What does the Autumn statement mean for Tenants and Landlords?

Autumn Statement 2016: What does this mean?

Chancellor Philip Hammond has given his first Autumn Statement aimed to help families who are ‘just about managing’. (JAM’s)

In his first major economic speech since the UK voted to leave the EU, the Chancellor reiterated that “Britain is open for business” and pledged to “build an economy that works for everyone”.

His statement including major announcement on housing, benefits and tax, but failed to deliver any cuts on stamp duty.

Tenants will no longer be required to pay upfront fees that average £337, in a change aimed at helping the 4.3 million households that are living in private rental housing.

“Landlords appoint letting agents and landlords should meet their fees,” Hammond said.

The change should be introduced “as soon as possible”.

Mr Hammond has also announced the Government is investing £1.4bn in an effort to deliver 40,000 of new affordable homes.

Hannah Maundrell from comparison site, money.co.uk, said: “There’s little doubt tackling this ridiculous ‘tax’ on renters will make it easier and more affordable for people to move without having to borrow cash to cover the cost. The fact some people have to resort to payday loans for moving fees simply can’t continue.

“Scrapping letting agents fees is a smart move but the government need to make sure they think about damage limitation. Landlords could simply hike rents if they’re made to pay the difference.”

The government heralded a step change in its ambitions for addressing the housing supply shortage, pledging £1.4bn to build 40,000 additional affordable homes, an extra £2.3bn housing infrastructure, and a relaxation of financing restrictions on government grants. (to permit the financing of affordable rented housing).

There was little succour for Buy-to-Let landlords, as a ban on letting fees to tenants will doubtless see these costs passed on to landlords. This may be counterproductive in the longer term as it could translate into higher rents and may also lead to an increasing number of Buy-to-Let landlords exiting the market. The extension of the Right to Buy programme will also reduce rental stock. These measures may therefore cause further upward pressure on rents, which in London are already expected to grow faster than property prices over the next 5 years.

The rental sector is expected to provide an increasing percentage of housing supply over the next decade, as much of ‘generation rent’ are unable to afford to buy a property, especially in London. The moves today to boost the supply of affordable rented homes, coupled with previous initiatives regarding the emergent Build to Rent sector, signal that the government is committed to supporting the rental market, and increasingly regards it as playing key part in addressing the housing shortage.

David Poppleton, Director at Inspired Property Management welcomes these moves to improve the rental sector, stating that ‘Renting must become an acceptable alternative tenure and IPM will work positively to implement these changes without compromise’ .

Image courtesy of gov.uk website for more information on the Autumn Statement please click here

Service Charges Explained

What are service charges?

Service charges are fees that most leaseholders pay to cover their share of the cost of maintaining the building they live in.

Service charges usually cover the costs of:

Repairs to shared areas and the outside of the building, such as roof, external pipes, drains
Buildings insurance.
Freeholders’ administration or management charges

They can also be used to pay for shared services such as a caretaker, cleaners and the maintenance of shared areas.

You usually have to pay a share of everything even if you don’t use some of the services. For example, if you live on the ground floor and never use the lift, you probably still have to pay something towards its maintenance.

Which service charges you must pay?

Check your lease to see what service charges you must pay.

Your lease may set out in detail the services that you can be charged for.

It may also have a section that covers general services not specifically mentioned in the lease.

If your lease doesn’t have this type of clause, you don’t have to pay for anything that isn’t specifically included in the lease.

The lease may allow the freeholder to charge a reasonable management fee.

Cost of service charges

Service charges are usually variable. This means that the amount you pay changes each year.

Your lease should say:

  • what services you have to pay for and when
  • how your freeholder can collect the charges
  • how service charges are calculated
  • how they are divided between you and any other leaseholders
  • whether there is a sinking or reserve fund

Payment of service charges

Service charges can be paid annually or more frequently. Your lease sets out when you should pay yours.

You don’t have to pay service charges until the freeholder sends you a:

Request for payment
Summary of your rights and obligations
Your freeholder must send you a summary of the service charges if you write to them and ask for it.

