Agenda item

S Mogan updated Committee on rents and other charges report and asked Committee for any questions.

Cllr Freedman said he was interested in the examples that had been used for service charges in the report, for example you’ve used sprinkler systems would be considered a service charge because it’s a benefit to the tenants.  Cllr Freedman felt it was a good example of something that a landlord should be providing and would challenge whether costs like that should be included in the service charges.  L Warden replied that there is a list of approved services that are considered under a service charge, at the moment we have very few sprinkler systems, but they require quite a lot of additional maintenance and upkeep and yes it is the responsibility as the landlord to provide that but that doesn’t change the fact that we also have pay for that service.  That is something that we can pass on to tenants, because otherwise all of our tenants would covering the charges of that through normal rent, but they wouldn’t be receiving any of the benefit of that.  Where it’s specifically just in one block, Kylna Court is an example, that’s the only one at the moment that pays any service charge for a sprinkler system maintenance and upkeep.  They are receiving the benefit of that, whereas other tenants in other blocks would have to cover the extra amount to cover the cost.

Cllr Freedman said he had used that as an example, but he thinks it’s contentious to say that it’s a benefit, so I’d be glad to get the list.  The question is who has decided the list and has it been held up to scrutiny, probably tenants and leaseholders would be a good place to see that.  Cllr Freedman understands it’s a cost but we’ve also seen from previous comments on service charges that the money that we raise on service charges is not reserved for use on these things and therefore right at the moment you are producing a surplus.  Cllr Freedman is not arguing about the principle of service charges, but there is some subjectivity on what a tenant is going to consider a service charge, especially given what the private sector would regard a service charge.  L Warden advised that the items need to be serviced is reproduced from the service cost for residential premises via statute and case law via the former Institute of Rent Officers Educational Trust 1994, that’s the best guidance that’s been produced, there’s not that much guidance on service charges for tenants, there is a huge list of items, we’ve made a decision not to apply all of those.  We are concerned about making sure that things are affordable for our tenants, that’s a priority for us.  In relation to recovering the costs we do aim, when we set our charges each year, we look at the cost to us for that exact service and that’s the amount that is apportioned between the tenants that gain from that service.  For example with cleaning we look at the total cost of the cleaning service, we then work out the amount of time spent on each of those schemes and we proportion that accordingly so the tenants of the blocks will only be paying for the amount of time that a cleaner is on site.  The only exception to that is lifts and that’s where there is a reserve for replacement, but other than that no other services there is a replacement cost for.

Cllr Freedman asked about refunds, what happens when you’ve got a block and someone has moved out before a refund would happen, would that just be held by the Council or would it be shared to other tenants, would someone who just moved in, find that their rents gone because a previous years and a lack of service.  L Warden confirmed that any refunds initially ensure that we provide above and beyond, so we make sure that we’re providing a superior service rather than going through the administration costs of refunding amounts to each account, then the next step if there is a refund, it would be to provide for the following year, so it would then need to reduce those services so if the tenant was to move out, we can obviously look at it on an individual basis and make a decision about reducing that charge.  The initial intention is to always look at reducing the future costs, rather than refunding money back for previous years.

The Chairman asked for a comparison from our service charges versus what they would pay for the equivalent service in the private sector, when speaking with F Williamson previously it was a good education when I was challenging if we are charging the right amounts.  F Williamson mentioned this related to leaseholders rather than tenants, in respect of leaseholders, since de-pooling the tenants service charges and working on a cost recovery basis, it’s given us greater visibility of the leaseholder recharges as well.  Historically some of them were just set at a fixed fee, that was just increased by inflation.  If there had been any major changes to the service level in that block it hadn’t been uplifted accordingly, so we do have some additional recovery from leaseholders, but if we were looking to compare these recovery rates within our blocks compared to leaseholders in the private sector, they benefit from much lower ground rents, our ground rents are set at £10 annually.  Some of the ground rents in the private sector run in to £100’s and there’s no direct comparison between that and the tenants who don’t pay any form of ground rent, they are just paying the service charge on a cost recovery basis.

