Limitation of charges

Your charges as a leaseholder may still be limited for an initial period of ownership, due to your offer letter.

Once it has been established that the works are of a rechargeable cost and type, it could still be that the leaseholder is not rechargeable for them.

This depends on when the lease was originally purchased for that flat, the legislation under which it was purchased, and whether or not the “reference period” of the lease is still current when leaseholder consultation is about to take place. Under legislation current since 1985, the reference period runs for 5 full financial years after the original purchase date from the Council.

It should also be remembered that once the a tenant has had an application to purchase the lease of a property, form has been issued, the acceptance of the tenant’s Right To Buy, the reference period commences.

This means that it is possible to get the situation where someone is a tenant at the time of consultation but is also a RTB applicant, and becomes liable for contributions once they have ompleted their lease purchase.

If the lease falls within this reference period when the works are to receive statutory consultation (Housing Act, Section 20 Consultation), only those works listed in the Section 125 Letter of Offer that was issued to the tenant of the flat in line with the Housing Act, 1985 (under which the offer was made and accepted at the Right To Buy application stage) may be recharged to the leaseholder. In addition, if the share of the costs exceeds the limit shown in that offer letter, the limit shown (plus a management fee) must apply rather than the full share for the property.

It should be realised that a few leases were sold under the earlier and original RTB legislation, the Housing Act 1980, which provide a 10 year initial period and allowed for all repairs to be recharged (with no financial limits) but limited structural defects.

Structural defects also come into the 1985 legislation to a degree, and should generally be taken as inherent defects to the building structure. These do not include repairs that will inevitably be required during time or through other reasons, and legal advice is sought to establish the difference when necessary, before any statutory consultation is approached.

Any professional fees are included in the contract costs and will be apportioned across the contract to each element of work, so as to provide as accurate an estimate for each item as possible. If the reference period of the lease agreement has ended, the full share of the cost of each element of the works will be recharged to the leaseholder.

Once the shares rechargeable to each leaseholder are calculated, the Council’s Management Fee is applied. In virtually every case this is applied at a
rate of 12.5%, as is stated in the offer letter.

There is therefore not a direct way of telling that works are rechargeable to a leaseholder without examining the type of works, the cost of the scheme, the legislation that governs the sale of the lease, the lease agreement itself and possibly the Section 125 Letter of Offer. Once the TMO Leasehold Services team have been provided with estimated contract figures and have done these calculations, statutory consultation with leaseholders may proceed.

It should also be remembered that any estimated recharges calculated before the scheme is tendered will be calculated in this way, in order to provide as accurate as possible an estimate for the leaseholder. Once tenders have been received the amounts to be invoiced to leaseholders will be calculated in the same way.