Agenda item

To receive a report from the strategic director of housing, and to hear from resident leaseholders in respect of Consort Estate SE15 major works charges to leaseholders, following a request from a council for the matter to be scrutinised by the overview and scrutiny committee.

 

Note: Appendix 1 to follow.

The committee heard from representatives of the Consort Estate Tenants and Residents Association (Roma, Tayo, Sam, Nell, Katherine, and Jacob) in respect of Leaseholder service charges and section 20 notices.

 

Roma, lead spokesperson, gave a presentation to members of the committee on the Consort Estate Major Works costings and highlighted areas of concern set out below:

 

·  Provisional sums should not be used as a fallback position for consultants when designs are incomplete, or information is difficult to obtain and should only be used as a last resort. Provisional sums were however making up 59% of the Consort Estate major works.

 

·  Certain construction contracts such as New Engineering Contract (NEC) do not allow provisional sums to be included. The TRA were asking for the provisional sums to be removed from the scope which would then reduce the programme length and the cost of associated works.

 

·  Roma gave a number of examples where the TRA considered that works were unnecessary and indicated that early feedback from the council suggested that it [the council] agreed with their analysis and would consider removing some of the proposed work.

 

·  Roma stressed the use of provisional sums could have a financial and mental toll on residents.

 

·  The contractor’s own feasibility study identified works that were not needed, including works linked to other works such as scaffolding. Associated costs would be difficult to recover once the works were reviewed post contract. The TRA were requesting that provisional sums are reviewed for the scope which would reduce programme length and costs of any associated works.

 

·  The current scope includes unnecessary works, with the scope being expanded and costs increased beyond what is reasonable. Roma gave a number of examples where the TRA believed this had happened. The TRA were requesting that the scope of work is reduced so that critical activities are completed only.

 

·  The rates in the cost estimates were excessively high and not value for money. Roma gave some examples of where this was felt to be the case. The TRA were requesting that there was greater scrutiny over the costs to ensure they represent good value for money to both leaseholders and the council.

 

·  The TRA lacked confidence in the council’s role in quality assurance and its ability to effectively oversee the building works. Roma gave several examples of why the TRA lacked confidence in the council, one of which was around the sign-off of potentially non-compliant works, and major works being used to cover the cost of remedial works at cost to the council and residents. The TRA were requesting that the council conducted greater scrutiny over activities to ensure they represent good value for money to both leaseholders and the council, and investigate who is responsible for the works, initiate remedial works with those who designed and installed the works as defective works should be covered for a five year period, and ensure the works have no cost impact on the major works.

 

·  Roma outlined areas where the TRA felt potential savings could be made which based on one block could amount to 43% work of savings.

 

The committee then heard from Councillor Esme Dobson, local ward councillor. In addressing the committee Councillor Dobson put forward the following suggestions for the committee to consider as recommendations to the cabinet member for Council Homes.

 

1)  Strengthen the Council’s in house Quantity Surveyor function and skills to scrutinise estimates provided by contractors.

 

2)  Change the way the admin fee is calculated on contracts in order to remove the possible incentivisation of large contracts.

 

3)  Review and strengthen communications and cross-department working to improve the services provided by the Homeownership Team and to fulfil a ‘whole council approach’ to housing. This should include but not be limited to:

 

·  Including a covering letter to leaseholders with annual service charges with clear explanations if there is a large difference between estimates and actuals;

·  Engaging with Tenants and Residents Associations much earlier when major works are being planned;

·  Developing website functionality to enable leaseholders to automatically download service charge breakdowns from their MySouthwark account;

·  Developing a standard FAQ document about major works which is sent out with all Section 20 notices as well as clearer information about payment options and external advice services.

 

4)  Introduce an automatic option of being able to pay over six months where the difference between estimates and actuals is above a certain percentage of the estimated service charge.

 

5)  Remove car parking charges for contractors from leaseholders’ major works bills.

 

6)  Pilot working with solicitors and estate agents to provide far greater clarity on the realities of leaseholder responsibilities and future costs.

 

7)  Strengthen the whistleblowing system within the Council.

 

In putting forward the suggestions Councillor Dobson highlighted the following:

 

·  The estimate had not been checked properly. Leaseholders had been vocal, but the council was paying 90% of the bill, which would have to come from the HRA which was already in deficit.

·  The admin fee on the contract should be noted and questioned.

