A bitter dispute
The death of a Newham Council leaseholder hit by a high service charge prompted the government to look at capping bills last year. Martin Hilditch investigates if the case is unique and the likely impact of any changes
Until last October, the death of Florence Bourne received little attention beyond her grieving family and the pages of her local paper.
Ms Bourne (pictured above) died at the age of 93 in 2010 believing she owed Newham Council almost £50,000 for work its former arm’s-length management organisation Newham Homes had carried out to improve the estate she lived on.
Her story might have passed almost unnoticed had it not been for the fact that her constituency MP happened to be communities secretary Eric Pickles. In a passionate finale to his speech to the Conservative Party’s autumn conference, Mr Pickles laid the blame for leaseholder Ms Bourne’s death squarely at the council’s door. The £50,000 bill was ‘a crushing sum for a proud woman who had never been in debt before’, he stated.
‘The last time I saw her she looked every one of her 93 years, weighed down by the drilling, the banging, the dust, the mess, but above all the debt and the worry,’ he said. ‘She died a couple of weeks later, still believing she owed £50,000. Ninety-three is a good age, but I’m convinced she had a few more good years in her and I blame Newham for its lack of care.’
The bill, along with similar bills for other leaseholders, would eventually be slashed at a leasehold valuation tribunal. ‘Right across the estate former tenants were billed for work that was not done, work that was poorly done, work that was overpriced,’ Mr Pickles told delegates packed into the conference hall. ‘Most shocking of all, work that was not necessary,’ he said. In Ms Bourne’s case this included ‘a replacement roof she didn’t need’.
Mr Pickles’ speech turned out to be a prelude to a consultation document called Protecting local authority leaseholders from unreasonable charges. This laid down plans to cap the share councils that carry out work on housing estates can claim back from their leaseholders, if the work was part-funded by the government. The cap would be a maximum of £15,000 in London over a five-year period and £10,000 everywhere else in the country.
Is Ms Bourne’s case an extreme example or an illustration of an all-too-regular scenario between landlords and leaseholders? If the latter, then what is commonly going wrong?
Research by Inside Housing certainly reveals that landlords are losing out in a significant proportion of cases that reach tribunal. We looked at the decisions made in 89 separate tribunals in 2013 and found that landlords wrote off at least some costs following 45 of those cases. In total our landlords wrote off almost £300,000.
Source: Brentwood Gazette
The reasons for the losses vary from landlord to landlord, although there are some recurring themes. One common dispute that has led to housing providers writing off charges is about whether leaseholders have actually been able to benefit from the services they are being billed for. In one case 10,000-home Swan Housing Association was told it couldn’t reclaim some £1,615 from leaseholders on an estate in Harlow, because the tribunal found it had been averaging out costs across its entire housing portfolio on one estate. The tribunal’s decision stated: ‘We find that it is not reasonable that the respondent should allocate costs across its entire portfolio without regard to the actual services provided to the subject block and what a reasonable cost for the services actually provided might amount to.’
Landlords should also ensure the services they provide are up to scratch before they think about billing leaseholders for them - or they are likely to find themselves writing off substantial sums. In a case involving Hackney Council, a tribunal slashed the amount the council could claim from a leaseholder in management fees over a four-year period by 50 per cent (although the tribunal’s decision did not make it clear what this amounts to). It made it obvious that if the services charged for had been ‘appropriately provided’ then the outcome could have been very different. ‘However, in the tribunal’s opinion the respondents have had a very poor service from the applicant,’ it added.
A case involving 33,636-home Anchor also suggests providers must pay attention to whether or not occupiers would have had an expectation of paying certain sums when they signed tenancy agreements. The case involved lessees of 28 flats in Elliott Gardens, Rednal, in the west midlands, who challenged Anchor over its decision to reclaim the £57,311 cost of upgrading fire safety equipment from them. The housing association carried out the work after contacting tenants of the retirement complex in 2010 to tell them that their fire alarms did not comply with the latest standards. They proposed to reclaim the sum via an £8.85 charge per month for the next 15 years.
The tribunal, however, decided that Anchor could not recover the money because ‘the parties cannot have intended that the tenants should pay such a high sum when entering into the tenancy agreement’. Its decision document added that ‘£8.85 per month may be a minor amount to employed members of the public but to the retired tenants living at the property who are required to be on low income… it could be a substantial sum’. The decision could potentially have bigger implications for Anchor - if other tribunals take a similar position - because the tribunal points out that ‘this was one of a number of Anchor developments around the country where the fire system required upgrading and the total cost nationally was £22.24 million’.
