Ministry of Housing, Communities and Local Government
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Leaseholders to know how their service charges are being spent
- Proposals for
service charge payers to receive regular statement of
account
- Plans will protect landlords and leaseholders from
disproportionate costs -
Junior Housing Minister Iain Wright MP today set out proposals to protect tenants paying service charges and improve transparency around how landlords hold money. Proposed changes to the law, set out in a consultation paper, will require landlords to provide their tenants with an annual statement showing how service charges are spent.
The measures will be backed by new rights for tenants to withhold service changes where a landlord fails to comply.
The new rules mean at least one million people living in leasehold flats in England will receive an itemised statement showing a breakdown of how much service charge money their landlord has spent in the last year on repairs, maintenance, improvements, professional fees, and staff costs.
The proposals suggest that any single item of expenditure accounting for 10 per cent of total spend, such as lift maintenance, utility bills, cleaning and refuse collection costs, will need to be shown separately.
Landlords will also need to show balances of service charge monies held at the beginning and end of each year.
Junior Housing Minister Iain Wright MP said:
"Leaseholders are expected to contribute towards the upkeep and maintenance of their property through service charges, so it's only reasonable for them to expect that money is properly accounted for.
"People should be able to see what they are paying for and a yearly statement of account will create transparency and ensure that tenants receive information about service charges.
"Tenants will be better able to check that they are receiving value for money and see whether sums paid towards the upkeep of their property are being used for the right purpose."
The proposals have been drawn up to ensure that the new measures do not impose disproportionate costs on landlords and their leaseholders. The proposals will allow landlords the flexibility to provide information in a form that is more relevant to their accounting process.
Changes to the existing proposals will also allow landlords to retain the flexibility to hold service charges for more than one separate group of service charge payers in the same account.
The closing date for the consultation is 4th October and we would welcome receiving views on the proposals up until that date.
Note to Editors:
1. Section 21 of the Landlord and Tenant Act 1985 gave tenants paying variable service charges the right to demand a summary of information about those charges. Local authorities only have to supply such summaries upon request to their long leaseholders rather than all their service charge paying tenants.
2. The Commonhold and Leasehold Reform Act 2002 included provisions that would require landlords to provide a regular statement of account, an accountant's certificate and a summary of tenant's rights and obligations to each service charge payer (known as s152). The Act also contains measures that would require landlords to hold service charge monies to be held in separate designated bank accounts (known as s156). These measures have not yet been implemented and are the subject of this consultation exercise.
3. Many service charge payers already receive some accounting information, but there are currently no statutory minimum standards.
4. Copies of the consultation paper "Commonhold and Leasehold Reform Act 2002 - A Consultation Paper on Regular Statements of Account and Designated Client Accounts" can be obtained from Communities and Local Government Publications, PO Box No 236, Wetherby, LS23 7NB. Telephone 0870 1226 236. Fax: 0870 1226 237. Text Phone: 0870 1207 405. E-mail communities@twoten.press.net
5. The paper is also available on the Communities and Local Government Website at http://www.communities.gov.uk/index.asp?id=1017165
Public Enquiries: 020 7944 4400;
News Releases: http://www.communities.gov.uk
