One week ago the world of leaseholder asset management and maintenance received a major shake-up. New directions – not to be confused with the fictional glee club from popular American musical comedy-drama Glee – have been issued to social landlords, restricting their ability to, as Eric Pickles puts it, “levy huge bills for future government funded repair work on people who simply have little or no hope of meeting their demands.”
What impact will this new legislation, known colloquially as “Florrie’s Law”, have on social landlords? Are the new rules a step in the right direction…or a step too far?
‘Florrie’s Law’ is named after 93-year-old Florence Bourne, a leaseholder of a flat from Newham Council, who faced a £49,000 bill for repairs to her roof before dying from a heart attack in January 2010.
However, as noted by the Leasehold Tribunal Service, Newham Council made a number of series of miscalculations regarding the necessity and cost of proposed works to the roof, which subsequent investigations found to have an estimated repairs life of 40 years – tragically, the works for which Mrs Bourne was charged were not needed at all.
I was appalled at Florence’s treatment and was determined that no other leaseholder should ever have to endure the stress and hardship she experienced in the final weeks of her life. – Eric Pickles
This new cap, contained within “Social landlords reduction of service charges: mandatory and discretionary directions 2014“, restricts social landlords from levying ‘excessive’ service or major works charges for “repair, maintenance, or improvement work” wholly or partially funded by the Government: the cap is set at £10,000 over five years for properties outside London, while a cap of £15,000 will apply to social landlords in the capital.
The cap is intended to protect leaseholders from getting “stung by unexpected and unnecessary charges”, and would appear to be welcomed by those few leaseholders consulted by the government – of the 28 leaseholders who responded to a question asking whether the then-proposed cap struck the right balance between the interests of leaseholders and those of councils, 15 were in agreement, while 18 thought the proposals were insufficient – that is, they could have gone further. In contrast, all 21 local authorities who responded to the same question disagreed, stating the proposals were excessive.
It is understandable why leaseholders would welcome ‘Florrie’s Law’ – any cap on their asset management charges will be to their financial benefit – but why are social landlords so opposed to the cap? What is the impact, and what are the potential consequences?
Implications & Impact
With caps placed on the amount that social landlords can impose on leaseholders for major repair or improvement work the shortfall in cost will need to be made up from somewhere. A major concern is that landlords will need to meet the cost difference through the HRA, which would mean that social tenants would effectively be subsidising leaseholder works. How would social housing tenants feel about having to pay (via rent, etc.) the costs of not only their repair work, but also the repair work of individuals who have ‘bought’ their own property? I can’t imagine that would be received too well.
(It should be pointed out that the cap only applies when work is wholly or partially funded by the government, so for those works funded wholly by the social landlord this will not be a concern; having to potentially wholly fund works, however, will be a concern for social landlords.)
Regardless of how the work is funded – whether by dipping into the HRA or through other funding streams – social landlords will find it more difficult to affect major repairs and improvement work on leaseholder properties due to the necessarily increased costs to their organisations. Consequently, Councils may be less willing to engage in government-funded improvement schemes – the cap will mean that government funding may not be worth applying for. As the cap applies to the 2015-16 Decent Homes Backlog Fund the cap may even stymie vital decent homes works that bring properties up to a…well, decent standard; the DCLG’s consultation document suggests five councils believe the cap would prevent them from achieving planned Decent Homes works (one London borough estimates that when applied to works programmed over the coming two years, the cap would cost the borough at least £1.7m.) Our Castle’s Strength has already looked at how important a decent home is for health and safety of tenants – to have that work second-guessed by service charge caps could potentially lead to long-term problems for leaseholders and tenants alike.
Perhaps the most worrying possibility it that, faced with increased costs and limited funding options outside an already-stretched rent-funded HRA, social landlords may simply decide to do less work…or no work at all. Given the prohibitive costs of some Decent Homes repairs work – roofs and structural works being classic examples – is there a danger of leaving work longer than necessary in order to accrue sufficient funds to affect it? A recent incident at Blackpool Costal Housing, where the ALMO was found guilty of taking a “prolonged gamble with the safety of its tenants” by not engaging in timely maintenance works that consequently saw the complete collapse of a second-floor balcony, should be evidence enough that no matter the cost of works landlords cannot afford to ignore them where necessary. Still, I wouldn’t want Mrs Bourne’s legacy to be a law that inadvertently caused injury or death due to a perceived lack of money to make a property safe.