You can then ask to inspect and take copies of the accounts, receipts and other relevant documents. The freeholder must allow this within one month of your request.

Sinking funds

Many leaseholders have to pay towards the cost of future repairs. This is called a sinking fund or a reserve fund.

Leaseholders are required to pay a certain amount every month or year to build up the sinking fund. You usually pay this as part of your service charges.

You only have to pay into a sinking fund if your lease says you have to.

Sinking funds provide a way to spread the cost of expensive works on your building.

If you sell your home before the money has been spent on repairs, you can only get a refund if your lease says this will happen.

You could agree with your buyer that they pay you a sum to cover what you have paid in to the fund.

Get advice if you want to set up a sinking fund. You need a formal agreement with the freeholder and all the other leaseholders.

Charges for major works

Your freeholder has to consult you if they are going to:

Set up a service such as gardening or cleaning that will cost you more than £100 a year
Carry out a repair or improvement that will cost you more than £250

Before arranging these repairs or services, the freeholder must:

  • Tell you what work they plan to do and why it is needed
  • Provide an estimate of the total cost of the work
  • For a repair or improvement the landlord must obtain at least two estimates.

You have the right to comment on what is being proposed and can usually suggest alternative contractors.

If the repairs needed are urgent and essential, the freeholder can go ahead before you have had time to comment.

If you were not properly consulted, you can take legal action through the tribunal. It could decide that you don’t have to pay for all of the service charge.

Get advice if you are in this situation. Contact the Leasehold Advisory Service.

Most leaseholders pay a service charge to cover the cost of maintaining the building they live in.

What are service charges?

Service charges are fees that most leaseholders pay to cover their share of the cost of maintaining the building they live in.

Service charges usually cover the costs of:

  • Repairs to shared areas and the outside of the building, such as roof, external pipes, drains
  • Buildings insurance
  • Freeholders’ administration or management charges
  • They can also be used to pay for shared services such as a caretaker, cleaners and the maintenance of shared areas.

You usually have to pay a share of everything even if you don’t use some of the services. For example, if you live on the ground floor and never use the lift, you probably still have to pay something towards its maintenance.

Which service charges you must pay?

Check your lease to see what service charges you must pay.

Your lease may set out in detail the services that you can be charged for.

It may also have a section that covers general services not specifically mentioned in the lease.

If your lease doesn’t have this type of clause, you don’t have to pay for anything that isn’t specifically included in the lease.

The lease may allow the freeholder to charge a reasonable management fee.

Get advice if your lease doesn’t give enough information about service charges. You may be able to ask a tribunal to change it.

Cost of service charges
Service charges are usually variable. This means that the amount you pay changes each year.

Your lease should say:

  • What services you have to pay for and when
  • Whether there is a sinking or reserve fund
  • How service charges are calculated
  • How they are divided between you and any other leaseholders
  • Whether there is a sinking or reserve fund
  • Payment of service charges

Service charges can be paid annually or more frequently. Your lease sets out when you should pay yours.

You don’t have to pay service charges until the freeholder sends you a:

Request for payment
Summary of your rights and obligations
Your freeholder must send you a summary of the service charges if you write to them and ask for it.

You can then ask to inspect and take copies of the accounts, receipts and other relevant documents. The freeholder must allow this within one month of your request.

Contact the Leasehold Advisory Service for more information on service charges.

Problems with service charges

Common problems with service charges include:

work not done or done badly, for example you may be paying for weekly cleaning but the building is not: Cleaned regularly
Charges are too high
No information on what service charges are being spent on
Being charged for things not covered in your lease
Contact your freeholder if you are unhappy with the services you are paying for. You may be able to negotiate a lower price or a better service.

Court action by freeholders over unpaid service charges
If you don’t pay your service charge, your freeholder can apply to the county court and in theory you could lose your home.

The freeholder has to follow special procedures and get a court order to repossess your home because you haven’t paid your service charge.