Service charge warning as Right to Buy sales pick up speed

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government

A legal expert has warned councils and housing associations to ensure tenants are fully aware of their service charge responsibility as sales through the revamped Right to Buy pick up speed.

The revamped scheme was launched in April and offers 2 million council tenants and 500,000 housing association tenants increased discounts of up to £75,000 when buying their home. In London, the discounts have quadrupled.

Writing in 24housing magazine, Emma Duke, associate at Anthony Collins Solicitors, said however that both councils and housing associations needed to ensure details on service charges were effectively communicated to avoid potential Leasehold Valuation Tribunal (LVT) challenges.

She said: “For tenants who are considering buying a flat, the extra service charge becomes a factor and it is important to ensure that the inclusion of these charges is communicated properly. As with the private sector, the buyer purchases a ‘long lease’ and the overall block is still owned by the council or housing association. The seller remains responsible for the upkeep of the building and tenants pay a service charge towards this. Should major work be required, this could cost thousands of pounds.

“Whilst in the private sector these outgoings are a well-known necessity, for public sector tenants many are becoming leaseholders without the full knowledge of future costs that home ownership may bring. This is becoming a bigger issue now that more people are exercising the Right toBuy, and although it may not be officially their job, landlords should try to ensure that details on service charges are effectively communicated to minimise difficult conversations/challenges in later years. In both sectors people often find that owning their own home is not worth the pay out for service charges, as they face the burden of financial responsibility with little control over costs."

In March, leaseholders in Westminster hailed a "major victory" over the city council following a row over service charges. The LVT said the council failed to consult the leaseholders properly and as a result it could only recover a maximum of £250 per leasehold flat.

In May, however, leaseholders at eight blocks of maisonettes which were upgraded and improved by Herefordshire Housing lost their bid to escape paying thousands of pounds each to cover the cost of the works.

The leaseholders at Dartmouth Court in Hereford had applied to the LVT claiming that they weren’t adequately informed by Herefordshire Housing of the works and disputed the cost.

The case hinged on whether a “crucial” notice informing leaseholders of the work had been sent to them in April 2009. 

Many councils and ALMOs are reporting a surge in Right to Buy sales since the new discounts were introduced.

Wolverhampton Homes manages 23,500 homes on behalf of Wolverhampton City Council.

Chair Sue Roberts revealed that last April the council sold two homes under Right to Buy and received 18 applications.

This April - since the discounts have increased - it has sold five homes and received 57 applications.

Since the Government reintroduced big discounts, Conservative-run Wandsworth Council said it had received more than 1,000 enquires and the number of full applications had more than doubled.