A Revised Approach
The views of leaseholders in the DCLG’s consultation document shouldn’t be dismissed outright – there is clearly a sentiment that something Councils are charging too much, or otherwise being inefficient in how they go about the process of major repair and improvement schemes.
A suggest from the consultation document (it does not specify whether the suggestion came from a local authority, HA, or leaseholder) argues that the cap should only apply where work costs more than any increase in the capital value of the property. However, this approach would be very complicated (the response given by the DCLG in the document is the same) – how would you effectively determine new capital value before works were complete? How could you plan and fund works in advance if retrospective valuations were needed following completion?
A legislative option might be for the government to introduce a “Right To Sell” option, whereby leaseholders can sell the lease on their property back to the social landlord and become a full social tenant again. This option would allow leaseholders who had not fully appreciated the potential costs of planned maintenance work to their property to “bail out”, but could equally be applied to those who simply do not want to be a leaseholder anymore and wish to convert their tenancy accordingly. This option would need careful consideration before being introduced – I’m sure no social landlord wants a “yo-yo” situation to develop where properties are constantly bouncing in-and-out of social status – but arguably one of the main flaws of the aggressively-yang Right To Buy policy was a yielding yin counter, one that allowed the loss of social rented housing stock to be replenished by return.
Perhaps the simplest resolution, however, would be to cap major repair work costs on leaseholder dwellings against the (local) market rate rather than an arbitrary figure of £10,000/£15,000 – if landlords could charge no more than the going rate they would be levying no greater charges than leaseholders would experience were they to undertake the work themselves.
We strongly urge councils to scrutinise their contracts to make sure they deliver good value for money, avoid perverse incentives, and put in place strong performance management to ensure work is carried out efficiently, effectively and only when necessary. – Protecting local authority leaseholders from unreasonable charges – Analysis of consultation responses and next steps, DCLG
There is a danger that capping charges will result in less work being done, or corners cut regarding materials and procedures, or work simply not being done at all. This is sad when considering potential improvements a property might receive; it is outright dangerous when considering works that might impact health and safety of leaseholder and social tenant alike.
That the charges levied against Mrs Bourne might have in some way contributed to her fatal heart attack is a tragedy, but emotive responses shouldn’t dictate or obstruct the necessity of proper asset management and maintenance, nor place people in danger because of a lack of funding resources.
Major repairs work is not something that should be optional – if work needs doing, it needs doing. This, remember, was one of the main failings of Newham Council – they had not commissioned a full survey of the property to determine that work was actually needed; as it turns out, it wasn’t. The new caps may have stopped Mrs Bourne receiving such a high bill, but the fact is that if the roof didn’t need repairs then she shouldn’t have received a bill at all.
‘Florrie’s Law’ won’t stop major repairs charges being issued to leaseholders where work is not necessary – only proper asset management can do that – but it might make social landlords hesitate to issue orders when work is. Maybe the best way to ensure a tragedy like this doesn’t happen again is for social landlords to view this example as a wake-up call against complacency, and to treat asset management and maintenance with the respect and attention to detail it deserves.
To put it bluntly, maybe we don’t need ‘Florrie’s Law’ – maybe Newham Council just needed to do their job.
- Protecting local authority leaseholders from unreasonable charges – Analysis of consultation responses and next steps; DCLG, August 2014
- ALMO fined £50,000 over balcony collapse, Inside Housing, Online: http://www.insidehousing.co.uk/almo-fined-50000-over-balcony-collapse/7004973.article, Available: August 2014
- Cap on leaseholder repair works comes into force, Inside Housing, Online: http://www.insidehousing.co.uk/repairs/cap-on-leaseholder-repair-works-comes-into-force/7005109.article, Available: August 2014
- Indecent Homes and Major Works Charges, Nearly Legal, Online: http://nearlylegal.co.uk/blog/2014/08/indecent-homes-major-works-charges/, Available: August 2014
- Pensioner’s death spurs council house repair bill law change, Brentwood Gazette, Online: http://www.brentwoodgazette.co.uk/Pensioner-s-death-spurs-council-house-repair-law/story-19898345-detail/story.html, Available: August 2014
- Press release – Florrie’s law: new cap for council house repairs comes into force, DCLG, Online: https://www.gov.uk/government/news/flos-law-new-cap-for-council-house-repairs-comes-into-force, Available: August 2014
- Repair bill cap threat to London councils’ housing revenue accounts, Inside Housing, Online: http://www.insidehousing.co.uk//7005179.article, Available: August 2014