Cllr Adeleke clarified that with the sprinkler charges is there an obligation to provide this service under health and safety, it’s right that we charge for it, the question about whether we charge for it, should be the level at which we charge.  The charges that we include, how do they compare with other local authorities, are we on a par, higher or lower.  L Warden said we haven’t done much comparison, mainly because these are new charge, for example where we’ve had some of these charges we have a quote from three different providers and identify who will be providing the service for us, we can then divide between the tenants to make sure that we have that cost recovery.  It’s mainly around making sure we get best value for our tenants for cost of those services. Previously these charges will have been hidden in the rent, the advantages are that these are seen and visible to our tenants is that we are a lot more transparent. 

Cllr Arslan asked if there was any control over what’s charged by Hightown, it’s very high.  L Warden highlighted that through our Housing Strategy our responsibility as a local authority is to ensure that housing provided by external providers is also fit for purpose and meets the demands of our residents.  While we don’t have control over those we have regular conversations, so for example a new Hightown block will be advertised through our choice based lettings system and then if those charges are considerably higher and they are not getting the demand, we will discuss this with Hightown, but unfortunately we can’t control those charges.  We can try and influence where possible.

Cllr Arslan questioned if we should have to pay for safety, like fire doors.  Should each individual tenant of the flats where they’ve bought, should they have to pay for their safety.  L Warden advised it was the services provided, so we wouldn’t charge for purchasing the individual items, but if someone is coming in to maintain things like fire doors then those are things that you can apply a service charge.  What I would suggest if tenants are unhappy with any of their charges there is the opportunity to contact their landlord to discuss the charges and look at whether that is fair and transparent.  The Ombudsman are there to ensure they can arbitrate over anything where something goes through a complaints process and is still upheld, the tenants have the opportunity to take that further.  Personally I’d say we’ve had a few cases where tenants have contacted us about charges, we’ve then reviewed those and realised that they may be higher than they should be and can then make adjustments ourselves.  In each year when we are setting our charges, so we are just about to start looking at how much we charged everybody last year and how much we are proposing for April 2020, so we can identify anywhere the increase has gone up considerably and can work out where we need to cap that to make sure it’s not excessive and it remains affordable.  That is our approach because we appreciate financial concerns are quite high on the agenda for our tenants and we want make sure it remains affordable. 

The Chairman commented that it’s important that we don’t confuse what we are obliged to provide and how fund it because as a Council we must absolutely make sure that housing provision is safe, which we do.  The issues that have been in the news recently was where the housing wasn’t safe, it would be very different conversation if they were just deliberating over how that is funded and we must make sure we don’t confuse the two.  The Chairman said that she can sleep at night knowing that we’ve got the right provision, but there is a cost that’s passed on, as opposed to it maybe being not as good quality as it should or not being scrutinised properly for the sake of cost saving.  We can confidently say with what we are doing now we are doing the right thing.  Also we have had opportunities to go to an affordable rent and as a Council we have decided to stay with social rent, which means we get less income, but we want to ensure that everybody in their community is adequately housed and they do have the opportunity to be self-sufficient. If that means they have minimal additional costs like £10 ground rent or other service charges as a Council we have made the right decision.  The alternative is to charge a lot lot more which is not the right option and secondly we do need to fund the safety measures, some of that will be passed to tenants.  The priorities are that people are safe and lives are not lost.

Cllr Freedman wanted to give clarity on his point, what he is pushing for is the fact that there has been some input from members on to that list of what we think that is fair for a tenant to be charged for and what we think we as a Council should provide. If we as a Council has decided that sprinklers is something that we are happy that individual tenants need to contribute to, then fine.  There is a list from 1994, when we are talking to residents and they are asking why they are paying for this, we are not able to say the Council has deemed that you should be paying for that, basically saying there is a document produced by someone else in 1994, that we are using as our list, it’s makes it difficult.  We are all going to have different views on what the Council should provide and democratically we choose what that is, but even if that happens to be that the Portfolio Holder approves the list and gives it to us through the Cabinet, it’s just I don’t think there’s been a choice on that list yet, I think we’ve just adopted it and that’s what I’m asking us to do.

The Chairman said that we need to be careful with some of these things because definitely there should be as much democracy as possible, but a number of Councillors are not qualified decisions on what should or should not be included in certain regulations and I certainly don’t want that to be something we start to adopt because that is part of the problem with Grenfell, we are unqualified people that are making big decisions on housing and several people lost their lives over it and that’s the risk you get if Members have to contribute on absolutely everything, because we are not always qualified enough to be making all of those decisions.  If someone who was an expert has done a lot research, provided a paper, people that qualified recommend that, for sure bring it to Committee for discussion sometimes, but those types of things cannot start and end with this Committee because most of us are not qualified to make those decisions.

