Shapps hits out after council overcharged leaseholders by £1 million

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

The housing minister Grant Shapps says it’s shameful and unforgivable that some councils are hitting leaseholders with unfair service charges after it was revealed that a North London borough had overcharged residents by £1 million for maintenance works.

Mr Shapps was interviewed for Channel 4’s Dispatches, which uncovered evidence of leaseholders being hit with unfair service charges by private companies, housing associations and local authorities.

He also condemned the so-called ‘profit-sharing’ agreements between councils and repairs firms that risk seeing leaseholders pay over the odds for maintenance work.

Shapps said he was happy to “name, shame and embarrass” those involved in such practices after hearing that Islington Council had overcharged leaseholders on the Tremlett Grove Estate by more than £1 million for service charge works.

One of the leaseholders on the block who fought the charges had her flat bought for her by her daughter through the Right to Buy (RTB) in 2001. Two years ago the council – the freeholder – decided to do work on the block and she was hit with a bill of over £28,000.

However, leaseholder’s challenging Islington’s legal team at the Leasehold Valuation Tribunal (LVT) found the council had based the cost of the work on the condition of the worst blocks on the estate.

Patricia Napier, a Pro Bono legal advisor, told the programme: “What they had done is surveyed the worst of the blocks on the estate and based their decision to replace all of the roofs and all of the windows on that building which is shocking.”

In total, it was found that the council’s spend on the estate was £1 million too high, with the £111,112 and £149,543 charged for the replacement roof and windows cut to £25,000 and £10,000 respectively.

Islington – which has had two appeals rejected and are considering a third - said most residents prefer to have asbestos removed and that it was following Government guidance that roofs should be replaced after 30 years. It also stressed that it had consulted with leaseholders before bills were sent.

Another example saw two leaseholders of a block in Cwmbran, now run by Bron Afon housing association, hit with estimated bills of £17,352 and £26,364 to cover the cost of a replacement roof and windows.

The latter charge was described as “monopoly money” by one of the leaseholders. Bron Afon said it carried out lengthy consultation with leaseholders and that it has offered a “range of payment options”.

However, one of the leaseholders who had bought her flat through the RTB was concerned about leaving her children with debt attached to the property.

Local Assembly Member Lynne Neagle said there has to be a certain “sensitivity” to the kind of “anxiety and stress” such large bills would cause people in the current climate.

Mr Shapps was equally appalled at the so-called profit-sharing agreements in place between councils and repairs firms. These deals, explained Dispatches, see the local authority share a slice of the surplus once the contractor’s profits pass a certain point. It’s argued such practices risk leaseholders paying over and above what repairs actually cost.

A Freedom of Information request sent to all councils in England and Wales revealed 10 had such agreements in place, with none saying they would directly reimburse leaseholders. Some said they would use the excess cash for future repairs.

Shapps said: “I think that’s unforgivable. These kind of sweetheart deals – frankly, I feel very strongly where it’s a local authority doing this kind of thing. They should have the interests of their tenants automatically at heart. I’m going to make sure they understand the lease guidance out there – perhaps there is a little bit of confusion we can help them fully appreciate.”

However, he warned against regulation, adding that it was wrong to increase costs for the vast majority when such practices concerned a tiny minority.

He said: “I believe there is a problem and I am going further and saying to those who want to rip leaseholders off – ‘you’re on watch. I am looking at what’s happening very very carefully’.”