FAQ's Paying for Major Works
Information for leaseholders – ways you can pay for major works charges
1. Payment of the full sum
If you are able to, you can settle the debt fully and immediately (within 3 weeks of the date of the invoice) using funds from your own sources (such as savings or a private loan).
2. Payment in instalments for estimated major works billed in advance
If we have billed you an estimated service charge for major works at the start of a contract, we will accept monthly interest-free instalments for the duration of the contract, until we have agreed a final account with the contractor. When we are sent a breakdown of the Final Account we will calculate your actual service charges for the work and send you a statement showing the difference between the estimated bill we sent you and the actual costs. If the estimated bill we sent you was too low we will send you an additional invoice. You will need to make arrangements for paying the additional invoice and any money still owing from the earlier estimated invoice immediately using any of the other options on this information sheet.
If the estimated bill was too high, we will tell you how much credit or refund is due to you. Refunds will only be given if your service charge account is fully paid.
3. Payment in instalments for major works billed after the end of a contract.
We may be able to agree with you that you can pay the amount owing over 12 months. If you want to do this, you must write to us within 3 weeks of the date of the invoice and tell us how much you are going to pay us each month. We will not be able to do this over the ‘phone. As long as the amount you offer to pay will clear the debt within 12 months, we will write to you to tell you that we agree to your offer. When we write, we will tell you when you must make your first payment. All payments must be made regularly every month and we will send you a banker’s standing order form to help you do this.
Whether or not you arrange to make your payments by standing order please remember that, if you miss any of the monthly payments we will refer the debt to our solicitors immediately, to recover the amount you owe in the County Court.
4. A “statutory” or “discretionary” service charge loan from the Council.
You may be entitled to a loan from the Council, either by law (a “statutory” loan) or, if you are not entitled to a statutory loan, a “discretionary” loan. The loan would be secured by a charge on the property. However, the interest rate payable is set by central government so it is likely that you should be able to get a loan at a lower rate of interest from a commercial mortgage lender (such as a high street banks or building society).
If you are entitled to a statutory loan the Council must allow the loan, whether you can afford it or not. But, the law sets out the amount you can borrow and the term of the loan. If you are not entitled to a statutory loan the Council can offer a discretionary loan. The terms of discretionary loans can be a bit more flexible than for statutory loans. For example, with a discretionary loan the Council would be able to agree a longer repayment period than would be allowed for a statutory loan.
If you are receiving Income Support, the Council can offer “interest-only” loans. This means that the amount of loan we offer (the capital) is not repaid, but is set up as a charge on the property. You only pay the interest due on the loan each month. If you are
on Income Support, your benefit can be adjusted to include the amount of interest you have to pay. You would have to apply to the Benefits Agency for help to meet the interest payments. The loan (the capital) would be repaid on the sale of the property or could be repaid earlier, with a lump sum payment.
Any invoices we send you for major works charges will include information on how you can apply for a service charge loan. Please note that at the moment, we can only offer a service charge loan where the service charge is for repairs, improvements or maintenance. We cannot give a loan to pay off other service charge debts.
You might wish to consider the following options: -
5. An adjustment of any existing mortgage on your flat, or a further advance from your mortgagee (lender).
This option does not involve the Council directly. You could ask your existing mortgage lender for a further loan to pay the service charge bill for the works. Usually, this would involve the amount of the loan being added to the amount already outstanding on your mortgage. Your mortgagee would then calculate a new rate of repayment on your mortgage. They might also consider extending the mortgage term, say from 25 to 30 years, in order to keep the repayments affordable.
If you want to consider this option you should contact your existing lender in good time to discuss the matter. Most lenders are prepared to approve or refuse such a loan in principal, before the Council has sent you the details of your share of the cost of the works.
Please note that where the bill is not in dispute, or where you have disputed the bill but a court (or arbitration panel) has ruled that you should pay the bill, we would be entitled to approach your mortgage lender to ask them to settle the debt on your behalf, if you could not pay, or if you refused to pay the bill. Any sum paid by your lender would be added to your existing mortgage, and there may be further costs to be added (such as the lender’s administration costs). Your lender can only take such action if your mortgage contract allows it, but most modern mortgage contracts do give the lender this right.
