Housing Association - Enforced Changes to Lease

DE_612183

Ok, so the MIL lives in a +60 complex.
She pays £235 a month service charge which covers the communal stuff and when she disposes of the property then 1% of the property value ( think it is based on when she bought it ) goes back to the HA towards the sinking fund.

The HA have now brought of a different lease agreement for new owners - they have a 2% when they dispose, but as a sweetener they have internal electrics and gas covered ( including the replacement of boilers ) but the costs are still added onto the Service Charges.

The current occupiers have the option of moving onto the new lease agreement, however I was advising her not to.

However it did get me thinking - if there were 50 properties and 25 were on the new lease, and 25 on the old - the people on the old lease would be subsidizing the ones on the new lease as the costs would ultimately be shared by all 50 properties.

I cannot understand how this is legal - it looks like they are trying to increase the sinking fund, by forcing people to pay for the upkeep of other peoples internal electricity wiring and gas servicing etc.

Looking for some advise on how to challenge the HA on this - as an aside they have also said that if residents want to go onto the new lease they have to pay for their own legal fees ( for the variation of deed ) - but they will not charge their legal fees as a gesture of goodwill!

eddddy

DE_612183 said:

The HA have now brought of a different lease agreement for new owners - they have a 2% when they dispose, but as a sweetener they have internal electrics and gas covered ( including the replacement of boilers ) but the costs are still added onto the Service Charges.

I suspect you are looking at this a bit back-to-front.

In retirement developments, Freeholders / Management companies are often responsible for electrics, plumbing, heating etc in the flats/houses.

The 60+ year old retired people like that arrangement. If something goes wrong or wears-out, they don't have to search around for electricians, plumbers, heating engineers, etc. (And you hear lots of stories of elderly people being ripped off by cowboys.)

So the HA are doing the leaseholders a favour by taking over responsibility. A single contact point for most types of problems in the home.

But... in order to cover the cost of that, they have to increase the service charge and/or increase contributions to the sinking fund.

DE_612183 said:

However it did get me thinking - if there were 50 properties and 25 were on the new lease, and 25 on the old - the people on the old lease would be subsidizing the ones on the new lease as the costs would ultimately be shared by all 50 properties.

I imagine there will be 2 sinking funds and 2 service charge accounts. One for leaseholders on the old lease, and another for leaseholders on the new lease. So no cross-subsidies.

DE_612183 said:

Looking for some advise on how to challenge the HA on this...

You would challenge the Service Charge demands and/or the Sinking Fund demands at a tribunal.

i.e. If your MiL is asked to pay a demand, and you think it's unreasonable because of the way it's calculated, or the way in which the funds are used - you make an application to a tribunal.

• You would write a statement explaining why you think the amount demanded is unreasonable (i.e. unfair, incorrectly calculated etc)

• The HA would write a statement explaining why they think the amount demanded is reasonable (i.e. fair, correctly calculated, etc)

The judge and the experts at the tribunal would decide who they agree with.

DE_612183

eddddy said:

DE_612183 said:

The HA have now brought of a different lease agreement for new owners - they have a 2% when they dispose, but as a sweetener they have internal electrics and gas covered ( including the replacement of boilers ) but the costs are still added onto the Service Charges.

I suspect you are looking at this a bit back-to-front.

In retirement developments, Freeholders / Management companies are often responsible for electrics, plumbing, heating etc in the flats/houses.

The 60+ year old retired people like that arrangement. If something goes wrong or wears-out, they don't have to search around for electricians, plumbers, heating engineers, etc. (And you hear lots of stories of elderly people being ripped off by cowboys.)

So the HA are doing the leaseholders a favour by taking over responsibility. A single contact point for most types of problems in the home.

But... in order to cover the cost of that, they have to increase the service charge and/or increase contributions to the sinking fund.

DE_612183 said:

However it did get me thinking - if there were 50 properties and 25 were on the new lease, and 25 on the old - the people on the old lease would be subsidizing the ones on the new lease as the costs would ultimately be shared by all 50 properties.

I imagine there will be 2 sinking funds and 2 service charge accounts. One for leaseholders on the old lease, and another for leaseholders on the new lease. So no cross-subsidies.

DE_612183 said:

Looking for some advise on how to challenge the HA on this...

You would challenge the Service Charge demands and/or the Sinking Fund demands at a tribunal.

i.e. If your MiL is asked to pay a demand, and you think it's unreasonable because of the way it's calculated, or the way in which the funds are used - you make an application to a tribunal.

• You would write a statement explaining why you think the amount demanded is unreasonable (i.e. unfair, incorrectly calculated etc)

• The HA would write a statement explaining why they think the amount demanded is reasonable (i.e. fair, correctly calculated, etc)

The judge and the experts at the tribunal would decide who they agree with.

Thanks @edddddy

1. I recognise that some elderly folks would like the set-up - but it seems that the benefits do not outweigh the costs.
2. No, there will not be 2 sinking funds & 2 service charge accounts - I checked with the HA.
3. Thank you for that - do you know what Tribunal that would be - is it local council?

Thanks

eddddy

DE_612183 said:

1. I recognise that some elderly folks would like the set-up - but it seems that the benefits do not outweigh the costs.

I think you might be thinking of service charges as thought they are a "fee" or an "insurance premium".

That's not really how they work. They are more like deposits into a communal savings account. The savings account will be used for maintenance and repairs.

It probably makes sense to look at the 1% vs 2% issue, and the heating/electrics issue separately.

1% vs 2%

Let's say the property is worth £100k. Maybe you should look at it like this made-up example:

• 1A) 1% option = pay £225 per month into the service charge account plus £1k when you sell

• 1B) 2% option = pay £200 per month into the service charge account plus £2k when you sell

So the key questions are things like - "How long do I expect to own the property?", "As I'm living on a pension, would I prefer to pay £20 less each month?"


Heating/electrics

I guess the question here is...

• 2A) Do I want to pay £25 per month into my own personal savings account - and use that savings account to pay for my heating/electrics repairs?

• 2B) Or do I want to pay £25 per month into a communal savings account - and use that to pay for my heating/electric repairs?

And the HA has given leaseholders 2 choices - they can either go with options 1A and 2A together (current lease) or options 1B and 2B together (new lease).


All the above assumes that the HA is acting fairly and reasonably.

DE_612183 said:

3. Thank you for that - do you know what Tribunal that would be - is it local council?

The tribunals are administered by HM Courts and Tribunals Service. They're like a "user friendly" court, with a Judge etc.

Take a look at Section 3 "Applying to the Tribunal" here:
https://www.lease-advice.org/advice-guide/service-charges-other-issues/

DE_612183

Hi @eddddy - I understand the point you make - the issue is that there are no options regarding the service charge.

Some of the flats will opt to go the new lease - so by definition as the costs will go up then that will have to be met - the problem is the future service charges will be the same for all 50 flats regardless of which lease option they choose.

So if you stay on the old lease - your service charge will go up - even though you get no benefit from those additional services which are provided. The only way to take advantage of those additional services is to contribute more to the sinking fund when the property is disposed of.

If they has said "there is not enough funds in the sinking fund for communal upgrades so everyone has to move to 2% to support this" - then at least we would have known - it just seems underhand the way they have gone about it.