Linda Watson, district manager of Elliot Gardens, says that it carried out the work because it is ‘committed to ensuring the health and safety of our customers’. The importance of the case to Anchor is obvious because, she adds: ‘We are appealing the [tribunal’s] decision to the upper tribunal (Lands Chamber)’. A spokesperson for Anchor says it cannot comment further on how it will treat the total £22.24 million upgrade bill because ‘we are awaiting the outcome of the appeal’.
Source: Brentwood Gazette
A more common running theme that landlords should take heed of is the need for clear record keeping - both to justify charges and help tribunals reach a conclusion. In one notable case involving Guinness Northern Counties Housing Association, the tribunal made it very clear that the information available to it made it very difficult to reach an accurate decision. In the end it concluded: ‘The tribunal is also of the view that the management fees have been wrongly calculated but cannot establish from the information supplied to it quite what the error might be in monetary terms.’
Another case involving Brent Housing Partnership saw some £4,482 written off because ‘no cogent evidence was produced to show that the windows were in disrepair [before the work]’.
All of which brings us back to Newham Council, which picks up the gold medal for tribunals in which money was written off in 2013.
In the case of Ms Bourne, together with leaseholders from two other flats in Eastham Crescent, Brentwood, a tribunal determined that substantial sums should be written off by the council, covering a variety of work. It said the cost of replacing the roof of the block was ‘not payable’ because ‘the roof remained in reasonable condition’ before the work was carried out. ‘This position is not changed by the imposition of the decent homes condition standard or the availability of decent homes funding,’ it added. Newham was told to recalculate the bills of individual leaseholders as a result.
Another case, following a challenge over charges for work from a resident of Springfield Avenue, Brentford, also saw Newham admonished by a tribunal for renewing a perfectly good roof. ‘The tribunal has seen photos and heard evidence which both suggest that the roof was in good condition [before the renewal work was done],’ the decision stated. The individual leaseholders’ bills were reduced by £4,387 as a result. Newham wrote off money following at least three other tribunals last year.
Ms Bourne wasn’t the only one who suffered as a result of the problems the charges caused, however. Another tribunal makes it clear that an applicant from Milton Avenue, East Ham, ‘had to sell his property and was returning to his home country because he simply could not afford to continue with his ownership of the property with this dispute unresolved’. In this case significant amounts were written off because of ‘the absence of a proper consultation process’ and of ‘any evidence from the local authority to show the need for the works’.
If Mr Pickles had his way Ms Bourne’s family, and the other leaseholders who challenged the council in Eastham Crescent, would cost the council more money. Following their successful tribunal in June he called for Newham ‘to compensate these constituents for the distress they have suffered’.
A spokesperson for Newham Council says the cases dealt with at the tribunals in 2013 ‘concern historic invoices from when leasehold services were carried out by previous management organisation Newham Homes’.
‘In 2011, all council housing services were brought back under our control and since then we have reviewed leasehold services, strengthening the procedures in place for calculating and invoicing charges.’
She says there had been ‘procedural errors’ in the way the work to Ms Bourne’s estate had been carried out.
‘While we have sympathy for the family of Florence Bourne, there is no evidence to suggest the work contributed to her death and it is inappropriate and disrespectful to say otherwise,’ she adds.
For Ms Bourne and her family, of course, all of this comes far too late. But councils and housing associations can still pay heed to the lessons above if they want to avoid similarly distressing and costly cases.
Restricting costs: plans for the future
Last year the government consulted on plans to cap charges to leaseholders for repairs and improvement works to estates that have been part-funded by the government.
The proposals would restrict the amount local authorities are able to recover from individual leaseholders to £15,000 for homes in London and £10,000 everywhere else.
However, there is the chance that the restriction’s bark may be worse than their bite from councils’ point of view. This is because there is a shrinking number of directly government-funded schemes. In other words, most future repair work will be funded from councils’ own housing revenue accounts and won’t be subject to the restriction.
Giles Peaker, a partner at Anthony Gold Solicitors, says he imagines the impact of the plans - if implemented as they stand - ‘would be fairly negligible’.
‘How much decent homes work is going on?’ he states. ‘Mr Pickles is obviously making a populist gesture. Certainly I am still seeing £30,000 charges going through on major repair work on blocks.’