Leasehold Major Works Payment Policy

Policy reference number: POL-HOU-WORKPAY
Version number: 3
Date applies from: 26/6/13


1. Aim of Policy

1.1. City West wants all leaseholders to be aware of their financial responsibilities in respect of covering the costs of major works and encourages leaseholders to save towards these costs wherever possible to avoid payment problems in the future. Failure to pay such charges is a breach of the lease, but City West also recognises that large bills for major works can cause financial hardship for some leaseholders.

1.2. Where leaseholders are unable to meet the charges for major works, City West will provide guidance on the options available and work with them to make sure they can pay the charges in the shortest possible period that is appropriate to their financial circumstances.

1.3. Our Commitment
1.3.1. City West has agreed with leaseholders that we will:
• Encourage leaseholders to become aware of their financial responsibilities for covering the cost of major works and where possible to save for these costs.
• Advise leaseholders who may require a loan to meet the costs of major works to obtain independent financial advice on the availability of loans from private lenders and government funded agencies.
• Advise leaseholders of a range of agencies that can give practical debt management assistance.
• Inform leaseholders that they may be eligible for service charge loans from the Homes and Communities Agency, (HCA), in certain circumstances.
• Where possible, provide a deferred payment option for leaseholders who would otherwise be unable to pay, encouraging leaseholders taking out loans to select the shortest repayment period that suits their financial circumstances.
• The costs of the works will be capped at 40% of the value of the property after the works have been carried out.

2. Policy

2.3. Major works payment options
2.3.1. City West will provide guidance on five payment options to leaseholders who are charged for major works. These are:
• Personal savings;
• Private finance (borrowing);
• Service Charge loans from the HCA;
• The Home Improvement Trust;
• Discretionary deferred payment;
• Voluntary charge on the property.

2.4. Personal Savings
2.4.1. City West will encourage leaseholders to save towards the cost of major repairs. Where possible, as soon as City West knows that major works are to be / need to be carried out we will carry out the required consultation and write to leaseholders giving an estimate of the cost and their likely contribution. This is the most cost effective way of paying for both the leaseholder and City West and one which we will promote most strongly.

2.5. Private finance (borrowing)
2.5.1. City West will advise those leaseholders without savings to obtain independent financial advice on taking out a private loan. Leaseholders may find adding the amount to their mortgage, or seeking a private loan to be the cheapest method of borrowing.

2.6. The Home Improvement Trust
2.6.1. The Home Improvement Trust is a national scheme supported by government and is available to leaseholders aged over 60 or have a disabled person living with them.

2.6.2. The Home Improvement Trust operates a range of loan options which include:
• Capital Release.
• Interest Only.
• Capital and Interest.

2.6.3. City West will advise qualifying leaseholders of the options available and assist them in understanding the Home Improvement Trust options.

2.7. Service Charge loans from the Homes and Communities Agency (HCA)
2.7.1. A leaseholder has the right to request a loan from the HCA to cover the costs of major works to the property demanded as part of the annual service charges, provided that:
• The leasehold property was purchased under the Right to Buy legislation (not the preserved right to buy or via a voluntary sale by the landowner).
• The leasehold was purchased less than ten years before the date of the invoice for service charges.
• The amounts demanded for service charges in respect of major repairs and routine service charges are such that they qualify for a loan in accordance with HCA guidance.

2.7.2. City West will provide upon request up to date information from the HCA about this facility. The HCA publishes revised thresholds in March of each year using the Retail Price Index from January of that year.

2.8. Discretionary deferred payment agreement
2.8.1. Providing a leaseholder cannot access any of the above assistance methods. City West may offer discretionary deferred payment options providing for instalment payments on the following basis.

2.8.2. City West reserves the right to secure these payments by means of a charge on the property in certain circumstances.

2.8.3. Failure to maintain deferred instalment payments will result in the total sum outstanding becoming due for immediate payment.

2.9. Voluntary charge on the property
2.9.1. Where all leaseholders of the property are retired, have a disability (or are unlikely ever to work again), have no savings and no ability to obtain a loan from a reputable financial institution, and cannot afford even deferred payments, they may be considered for a voluntary charge on the property. This charge will be secured against the property. The interest rate set by City West will be set at nil % until the debt is paid off. Loan arrangement fees (also reviewed annually) plus legal fees will be rolled up and included in the loan.

2.9.2. Although the leaseholder will be able to opt to pay off the debt at any time, there would be no requirement to do so until the property is either sold, transferred in title, or if any of the initial leaseholders have not been resident in the property for a period of six months. City West will allow this option only to leaseholders who would have no other option but to sell the property to pay for the major works charges.

2.9.3. The Executive Management Team of City West Housing Trust must approve any application for a voluntary charge.

2.10. If payment is not made
2.10.1. If the leaseholder does not make payment as agreed, then City West will pursue the debt in line with its Service Charge Arrears Policy and will consider options including:
• Recovery action as a civil debt via the courts.
• Seeking mortgagee’s capitalisation of the debt.
• Securing a charge on the property via the courts.
• Seeking forfeiture of the lease (following a decision of the Leasehold Valuation Tribunal).

2.11. Optional Works to Properties
2.11.1. Leaseholders are able to buy additional works from City West for internal improvements to their home. These include purchase of and fitting of new kitchens and bathrooms, lighting improvements and security improvements. Leaseholders will be charged the same cost price that City West pays for the products. Payment for optional work items must be made in full prior to the works being completed. No deferred payment options are available for optional works.

3. How the Policy will be delivered

1.1. The delivery of this policy and associated procedures will be the responsibility of the Leaseholder Manager.

1.2. If staff become aware that there are problems with effective operation of the policy or the associated procedures, they should report this to the policy owner. This feedback will be incorporated into the policy / procedural review process.

4. Related Procedures

4.1. The following procedures need to be followed to implement the policy:
• Section 20 procedure.