1. 1 Home Ownership Services LEASEHOLD MANAGEMENT FEE 31/10/12 Marco Pelazza, Home Ownership Manager REGENERATION & HOUSING

2. 2 The Management Fee

3. 3 Why do we charge a Management Fee? It is a legal requirement that the cost of the leasehold management function is paid for by Service Charge Payers Council leases & transfers allow for a Fee to be charged to all service charge payers

4. 4 What is being proposed? 1.Changing the method of calculating the Management Fee to make it fairer to Service Charge Payer’s. 2.Changing the Management Fee so that the Council recovers the full cost of leasehold management. 3.Implementing the changes in the April 2013 Estimates

5. 5 Why should we change the method 1.Fairness The current system charges 26% on service charge costs plus £30 for approximately half of all leaseholders The highest Management Fee in 2011/12 was £392.42; the lowest was £0 In 2011/12, 181 leaseholders paid no Management Fee The level of the leasehold management function is generally the same: e.g. same number of bills issued, similar support from Home Ownership Team, same support services

6. 6 Why should we change the method (2) 2.Full recovery Shortfall of £245k in 2011/2012 Leasehold management costs were £723k. Current system recovered only £478k Proposal is not to increase the management. It is to recharge the correct amount 3.Transparency Actual management costs will be recharged, no more, no less Efficiencies in management will be passed onto Service Charge Payers

7. 7 Home Ownership Costs Recovered

8. 8 What were the options? A number of options were considered 1.Flat fee method – Same Fee for everyone 2.Percentage method – Current method but with higher percentage 3.A combination: Percentage + Flat for all – Higher flat fee and Percentage 4.Sliding scale method – A range of percentages based on level of your bill 5.Your suggestions - (none received)

9. 9 What was chosen? Flat Management Fee capped if service costs are below £50 Flat Management Fee Based on actual costs Can increase or fall each year depending on actual expenditure Based on 2011/2012 final accounts, the Management fee would be £173.94 Actual costs will be reflected in the final accounts Capped Fee Acknowledges likelihood that those in receipt of few services will require less management Applied if the sum of individual service costs, excluding insurance, heating and management are below £50 Fee will be capped to £50 If actual costs are higher than £50, full fee will be charged & vice-versa

10. 10 Example Individual share of service costs: Repairs: £25 Repairs: £80 Lighting: £8 Lighting: £8 Pest control: £5 Pest control: £5 Total service costs: £38 Total service costs: £93 Other charges: Heating: £425 Heating: £425 Insurance: £188 Insurance: £188 Management: £50 Management: £173 Total other charges: £663 Total other charges: £786 Total Service Charge: £701 Total Service Charge: £879

11. Simple and accurate to calculate Allows for full recovery of costs No more, no less Fair Does not penalise those with high service costs Allowance made for those with low service costs Other options: Percentage method: Unfair Combination method: Over or under recovery likely; unfair Sliding scale: Difficult to calculate, over or under recovery likely 11 Why was this option chosen?

12. Leasehold management costs in 2011/2012 were £723,379 Can be broken down into 3 areas: Home Ownership Salaries Home Ownership Service costs Other departments Analysis of time/work related to leasehold matters 12 How is the Management Fee Calculated?

13. 13 How are HO costs made up? 11/12 10/11 09/10

14. Home Ownership Salaries Home Ownership Service costs Postage, printing, stationery, halls hire, etc 14 How is the Management Fee Calculated? (2) Actual Cost (11/12)% of cost to be rechargedCost for Management Fee £834,420.7346.81%£390,602.06 Actual Cost% of cost to be rechargedCost for management fee £89,606.4546.81%£41,944.78 The % figure for service costs is consistent with the % figure for salaries