·  Consort Estate had several known problems (gas consumption/overheating, pest control, waste management, anti-social behaviour), and the major works would not be addressing any of those issues which were important to residents. Section 20 notices for major works issued to leaseholders, along with actuals from service charge estimates increasing service charges from £3,000 to £5,000 around the same period. These issues were covered by three different services in the housing department, not really seeing how the culmination of these issues were being received by the tenants/residents – Councillor Dobson considered this a lack of a ‘whole council approach’ and put forward examples of how communication could be improved. In addition, Councillor Dobson suggested the introduction of a policy whereby leaseholders were automatically given the opportunity to pay service charges over a six-month period where there was a significant increase from the estimate to the actual service charge.

·  Removing the car parking charges for contractors – Councillor Dobson indicated that from a leaseholder point of view, the council was passing on parking charges to leaseholders for something that was for the council.

·  Working with solicitors and estate agents – Councillor Dobson indicated that there were quite a few leaseholders who had purchased their properties recently, and she got the impression that solicitors were not making purchasers aware of the terms of the lease and major works. She wanted the council to work with solicitors to make sure that purchases at the point of buying a property knew what the likelihood of major works, and implications.

·  Strengthening the whistle blowing system – Councillor Dobson, informed the committee that there were officers in the council concerned about waste that goes on within the council, and cited as situation where an officer had informed her that they had raised concern about a particular matter three times with a senior officer and nothing had been done about it.  She felt that the whistle blowing service should be anonymous and that there were off the shelf IT packages that could be purchased, which she believed would improve the process. She asked that an anonymous whistle blowing service be introduced for both the housing department and social care.

 

Following the ward councillors address, the chair opened the meeting up to questions. Questions and discussion were held around the following areas:

 

·  Car parking charges being included in major works bills

·  Financial impact major works charges are having on leaseholders

·  Variation of major works charges per block and property size/type

·  Any approaches by leaseholders to the council around the possibility of extending the four-year interest free loan term the council offers

·  The T&RA leaseholder submission document and the council responses

 

The committee then heard from Councillor Sarah King, Cabinet Member for Council Homes, Hakeem Osinaike, Strategic Director of Housing, and Sayeed Kadir, Interim Assistant Director of Planned Maintenance.

 

Councillor Sarah King thanked the leaseholders in attendance for the work they had done around this issue, and that she was conscious that they were in effect saving the whole council money. She also thanked Councillor Esme Dobson and her ward colleagues for keeping her abreast of the issues leaseholders have been discovering in connection with the provisional works. Councillor King apologised for the situation.

 

Hakeem Osinaike, strategic director of housing, also thanked leaseholders. He stressed that it was officers’ jobs to ensure that whatever works the council did, that it presents value for money to residents. He reported that he had been assured by his team that the excessive cost would have been picked up at a later point, but his view was that this should have been picked up earlier. He apologised profusely to tenants and leaseholders, and assured the meeting that this was something that had happened in the past, and that many steps had been taken, and would continue to be taken to make sure that issues like this did not continue to happen.

 

Sayeed Kadir, interim assistant director of planned maintenance, reported that he had reviewed the issue and had prepared a ‘lessons learned’. Sayeed informed the meeting that the contract, which was supposed to start on 25 November, would not be starting. That in respect of all the provisional items, that he had asked for the site teams to go out and survey everything so that there could be certainty over the provisional items, and actual quantities put in. This would reduce the provisional terms.

 

Sayed informed the meeting that the contractor could only use the provisional sum to pre-instruct officers and would not be able to spend the money or get their profit and overheads from it. They could only spend the money when the council signed procurement instructions.

 

He was suggesting that the TRA appoint 3 to 4 representatives that could work closely with the council. They could meet with the council regularly, and the council could show them the items the council had gone through, where reductions had been made, and where the council could not make reductions.

 

Sayeed explained that there were some items that the council could not explore further until the scaffolding had been erected, so what he was proposing was to start a pilot project in January. He/his team would meet with the TRA once the scaffolding was in place, and all the provisional items had been reviewed. He would get the provisional items clarified and quantified and this would be set as a precedence for the rest of the estate. They would then meet with the TRA once a month and share with them any instructions the council had given.

 

He reported that the Section 20 notice would be revised.

