Paying for the costs of major works to your property

Paying for the costs of major works to your property

Introduction We are responsible for thousands of homes and are committed to keeping those homes in a good state of repair. This means that from time to time we will need to carry out major works, such as repairing the structure of a building, maintaining a lift or replacing windows. When we carry out major works to your block, your lease says that you have to contribute a share of the cost. We recognise that it can be difficult for some leaseholders to meet the costs of major works. We therefore offer a number of payment options. In some circumstances as prescribed by legislation, Councils are required to offer a loan to leaseholders (Housing act 1985 section 450a housing (service charge loans) regulations 1992). These loans are subject to strict criteria. If you meet the criteria for such a loan you will have been made aware of this when your invoice was issued. 1

What are the options for paying for major works? The normal payment options for major works are: Up to twenty four months interest free payments 12mths for accounts less than 5,000 24mths for accounts over 5,000 - You will have been sent a standing order mandate with your invoice, which you should complete and return to your bank if you want to pay by this method. Help from the Department of Work and Pensions - Leaseholders who get income support or income based Job Seekers Allowance may get help from the Department of Work and Pensions. They will not usually pay for the cost of major works but may be able to help you pay any interest on a loan or a mortgage taken out to pay for your major works. For more information contact the DWP on 0845 606 0265 for older people who receive a pension. A loan from your mortgage lender, or any other High Street lender If you have a mortgage you may be able to apply for an additional loan from your mortgage lender. If your mortgage lender agrees to give you an additional loan, you may be able to extend the mortgage period and pay the same monthly payments, or increase the monthly payment to cover to additional loan. You should contact your mortgage lender to discuss this option. If you do not have a mortgage it may be possible for you to take out a mortgage to meet the costs of your major works. Or you can apply for a loan from any high street bank / building society. 2

A Mandatory Loan These loans are available to help leaseholders pay their contribution towards the cost of major works. The entitlement to these loans and the terms attached to them are set by the Government. The Government rules say that you can qualify for a loan if your annual service charge is more than 2,800 and your Major Works charge is at least 940. The minimum loan amount is 940 and the maximum is 37,350. Your property must have been purchased under Right to Buy less than 10 years ago. (Figures quoted are correct as at April 2015, they are however revised annually with inflation) If you are eligible for a Mandatory Loan we will tell you when we send you your service charge account. If you wish to accept a Mandatory Loan you must respond in writing within 6 weeks. If you are not entitled to a Mandatory Loan, or the loan does not cover the full amount that you need to borrow and you can prove to us that you have not been able to obtain a loan from elsewhere, then we may be able to grant you a discretionary loan. Additional options for those in financial difficulties If you cannot pay or get further lending or a loan you can talk to us about a discretionary loan from the Council. If you already have a mortgage we can only consider your application if you have been refused an additional loan from your existing lender. A loan from the Council means that the whole or part of the service charge remains unpaid. It is secured by way of a legal charge on your property, which means your property cannot be sold without the debt being cleared. There are two types of loan which we can offer: 3

1. Discretionary loans (regular repayments) Interest is charged monthly on the debt and is a variable interest rate. The interest rate is set at the local authority mortgage interest rate, which at 1st April 2015 is 4.86%. This rate is reviewed every 6 months. Please ring us on 0114 273 5590 for the current rate, alternatively visit our website www.sheffield.gov.uk. The following conditions apply to discretionary loans (regular repayments) You must occupy the property as your only / principal home. The loan is in respect of a service charge for repairs and improvements. You are unable to secure further lending from a minimum of two high street lenders, one of whom must be your current lender if you have one. You must provide documented evidence of the refusals. There is sufficient equity in your home to allow for a further loan. You provide details of your current mortgage and any other mortgage or charge on your property. Terms of the discretionary loan (regular repayments) The loan is secured by a legal charge on your home. You will have to repay the loan by equal monthly installments of capital and interest. You pay the loan over a period to be agreed with us. You pay an administration fee of 150.00. You pay the legal fee to complete the mortgage deed. This is 200.00. (The legal fee will be refunded if the application is refused and no legal work is carried out). You may pay the loan in full at any time without penalty 2. Discretionary loans (Deferred payment) The amount owed is secured as a charge against the property, and remains unpaid until the property is sold / transferred at which time the full amount, plus interest, would be paid in full. Interest is charged monthly on the debt and is a variable interest rate. The interest rate is set at the local authority mortgage interest rate, which is as quoted above. The following conditions apply to discretionary loans (Deferred payment) You must occupy the property as your only / principal home. The charge is in respect of a service charge for repairs and improvements. 4

You are unable to secure further lending from a minimum of two high street lenders, one of whom must be your current lender if you have one. You must provide documented evidence of the refusals. There is sufficient equity in your home to allow for a further loan. You can demonstrate that you are unable to sustain loan repayments You provide details of your current mortgage and any other mortgage or charge on your property. Terms of the discretionary loan (Deferred payment) The loan is secured by a legal charge on your home. You pay an administration fee of 150.00. You pay the legal fee to complete the mortgage deed. This is 200.00. The legal fee will be refunded if the application is refused and no legal work is carried out. You may pay the loan in full at any time without penalty How do I apply for a discretionary loan? If you think you meet the conditions for a discretionary loan and agree to the terms you can ask for an application form by contacting one of our finance officers on 0114 273 5590. Once we get your application it will be given full consideration and we will make a decision in principle whether to offer you a discretionary loan. If we make a formal offer and you decide to accept, you will need to make a payment of 350.00 along with your acceptance. 5

Other costs The administration charge will cover items that we will have to pay for, such as bankruptcy searches, land registry registration as well as our processing charges. For further information on payment options please contact us on 0114 273 5590. Other Important Information If you apply for and are granted a discretionary loan, you will need to appoint your own solicitor to administer your part of the land registry charge. This is a legal requirement, and something which you will need to arrange and pay for yourself We strongly advise leaseholders to seek independent financial and legal advice, and in the case of the deferred payment loan you should talk to family members before making the application to make sure that it is the appropriate solution. You should also be aware that your home is at risk if you do not meet the repayments or other obligations within the legal charge deed. Property Valuation In certain circumstances a valuation of your property is required. This will be where the value of any secured borrowing including the value of our deferred repayment loan may exceed 70% of the property value. The cost of a valuation is 125 and is payable in addition to costs already detailed in this leaflet. 6

This document can be supplied in alternative formats, please contact: Sheffield City Council Financial Services Tel: 0114 273 5590 www.sheffield.gov.uk When you have finished with this document please recycle it 80% This document is printed on 80% recycled paper DP18020