In August the Office of the Deputy Prime Minister published a consultation document and draft regulations which will have a significant impact on public sector landlords.
Who is affected?
The changes will affect both local authorities and registered social landlords. For local authorities, it will only affect the service charges they charge their leaseholders. For registered social landlords, it will affect service charges for both leaseholders and assured tenants. In both cases only variable service charges are affected.
What is a variable service charge?
The Landlord and Tenant Act 1985 contains consultation provisions regarding service charges for works. These only apply to variable service charges – charges that vary according to the cost of services provided – and not to fixed service charges.
Many RSLs have moved towards variable service charges since rent restructuring. Getting them right has always been difficult and these new provisions do not make it any easier. Could this be a reason to move towards fixed charges?
What is the government proposing?
The government is proposing an extension of the consultation requirements to include contracts for services as well as works.
Getting variable service charges right has always been difficult and these new provisions do not make it any easier
This means that leaseholders and assured tenants who currently receive section 20 notices, see at least two estimates and have an opportunity to comment on a range of small works will no longer have those opportunities. A landlord will still be able to consult, but it will no longer be compulsory. n The consultation process is going to be longer. Service charge payers will first have 30 days in which to nominate a contractor. The landlord has to get an estimate from that contractor. The landlord then has to get at least one more estimate, and both estimates have to go to the service charge payers and/or the recognised tenants’ association. The landlord will have to provide written reasons for why they have chosen a certain contractor.
This provision brings long-term service contracts into consultation provisions for the first time. The three-year gas servicing contract, the five-year grounds maintenance contract and the two-year lift maintenance contract – all could be caught if the service charge payers (this may include your assured tenants) end up paying more than £25 each.
Local authorities letting housing management contracts where there are leaseholders in the stock, and where the cost of the managing agent is £25 a year or more, will also have to use these consultation provisions. Tenants and leaseholders will have a right to put forward a contractor.
Source
Housing Today
Postscript
Catherine Hand is a partner at solicitor Jenkins & Hand
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