Section: Leasehold Properties

Government Approval for New RICS Code of Practice

The RICS Code of Practice for Service Charge Management was published and it received Government approval from the Housing Minister, Iain Wright, who said:

"I am pleased to be able to approve the new RICS Service Charge Residential Management Code".

"This code will be an effective tool in driving up management standards in the leasehold property sector, and is part of the overall action we are taking with industry to improve service and information for consumers in the home buying and selling process."

The code of practice, first published in 1997, has been updated to incorporate the provisions of the Commonhold and Leasehold Reform Act 2002 (where implemented). It will apply to all leasehold properties where a service charge is payable, and the landlord is not a public sector authority or Registered Social Landlord.

This Code promotes good practice in management of residential leasehold property, and provides a basis for determining how management should be undertaken including legislative requirements and good practice, such as:

RICS spokesperson Gerry Fox said:

"Successful management can only be achieved through cooperation and a mutual understanding of the procedures necessary for the effective management of property as well as of the problems that can arise.

"The Code is, therefore, intended to be read by landlords, tenants, occupiers and managers of leasehold property and managing agents. Whilst we understand there are cost implications of managing residential properties to the standard specified by this Code, the benefits in terms of improved service and the level of satisfaction should make any additional cost worthwhile in the long run."

New Regulations

Source: Office of Public Sector Information

The Housing (Purchase of Equitable Interests) (England) Regulations 2009 SI 601

These Regulations give a housing authority which is a landlord of a flat under a long lease a power to purchase an equitable interest in the flat in order to assist the tenant to meet some or all of the costs of service charge payments payable by the tenant to the landlord in respect of repairs and improvement contributions. The agreement of the tenant is required.

The terms "housing authority" and "long lease" are defined in section 458 of the Housing Act 1985. Section 450D of that Act (under which these Regulations are made) modifies the definition of "housing authority", and defines "improvement contribution" and "repairs".

Regulation 2 sets out the conditions which must be met before the power to purchase an equitable interest can be exercised.

Regulation 3 provides that the landlord may exercise the power conferred by regulation 2 whenever the lease was granted or assigned, and whenever the service charge became payable.

Regulation 4 requires the landlord to pay for the equitable interest purchased by reducing or cancelling (as the case may be) the service charge payment for which the tenant is liable. Where the landlord and the tenant have agreed that the tenant will meet the landlord's administrative expenses in connection with the purchase, the landlord may deduct these expenses from the purchase price.

Regulation 5 allows the landlord to require the tenant pay the landlord's administrative expenses in connection with a purchase under regulation 2.

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The Housing (Service Charge Loans) (Amendment) (England) Regulations 2009 SI 602

These Regulations amend the Housing (Service Charge Loans) Regulations 1992 which provide for housing authorities to make loans to their tenants in respect of service charges for repairs or improvements.

The amendments, which apply only in relation to England, relate to loans made under the discretionary power in regulation 5 of the 1992 Regulations. That power may be exercised, in respect of flats, by "housing authorities". The term "housing authority" for the purposes of these amendments is defined in section 450B(4) of the Housing Act 1985.

Regulation 2 substitutes regulation 6(2) of the 1992 Regulations to provide that a loan made under the power in regulation 5 may be on terms that do not require the payment of interest or that require the payment of interest on only part of the loan.

Regulation 3 amends paragraph 1(a) of Schedule 2 to the 1992 Regulations in consequence of the new regulation 6(2).

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Reporting on Feb-Apr 2009

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