The Housing Forum recently published an advisory note, Best Practice Refurbishment Procurement and Delivery, which recommended new approaches to how residential refurbishment programmes should be initiated, procured and delivered. It was also submitted to the Ministry of Housing, Communities and Local Government.
Perhaps surprisingly, the central theme of the advisory note is the importance of full and proper stakeholder engagement.
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The advisory note, which stemmed from a round table attended by industry experts and government officials, recommends that residents are involved throughout the inception and delivery of schemes, to ensure that projects and objectives are properly prioritised, and to provide oversight to the decision-making.
If it is recognised that resident engagement is of key importance, the next step is to acknowledge and budget for a cost to the project to ensure that such engagement is valuable.
Large housing owners and landlords may have resident liaison officers whose knowledge of estates can provide useful insight from residents on priorities and literally unlock doors – avoiding “failed entries”, where a contractor has priced for refurbishment work on a property, but is unable to get access then puts in a claim for costs for time and resources wasted.
Appointing a resident’s friend
Of course, tapping into this insight might not be possible unless residents are given the benefit of professional advice when projects are assessed. It is therefore recommended by the advisory note that client bodies appoint an independent “resident’s friend” to assist in the process of resident consultation.
The advisory note specifically recognises that there is a risk to successful project outcomes that is posed by homeowners. Leaseholders who are absentee landlords or bought under right-to-buy schemes but are “asset rich and cash poor” will likely resist the cost of improvements and place pressure on landlords to carry out the minimum amount of work, to the minimum legal standards, for the lowest cost.
The statutory consultation requirements for landlords to recover costs by way of variable service charges – commonly called a Section 20 consultation, from section 20 of the 1985 Landlord and Tenant Act – contain the checks and balances to ensure that landlords do not abuse their power by instigating works that are unnecessary or do not provide value for money.
Section 20 consultations have some notoriety for preventing landlords from recovering costs that were properly incurred, because of a lack of adherence to the strictly stated consultation processes set out in the relevant regulations – in England, the Service Charges (Consultation Requirements) Regulations 2003.
However, more recent case law has given some leeway to recover service charges for the cost of works where any failure to comply with the strict requirements of the regulations does not prejudice the interests of leaseholders.
The principles entrenched in the regulations remain that service charges must be based on the agreement to pay, as set out in the relevant lease, must be reasonable and value for money, that landlords should allow some competition for contracts to carry out the works, and should try to provide information to, and take on board, the opinions of leaseholders.
Of most difficulty is the justification of “reasonableness” and “value for money” required when the works might be considered to be “improvements” to existing properties.
Landlords will need to justify any additional cost that is incurred because the works are to a higher standard than might be required by law or by the relevant lease agreements. However, justifications can often be made on the basis of whole-life cost and, perhaps, on the need to improve building safety standards.
Landlords are often understandably concerned with avoiding the pitfalls of the statutory service charges consultation regime, which might lead to the risk of non-recovery of the costs of a project. Frequently, the consultation might be limited to a rigid, formal process which only follows the black-letter of the regulations.
But this might remove the opportunity for residents to add value to the project. Guidance is available, and encouragement should be given to wider informal consultation with residents that might improve outcomes by focusing on proper planning and specification of projects.
Assad Maqbool is a partner at Trowers & Hamlins