Cllr Freedman said that we might not be qualified but we can invite the qualified people, the Officers can get that list, bring it to us and say this is our recommendation.  I don’t want to say that I can choose what those things are but what I’m trying to say is, there should be a process that that has been adopted.  That process should stand up to scrutiny.  At the moment I’m not saying that we’ve got it wrong, I’m just saying we’ve adopted the list without a decision on doing it.  All I’m trying to say is maybe we should plan on what that is, basically because of the fact that I think there will be a number of residents that disagree with us, we have a lot that do agree, but there will be a few that disagree.

Cllr Mahmood asked that we remember that we are talking about communal spaces for these leaseholders, with flats it’s just the corridors and the gardens.  Also bringing some of these to Scrutiny even though we might not be qualified, at least we can comment on them.  We should be given the chance to look at the list, it would have been nice to have an appendixes to the charges saying these are things we charge for, sprinklers we should charge for as we are providing a communal safe space for everybody.  The issue is that the charges have to be reasonable, we are not out to make a profit on them, they are there to recover our costs of maintenance.

Cllr Adeleke agreed that we should look at the list.  Cllr Adeleke said that for people who asked why we have to charge for an item, as a Council we pass on the costs to provide accommodation and if we’re supposed to provide 10 items and you want to be democratic and bring it to Scrutiny, which I fully agree with, if out of the 10 items we only approve eight of them, who is going to pay for the remaining two. 

Cllr Freedman said that in this case it would be the Council.

Cllr Griffiths confirmed it would be the tenants.

The Chairman highlighted so that it’s clear, we’re not charging for the installation we are charging for the service and upkeep.

L Warden advised that the list of items that can be charged for is guidance.  The list has a large number of things and it tells you what you can charge for and there are items that are not deemed to be services, that’s what we could charge for.  We have had a working party for the last 12 months between ourselves and finance, involving a number of people from the housing department to look at how we are going to apportion our charges, how to make it fair and transparent as possible and which charges to pass on to our tenants.  Just to clarify it is very much that actually we will provide all of these services regardless, service charges are then apportioned just for that particular one thing for that block for that particular service that those tenants pay towards.  Anything else that is not a service charge is part of the rent.  We obviously have options in relation to the rent for this year, so from April next year the rents will be able to go up by CPI plus 1%, so that’s something we will apply to all of our rents, once we’ve then worked that figure out, that is how much we have left to provide all these services.  We will provide these services regardless, our tenants will pay that through the rent but if we are not applying a service charge for something, something else will have to give through the service, we will have to reconsider things like our replacement of kitchens, bathrooms, etc.  The HRA is completely ringfenced, every money from rent and service charge comes in and covers every single service that we have to provide to tenants.  The balance here is making sure that the tenants of those particular blocks pay for the services that those blocks receive and the tenants in homes who have no use of any of those communal facilities aren’t paying for them or lose additional services within their rent that they are already paying.  L Warden confirmed she would be happy to share the list that are deemed to be services for information so you can see the information that we are working on.

Action: L Warden

L Warden added that there is not a huge amount of legislational guidance around service charges for tenants, there is a little bit of information around this and we’ve been taking advice from a consultant about what services we can apply a charge.  The other factor is what can we work out, because there are some services that we may say we could apply a service charge for something but how do we identify which blocks get use of that service, some of those is the amount of admin time it would take to calculate that isn’t worth the amount we would then charge, that’s when some of those decisions can’t be made.

Cllr Hollinghurst mentioned that he would associate himself from the thought that there are a class of decisions that Members cannot take because they are perhaps they are not qualified in some technical aspect.  We are responsible, you only have to look on facebook to find that the public certainly think that we as individual Councillors elected to be Members of this authority, we are the people that are responsible and I’m aware that some people are professionally qualified and that we should take due regard to professional advice, fundamentally the buck stops with elected Members, whoever they may be, whatever their background and that includes decisions on something that may be technical or specialised in nature.  A very simple example, a Minister of State, who’s not a GP, not a doctor, not medically qualified, can be a Minister of Health and be responsible for the working of a highly complex, very technical, very professional health service.  The situation is that democratically people who are not specifically qualified do accept and are given the responsibility for keeping the show on the road.