15. Other departments: 15 How is the Management Fee Calculated? (3) TeamsCost % of cost to be recharged Cost for Management fee Notes East Housing Team4.30%1 West Housing Team4.30%1 Responsive Repairs27.00%2 Mechanical & Engineering15.00%3 Resident Involvement Team5.00%1 HRA CSA Cost3.19% Total Cost Recharged to LH's£5,287,5715.50%£290,831 Notes 1: Percentage taken from HQN Review Report 2009 2: Based on the % of leasehold properties in housing stock 3: As Responsive Repairs but reduced due to fewer responsibilities to leasehold properties

16. Summary: Number of leaseholders:4,753 Number of with services below £50: 834 £41,700 Number of full fee leaseholders:3,919 Management fee to distribute: £681,679 Management fee per leaseholder: £173.94 16 How is the Management Fee Calculated? (4) ServiceCost % of cost to be recharged Cost for Management Fee Home Ownership Salaries£834,42146.81%£390,602 Services costs£89,60646.81%£41,946 Other Departments£5,287,5715.50%£290,831 Total Cost to be Recharged£6,211,59811.65%£723,379

17. 17 Impact of new Management Fee 628 (13%) will see management costs reduce 834 (18%) will see costs increase but capped to £50 3,291 (69%) will see costs increase Increases due to under-recovery and not because expenditure has increased

18. 18 Impact of new Management Fee Number of leaseholders Increase or fall in Management Fee (£)

19. 19 Efficiencies

20. 20 Fluctuations in the Management Fee Management Fee based on Actual costs Fee will change according to expenditure Higher costs = higher Fee Efficiencies = lower Fee E.g. £781k / 4000 = £195; £581k / 4000 = £145 Fee will change according to number of leaseholders Fewer leaseholders (Buy Back) = Higher fee More leaseholders (Right to Buy) = Lower fee E.g. £681k / 3500 = £194; £681k / 4500 = £151 Fee will change according to number with capped Fee More leaseholders with capped Fee = Higher Fee Fewer leaseholders with capped Fee = Lower Fee E.g. 1,034 capped = £180; 634 capped = £167

21. 21 How do our costs compare? Harrow£45 - Flat Fee Brent£73 average - % Ealing Existing£106 average - % Lambeth£114 - % + Fixed Fee Camden£114.58 average - % Greenwich£121.34 average - % Hillingdon£125.80 - Gross rateable value Kensington & Chelsea£172 average - % Ealing Proposed£173.94 Actual + £50 capped Hounslow£190 l/h; £125 street props - % Barnet£190 average - Flat Fee City West Homes (Westminster)£200 + actual - Flat Fee Lewisham£200 average - Flat fee Islington£218 l/h, £164.23 F/H estate, £145.33 L/h street props - % Hammersmith£229 (actual, with maximum) - % + FF Havering£229.48 actual - Flat Fee Hackney£235 actual - Flat Fee Haringey£262 l/h; £96 street props - Flat Fee

22. 22 What about tenants? Leasehold management costs are a small proportion of total housing management costs Tenants pay rent & service charges The income from rent pays for all housing management, service and major works costs In 2011/12, total management costs were £6.2m Leasehold share was £723k Total recovered: £478k Tenants paid the remainder

23. 23 Total Housing Management Costs

24. 24 What next? Feedback from service charge payers Report to Executive Director of Regeneration & Housing Delegated authority given by Cabinet to restructure the charging system subject to consideration of responses received through consultation with leaseholders Inform service charge payers of decision Include summary of feedback Implement in April with 2013/14 service charge estimates

25. 25 Summary Not about increasing costs Need to recharge full cost of leasehold management in a fair and transparent way This will result in an increase for some however some will see costs fall Transparent system based on actual expenditure as now Recovery of full fee Clear analysis of costs Reduction in the management fee with continued efficiencies

26. 26 Home Ownership Services Thank you and any questions? Marco Pelazza Email: homeownership@ealing.gov.uk orhomeownership@ealing.gov.uk Post: Perceval House, 14-16 Uxbridge Road, London W5 2HL