will receive a 2.5 percent discount

Alternative help and support

Department for Work and Pensions (DWP)
If you are in receipt of job seekers allowance or income support you may be entitled to help with any interest incurred on a loan or mortgage. Contact your local jobcentre for further information

Pension Credit
If you are of pensionable age you may be entitled to Pension Credit, which tops up your weekly income if it is below a certain amount.

You can contact the Pension Credit claim line on telephone 0800 99 1234, by text on 0800 169 0133 or by visiting the Pension Credit website.

Extend your mortgage
If you have a mortgage secured on your home, you may be able to apply for an additional loan from your lender and re-mortgage your property. Contact your mortgage lender directly to discuss this option.

A savings account
You can save towards the cost of major works by setting up a savings account with your bank or building society. This can make it easier to make regular savings and gain interest on your money at the same time.

Alternatively, you can make regular extra monthly payments into your service charge account however; this would not incur any interest.

Leaseholders’ right to a statutory loan
If you are having difficulty paying your major works bill in full straight away or by interest free monthly instalments, you may be entitled to a statutory loan from Gateshead Council.

The right to a loan is governed by the Housing (Service Charge Loan) Regulation 1992.

To qualify you must:

  • Have purchased your home under the Right to Buy scheme
  • Have held your lease for less than 10 years
  • Apply for a loan of £500 or more.

For further information or an application form call the Leasehold Services Team on 0191 433 5395 or 0191 433 5396.

Private loans
You could apply to your bank or building society for a personal  ‘unsecured’ loan to cover the cost of your major works bill.

An unsecured loan does not impact upon your mortgage, so your home is not directly at risk if you do not make regular payments.

Interest charges on this type of loan tend to be higher so you should check:

  • What level of interest and other costs you will be charged
  • If you can realistically afford the repayment plan
  • What other costs or penalties may apply if you cannot afford to keep up the repayments

Legal Charge
If you are unable to pay your major works bill within the 60 month repayment period, or are unsuccessful in applying for other packages, you can ask to place a voluntary charge on your home.

You may qualify to put a charge on your home if:

  • You are the original Right to Buy purchaser
  • You are over 60 years of age, vulnerable or in severe financial difficulty
  • The property is the only property you own and you are not renting another home
  • The property is your only place of residence.

If you meet the above criteria, the charge will be secured on your home with the Land Registry.

There is no fee for putting a charge on your home but you will incur interest set at local rates.

If your home is sold, assigned or passed on through inheritance the charge will be immediately repayable to Gateshead Council.

The charge must be fully repaid if your home is sold. In the event of the death of the eligible leaseholder, the remaining leaseholders, assignees or

inheritors will be liable to pay the outstanding charge.

Financial assistance through Gateshead Council
The assistance offered through the Gateshead Private Sector Housing Renewal Financial Assistance Policy is available for works where you have the repairing obligation.

Works where Gateshead Council has the repairing obligation are not eligible for financial assistance.

Visit Gateshead Council’s website for further information about Capital and Interest Repayment Loans,

Equity Loans and Decent Homes Assistance Grants are available from Gateshead Council or call the Private Sector Housing Team on 0191 433 3000.

The ability to offer financial assistance is subject to funding.

Mandatory capping of major works service charges

New legislation came into force on 12 August 2014 capping the amount you can be charged in respect to service charges for repair, maintenance or improvement, which is wholly or partly funded with assistance from central government by the Secretary of State or the Homes and Communities Agency.

They apply to leaseholders

  • Of social landlords
  • In England
  • Who are individuals (not a company)
  • Who occupy their house or flat as their only or principal home.

The costs of repair, maintenance or improvement must be limited:

  • To £15,000 for a dwelling located within a London authority
  • To £10,000 for a dwelling located elsewhere in England
  • Within any five year period.

Discretionary capping of major works service charges
Your contribution towards service charges may be waived or reduced by an amount Gateshead Council (the landlord) considers to be reasonable.

This also applies to service charges already demanded or already paid so as to permit a refund.

In deciding whether charges should be reduced Gateshead Council will consider:

  • Whether you or a previous owner was notified of any estimate for the repair, maintenance or improvement before the purchase of the lease of the dwelling;
  • Whether the purchase price took account of the costs of the works;
  • Any benefit you have received or will receive as a result of the works. This includes an increase in value of the property, energy efficiency, improvement in security and improvement in services or facilities;
  • Whether the purchase price paid by you took account of the costs of the works;
  • Whether you would suffer exceptional hardship in paying the service charge; or
  • Any other circumstance which are considered relevant.

When considering an application to reduce service charges due to exceptional hardship we will have regard to:

  • Whether the dwelling is your only or principal home
  • The total amount of service charges paid/payable by you since you purchased the property
  • The financial resources available to you
  • Your ability to pay over an extended period
  • Your ability to raise funds; and
  • Any other relevant considerations.

For more information email the Leasehold Services Team or call 0191 433 5395.

See also

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