A change to HCA rules has given social landlords greater freedom over the services they charge for, says Tim Miles
Traditionally, the service charge clause in a flat lease funded by the Homes and Communities Agency has been a fundamental one. As with all fundamental clauses, it could not be varied without the direct consent of the HCA or without potentially jeopardising the scheme’s grant funding.
This often caused confusion, as the practical service charge mechanism for one block of shared ownership flats could be entirely different to another, and therefore one clause did not fit all.
In particular, although contributions could be charged for insuring, repairing, redecorating, renewing and cleaning a block of flats and its common parts, it was open to interpretation as to whether this provided landlords with sufficient flexibility. It was unclear, for example, whether the fundamental clause enabled the landlord to charge for any additional services that it wished to provide in the interests of good estate management, such as closed circuit television cameras.
The HCA has now clarified this discrepancy. Paragraph 5.3.35 of the amended Capital Funding Guide declares that, from 22 October, the service charge clause is no longer to be treated as a fundamental clause for all new leases.
Social landlords are therefore now free to tailor their service charge provisions to their individual requirements. Although care should be taken to ensure ‘catch all’ provisions are included to cover all unanticipated or unforeseen expenditure, it should also not be forgotten that a charge must remain fair and reasonable - and extortionate charges will be subject to appeal to the Lands Tribunal.
Tim Miles is a social housing solicitor at Coffin Mew