COMMUNITIES AND LOCAL
GOVERNMENT News Release (66) issued by The Government News Network
on 29 March 2007
The Government is
working with local authorities and lenders to make it easier for
their leaseholders - people who own former council flats - to pay
their share of the cost of bringing them up to modern standards,
such as with new roofs and windows.
Currently there are several ways in which leaseholders can be
helped to pay bills for major works to their blocks, such as
through loans, extended and deferred payment schemes, and equity
release. Where works are funded by specified Government grants,
bills are capped to no more than £10,000 in any five years, and
local authorities have discretion to reduce bills to this level if
they consider this is justified.
Housing Minister Baroness Andrews said the Government was working
with councils and lenders to ensure leaseholders understood what
help was available so they can pay their major works bills.
'Although the vast majority of leaseholders are able to
manage their bills for repairs and refurbishment, which in turn
can increase the value of their home, we know in that in a
minority of cases families are facing particularly high bills
which they can find hard to meet. That is why the Government is
working with local councils to provide a wider range of support,
including developing options for equity release and equity loans,
which will help leaseholders with particular problems.'
Baroness Andrews added that the Government was also funding the
development of an advice and dispute resolution and mediation
service, and intended to legislate to improve the flexibility of
loans and make it easier for leaseholders to raise cash by selling
shares in their homes back to their landlords.
Notes for Editors
1. Social tenants who buy flats from local authorities and people
who buy flats formerly owned by local authorities on the open
market ('council leaseholders'), are responsible under
their leases for contributing towards the cost of repairing,
maintaining and improving the properties in which those flats are situated.
2. Works of repair, maintenance and improvement now being
undertaken by local authorities and by their associated arms
length management organisations (ALMOs) are generating substantial
major works bills - some recent ones for as much as £58,000.
However, the number of such bills should not be exaggerated. A
recent survey by London Councils showed that of 143,000 council
leaseholders in 26 London Boroughs, just over 9,000 (6.3 per cent)
were facing major works bills of £10,000 or more.
3. The results of research commissioned by the Government and
published on the Department for Communities and Local Government
website at: http://www.communities.gov.uk/index.asp?id=1504262
* the scale of the problem, in terms of the number of
leaseholders faced with bills in excess of £10,000 and those faced
with hardship as a result, was modest
* the Government's Decent Homes policy and other
regeneration activities have helped local authorities to address
the backlog of repairs to their stock
* but the Decent Homes standard is not the key driver of the
level of improvements
* especially in relation to large blocks of flats it would be
much more expensive to carry out piecemeal repairs (which involve
erecting, taking down and re-erecting scaffolding) than to carry
out comprehensive repairs and improvements at one time
* in the short term major works bills will be higher, but in the
longer term the quality of work is likely to be higher, resulting
in lower maintenance costs in future.
4. The Department for Communities and Local Government has
reviewed the issues, obtaining the views of all the stakeholders.
It has also taken account of information provided by individual
Members of Parliament and of the recommendations of a report by
the Social Sector Working Party of leaseholder and landlord representatives.
5. The review has mainly focused on the range of ways in which
leaseholders can be helped to pay their bills. But it has also
considered how landlords currently communicate with leaseholders
on scheduled major works and their costs.
6. Major works charges are capped to no more than £10,000 in any
five-year period when the works are being funded by specified
7. Local authorities can help leaseholders to pay their bills in
a number of ways. Firstly, they have discretion to reduce bills to
no more than £10,000 in any five year period if specified criteria
are met, including whether the purchase price took account of the
estimates of the costs of works given to the leaseholder before he
or she bought their flat, whether the leaseholder will benefit
from the works (eg, whether the value of their flat will increase,
and whether energy efficiency or security will be improved), and
whether the leaseholder would face exceptional hardship in paying
the bill. In assessing hardship, the landlord must consider the
leaseholder's ability to pay, including the funds available
to them and their ability to borrow to meet the cost.
8. Secondly, local authorities must offer loans to leaseholders
who have bought their flats under the Right to Buy scheme,
provided that they apply within a specified time. The terms of
such loans are specified in legislation. Local authorities may
also give loans to leaseholders under other circumstances, and may
then specify the terms themselves.
9. Thirdly, local authorities may allow leaseholders to pay their
bills by monthly instalments over an extended period (sometimes
3-5 years and including an interest-free period), or they may
defer payment (while charging interest) until the property is sold.
10. Fourthly, local authorities have powers to buy back
properties from owners who are in financial difficulties. Since
1999, we have given them financial assistance if they do this. In
effect, the Government meets 35 per cent of the cost of buy backs
where this exceeds £50,000 in any year.
11. Finally, some local authorities offer leaseholders the
HouseProud equity release scheme managed by the Home Improvement
Trust. A number of lenders also offer a variety of separate equity
release products that can be tailored to the needs of, in
particular, older leaseholders.
12. The Government considers that more can be done to help
leaseholders to deal with high major works bills through these
payment options, with minor enhancements and additions - if they
are managed sensitively and flexibly. It has therefore decided to
do the following:
* make it clear to local authorities that they should:
a. have a strategy for identifying and offering advice to
leaseholders who face particularly high major works bills
b. offer the full range of payment options already available and
share best practice to ensure that this happens everywhere
c. use existing resources, for example for private sector
renewal, which they are already expected to target towards those
in need and on low incomes, to assist leaseholders in hardship
* work with lenders and independent financial advisers, landlords
and leaseholder representatives to develop the use of existing
equity release / equity loan schemes (including the
'HouseProud' scheme managed by the Home Improvement Trust)
* increase funding for LEASE to enable it to increase its role in
the area of alternative dispute resolution and mediation in
respect of social sector service charge disputes
* legislate at a suitable opportunity to enable local authorities
to offer equity loans to leaseholders (ie, when deferring payment
until the property is sold, to take a proportion of the proceeds
instead of charging interest during the deferral period), and to
buy back shares in properties so that leaseholders in difficulties
do not have to revert to being tenants.
13. This is a complex and sensitive issue, and these actions
represent work in progress. The Government will also actively
monitor developments, to ensure that all concerned focus on the
best ways of tackling these issues both now and in the future.
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