 

The chair opened the meeting up for further questions. Questions and discussion were held around the following:

 

·  Scope creep, and why figures had not been challenged

·  Availability of inhouse skill set to scrutinise and challenge, to ensure value for money

·  Timing of commencement of works following erecting of scaffolding, and scaffold charges

·  What went wrong from a council perspective

·  Proportional admin fees and potential incentivisation for increased charges

·  Embedding change of practices that can be retained by future employees

·  When residents will have clarity about how much the refurbishment of the blocks are going to cost them

·  Difference between repairs contracts and major works contracts

·  Legitimacy of contractors charging for parking costs

·  Interest free period council offers to leaseholders for repayment plans – whether the options and how plans are structured should be reviewed (given inflation and cost of major works in general)

·  The housing revenue account (HRA) - how it relates to repairs and major works expenditure, and requirements around HRA funding structure

·  Capping annual payment of major works charges in any one year to address issues of affordability

·  Gas and electricity service charges, and any steps to be taken to move towards individual billing, and opportunity to introduce metering as part of the Consort major works package

·  Deadline for landlords to move tenants into individually controlled heat in their own homes as part of the legislative requirements.

 

The chair invited the TRA/Leaseholders to provide comment on the meetings deliberations.

 

The following issues of concern were flagged by the TRA/leaseholders:

 

·  It was felt that the answers were not appreciating the concerns residents were raising. 

·  There was no guarantee/confidence that issues that had not been picked up initially would have been picked up at a later stage.

·  There was a push for the contract to be signed with the contractor – once this happened, then it will be hard to remove works at a later stage

·  Question marks over the price of the scaffolding in that the price was not fixed as scaffolding was charged as a weekly rental

·  Questions around whether good value for money would be achieved

·  Refunding of payments to leaseholders following completion of works and calculation of final bill – who would be liable for paying the initial loan interest charges incurred.

 

·  Accuracy and apportioning cost to leaseholders – given the different leases on the estate, the complexities of costs entered by contractors, how will officers ensure that leaseholders are only billed for what they legally have to pay

·  Cumulative percentage charges for professional fees, and subsequent percentage charge for admin fees, and whether this is a fair way to charge people, even if this is legal

·  Question over merits of having scaffold erected before discussions had started, when there were alternative ways to do the necessary surveys

·  Factoring in what people can feasibly pay

·  Actuals coming in more than estimates due to things such as building insurance and hot water increases being revised upwards. This was questioned as the coverage would have come in and been paid at the start of the financial year. It was felt that issue could be avoided

·  Publication of government regulations on heating not expected until at least 2026, with more feasibility work to follow, taking the issue to the late 2020’s, in the meantime leaseholders paying a significant amount of money for heating and hot water – questions over why they could not have their costs being limited in the same way that other domestic users are.  Requesting for consideration to be given about what can be done now, in advance of the long term approach

·  Consideration of the introduction of Florrie’s law [cap on the amount councils can charge leaseholders for repairs to their homes]

 

Further discussion took place amongst the committee members.

 

The committee agreed not to take forward the suggestions in relation to removing car parking charges and capping leaseholder charges for repairs to council homes.

 

Following discussion, it was moved, seconded and,

 

RESOLVED:

 

1.  That the cabinet member for Council Homes be recommended to:

 

1)  Strengthen the Council’s in house Quantity Surveyor function and skills to scrutinise estimates provided by contractors.

 

2)  Change the way the admin fee is calculated on contracts in order to remove the possible incentivisation of large contracts.

 

3)  Review and strengthen communications and cross-department working to improve the services provided by the Homeownership Team and to fulfil a ‘whole council approach’ to housing. This should include but not be limited to:

 

·  Including a covering letter to leaseholders with annual service charges with clear explanations if there is a large difference between estimates and actuals;

·  Engaging with Tenants and Residents Associations much earlier when major works are being planned;

·  Developing website functionality to enable leaseholders to automatically download service charge breakdowns from their MySouthwark account;

·  Developing a standard FAQ document about major works which is sent out with all Section 20 notices as well as clearer information about payment options and external advice services.

 

4)  Introduce an automatic option of being able to pay over six months where the difference between estimates and actuals is above a certain percentage of the estimated service charge.

 

5)  Pilot working with solicitors and estate agents to provide far greater clarity on the realities of leaseholder responsibilities and future costs.

 

6)  Strengthen the whistleblowing system within the Council.

 

7)  Introduce fully itemised billing in final service charge invoices to leaseholders.

 

2.  That an item be added to the work programme on the transparency of Leaseholder costs.

 

3.  That an update report be received by the overview and scrutiny committee in January 2025.