If you are over 60 or are under 60 with disabilities you may be able to get help in the form of a low cost loan from the Home Improvement Trust. Ask the Right to Buy and Leasehold Services team for a leaflet or contact the Trust direct;
The Home Improvement Trust,
7 Mansfield Road
Nottingham
NG1 3FB
Freephone Helpline:0800783 7569 E-mail: info@hitrust.org
Fax. 0115 934 9501 Website: hitrust.org
6. The Council takes a charge on the property
If we agree that you are not able to afford any of the options described above, we could in exceptional circumstances, consider taking a charge on the flat to secure the debt, with your agreement. This is similar to a mortgage, but you would not have to make any monthly payments towards the debt. Instead, when the lease of the flat is transferred (for example, if the flat was sold) the charge would have to be redeemed (paid) in full along with interest due on the amount ‘charged’.
This option would be very much a last resort, and could probably only be considered if the only alternative available to us was court action to recover (forfeit) the lease (that is, to repossess your home). There are many factors that would have to be considered before we could decide whether this would be an appropriate course of action. As a rule, we would strongly advise leaseholders not to rely on this possibility and to investigate other means of meeting the service charge.
DSS (Benefits Agency) assistance with service charges
Our understanding is that, if you are entitled to benefits such as Income Support or Job Seekers Allowance, the Benefits Agency (DSS) can help with interest payments due on loans that you have to take out in order to settle service charges for certain types of work done to your building. For more information about help from the Benefits Agency please contact:
Benefits Agency Mortgage Section
Wentworth House
350 Eastern Avenue
Ilford
Essex
IG2 1BR
Or you can ‘phone the Benefits Agency Mortgage Section on 020 8532 4200.
Pension Credit
If you are over 60 and receiving a state pension, you may be entitled to help with your service charges through Pension Credit. If you are not sure whether you can apply for Pension Credit, or to find out more information, please phone the Pension Credit Application Line on 0800 99 1234
1. Payment of the full sum
If you are able to, you can settle the debt fully and immediately (within 3 weeks of the date of the invoice) using funds from your own sources (such as savings or a private loan).
2. Payment in instalments for estimated major works billed in advance
If we have billed you an estimated service charge for major works at the start of a contract, we will accept monthly interest-free instalments for the duration of the contract, until we have agreed a final account with the contractor. When we are sent a breakdown of the Final Account we will calculate your actual service charges for the work and send you a statement showing the difference between the estimated bill we sent you and the actual costs. If the estimated bill we sent you was too low we will send you an additional invoice. You will need to make arrangements for paying the additional invoice and any money still owing from the earlier estimated invoice immediately using any of the other options on this information sheet.
If the estimated bill was too high, we will tell you how much credit or refund is due to you. Refunds will only be given if your service charge account is fully paid.
3. Payment in instalments for major works billed after the end of a contract.
We may be able to agree with you that you can pay the amount owing over 12 months. If you want to do this, you must write to us within 3 weeks of the date of the invoice and tell us how much you are going to pay us each month. We will not be able to do this over the ‘phone. As long as the amount you offer to pay will clear the debt within 12 months, we will write to you to tell you that we agree to your offer. When we write, we will tell you when you must make your first payment. All payments must be made regularly every month and we will send you a banker’s standing order form to help you do this.
Whether or not you arrange to make your payments by standing order please remember that, if you miss any of the monthly payments we will refer the debt to our solicitors immediately, to recover the amount you owe in the County Court.
4. A “statutory” or “discretionary” service charge loan from the Council.
You may be entitled to a loan from the Council, either by law (a “statutory” loan) or, if you are not entitled to a statutory loan, a “discretionary” loan. The loan would be secured by a charge on the property. However, the interest rate payable is set by central government so it is likely that you should be able to get a loan at a lower rate of interest from a commercial mortgage lender (such as a high street banks or building society).
If you are entitled to a statutory loan the Council must allow the loan, whether you can afford it or not. But, the law sets out the amount you can borrow and the term of the loan. If you are not entitled to a statutory loan the Council can offer a discretionary loan. The terms of discretionary loans can be a bit more flexible than for statutory loans. For example, with a discretionary loan the Council would be able to agree a longer repayment period than would be allowed for a statutory loan.
If you are receiving Income Support, the Council can offer “interest-only” loans. This means that the amount of loan we offer (the capital) is not repaid, but is set up as a charge on the property. You only pay the interest due on the loan each month. If you are
on Income Support, your benefit can be adjusted to include the amount of interest you have to pay. You would have to apply to the Benefits Agency for help to meet the interest payments. The loan (the capital) would be repaid on the sale of the property or could be repaid earlier, with a lump sum payment.
Any invoices we send you for major works charges will include information on how you can apply for a service charge loan. Please note that at the moment, we can only offer a service charge loan where the service charge is for repairs, improvements or maintenance. We cannot give a loan to pay off other service charge debts.
You might wish to consider the following options: -
5. An adjustment of any existing mortgage on your flat, or a further advance from your mortgagee (lender).
This option does not involve the Council directly. You could ask your existing mortgage lender for a further loan to pay the service charge bill for the works. Usually, this would involve the amount of the loan being added to the amount already outstanding on your mortgage. Your mortgagee would then calculate a new rate of repayment on your mortgage. They might also consider extending the mortgage term, say from 25 to 30 years, in order to keep the repayments affordable.
If you want to consider this option you should contact your existing lender in good time to discuss the matter. Most lenders are prepared to approve or refuse such a loan in principal, before the Council has sent you the details of your share of the cost of the works.
Please note that where the bill is not in dispute, or where you have disputed the bill but a court (or arbitration panel) has ruled that you should pay the bill, we would be entitled to approach your mortgage lender to ask them to settle the debt on your behalf, if you could not pay, or if you refused to pay the bill. Any sum paid by your lender would be added to your existing mortgage, and there may be further costs to be added (such as the lender’s administration costs). Your lender can only take such action if your mortgage contract allows it, but most modern mortgage contracts do give the lender this right.
If you are over 60 or are under 60 with disabilities you may be able to get help in the form of a low cost loan from the Home Improvement Trust. Ask the Right to Buy and Leasehold Services team for a leaflet or contact the Trust direct;
The Home Improvement Trust,
7 Mansfield Road
Nottingham
NG1 3FB
Freephone Helpline:0800783 7569 E-mail: info@hitrust.org
Fax. 0115 934 9501 Website: hitrust.org
6. The Council takes a charge on the property
If we agree that you are not able to afford any of the options described above, we could in exceptional circumstances, consider taking a charge on the flat to secure the debt, with your agreement. This is similar to a mortgage, but you would not have to make any monthly payments towards the debt. Instead, when the lease of the flat is transferred (for example, if the flat was sold) the charge would have to be redeemed (paid) in full along with interest due on the amount ‘charged’.
This option would be very much a last resort, and could probably only be considered if the only alternative available to us was court action to recover (forfeit) the lease (that is, to repossess your home). There are many factors that would have to be considered before we could decide whether this would be an appropriate course of action. As a rule, we would strongly advise leaseholders not to rely on this possibility and to investigate other means of meeting the service charge.
DSS (Benefits Agency) assistance with service charges
Our understanding is that, if you are entitled to benefits such as Income Support or Job Seekers Allowance, the Benefits Agency (DSS) can help with interest payments due on loans that you have to take out in order to settle service charges for certain types of work done to your building. For more information about help from the Benefits Agency please contact:
Benefits Agency Mortgage Section
Wentworth House
350 Eastern Avenue
Ilford
Essex
IG2 1BR
Or you can ‘phone the Benefits Agency Mortgage Section on 020 8532 4200.
Pension Credit
If you are over 60 and receiving a state pension, you may be entitled to help with your service charges through Pension Credit. If you are not sure whether you can apply for Pension Credit, or to find out more information, please phone the Pension Credit Application Line on 0800 99 1234