Reporting back on the CIH South East Home Ownership Conference
14/01/09
The highly-successful CIH South East Home Ownership Conference, 'Delivering excellent home ownership services', was held on the 21 October 2008 at the Hawth Theatre in Crawley. What follows is an overview of the main sessions and some of the workshops from the day.
Steve Nunn, Director, Tower Homes Ltd, L&Q Group
Delivering excellence in home ownership services
Steve Nunn has over 18 years' experience in the affordable home ownership sector, most recently as Managing Director of Tower Homes and Sales Director for London & Quadrant Housing Trust. Steve led on Tower's approach on gaining its 'three star and excellent' Audit Commission rating in 2007.
Steve set for the scene for his presentation, describing how Tower Homes was only the second registered social landlord to get a 'three stars and excellent' rating from the Audit Commission, 18 months ago.
His session focused on the ten critical success factors that he has identified as the key things that Tower Homes did that made the difference.
'Tower Homes is unique - it's the only stand-alone specialist low-cost home ownership organisation that's ever been inspected by the Audit Commission. Which meant that the Commission needed to understand what low-cost home ownership was about.'
Since 1989 Tower Homes has helped over 13,000 buyers with its shared-ownership, equity loan scheme which equates to 1,400-1,500 transactions a year, including the shared-equity scheme. Based in Elton, it's the joint National HomeBuy Agent for South London.
Steve feels their key strength is their culture of excellence. 'We worked hard at Tower to develop it, through a number of routes. We regularly go in for awards - for external validation but also to build morale amongst staff. And we have a low staff turnover rate.'
He explained how they look for a balanced scorecard approach to awards, covering the whole range of their services, for example they recently achieved a Chartermark, an e-government award for their website, and Evening Standard awards for the design of their homes.
- Clear vision
Steve made no bones about the fact that their vision, before they were inspected, was to get a 'three stars and excellent' rating. 'We communicated that to our teams, our residents and to the Audit Commission. We wanted our staff to believe it and we developed our 'reach for the stars' branding. We looked at everything within the organisation and asked, 'Is that three star?'
'We also worked with the team to create a range of simple values to back up our push for three stars - provide a positive, first response; never walk past a quality problem; never accept average; take personal responsibility for quality. And it was key that everyone had a clear understanding of that within their role.' - Getting buy-in
Steve felt that everyone needed to be involved and that they knew their role was critical. 'All 95 staff had a list of specific objectives focused on the three stars. And we organised a themed staff conference that explored what was expected of them over the next nine months.' - Getting the little things right
Clive Woodward once said, 'If you can improve 100 things by 1%, you can make a difference.' Steve felt this was an approach to follow. 'We brainstormed what 'fantastic' could look like. Were our noticeboards up-to-date? Was everything straight? Was everything in the house font/style?' - Making it fun
With a number of younger staff at Tower, Steve's team developed quizzes and staff suggestion scheme, and they rewarded people. 'We worked incredibly hard but, on the Friday before inspection, we called everyone together and let them leave at 3pm. We were keen to show our confidence.' - Communication
Steve understood that good communication is about mixing it up. 'People absorb information in different ways. We communicated to our staff through newsletters, presentations and emails to ensure they understood the process and what they might be asked. And we ran short, sharp training sessions on some of the critical issues - half an hour on our complaints policy and how it works, what value-for-money means to us, how we get our residents involved. And we did daily briefing sessions during the week we were inspected which helped us, as a management team, know were the gaps were.' - Understand your inspectors
Steve feels that it is essential to find out more about the inspectors. 'What are their backgrounds and specialisms? It helps identify what they are likely to be interested in, what pushes their buttons.' - Preparation
The management team at Tower made it their business to read other relevant inspection reports, which are all available online, and to speak to other organisations that had been inspected. 'Through this, we found that they were really keen to see consistent information in publications and on the website.
'And we did a gap analysis. It was key for us to be absolutely honest with ourselves, looking at outperforming descriptors. But we had to prioritise - you can't do everything and we still had our day jobs to do. We decided not to go for a mock inspection but we did use the rest of the L&Q Group as a 'critical friend'. They talked to residents, looked at our files and gave us a presentation on what they felt could be improved.'
The Tower team also provided summaries of key areas for inspectors. 'We used these to fill gaps - a series of one-pagers that we hadn't really written anywhere.' - The golden thread
What Steve referred to as the 'golden thread' was showing a key link between individual objectives, team targets, and the organisational and corporate plans. 'The inspectors really liked that we linked training to these goals, and that we could evidence it through one-to-one meeting notes.' - Year-on-year improvements
'We had to demonstrate that, to get three stars, we were improving across the board year on year. And that we were concentrating on the areas that were important to our customers, with an acceptance that we couldn't do everything. We also did a huge amount of benchmarking. It was very time consuming but massively useful to show how we were doing against our peers, the private sector and developers.'
Download Tower Homes' inspection report from the Audit Commission website
Robert Wood, LEASE
Are you getting it right? Section 20 and service charges: good practice in consultations
As a solicitor, Robert has been been a legal adviser at the Leasehold Advisory Service (LEASE) for the last seven years. Prior to his appointment at LEASE, he worked in a variety of solicitor roles in local government.
There are new rules and management implications as a result of the section 20 consultation. So what does s20 apply to?
- Qualifying works
- Qualifying long-term agreements
- Qualifying works under qualifying long-term agreements
- Local authority and EU procurement rules
Section 20 doesn't apply to self-repairing leases where the leaseholders are liable to carry out the works. And it doesn't apply to any notices serviced before 31 October 2003.
Robert described qualifying works as 'works to a building or other premises, now to include improvements (s150) with a statutory limit of £250.'
Quality long-term agreements refer to contracts 'for a term of more than 12 months'. These have a statutory limit of £1,000 per tenant per 'accounting period' including VAT and on-costs. They apply where any one flat included in the proposed agreement exceeds £100.
Works to the building or premised under the terms of the agreement with a statutory limit of £250 per flat.
So who is consulted? Robert explained that those consulted were the leasehold and any recognised tenants' association representing the building or estate.
How long does it take? It's a three-stage process. There's the pretender stage which is the notice of intention, the tender stage (notice of proposals) and the contract stage (notification of reasons) with a 30-day period between each stage for responses. 'We would say to allow a three-month minimum time period.'
The notice of intention is a new procedure, giving advance warning and justification of the proposals. As the pretender stage, it means no contractors have been selected or prices yet obtained. 'It's to seeks the tenants' (resident and tenants associations) views of the proposals.'
Both the individual, and the resident and tenants associations have a right to nominate alternative contractors. The landlord 'shall try to obtain an estimate' from a nominated contractor and there is no exemption for the requirements to invite an estimate.
Between the first and second stage, the landlord has duty to 'have regard'. There is no change to original s20 wording but a new requirements for statements.
Paragraph B statement and notice of proposals, or the tender stage, means providing notification of the proposed costs. It must include a summary of the observations received.
The contract stage means notifying residents of the selected contractor.
There are some occasions when dispensation from s20 requirements can be sought (s20zA(i)). These include advance applications for dispensation where the jurisdiction moved from the County Court to LVT; urgent works; when there is an impracticability of obtaining more than one estimate. And for fast-track and paper applications, things have been simplified.
Who owns the process? There is a three-months minimum timescale and an ability to react to observations, but is this a real consultation or a sham? 'It depends on your organisation and its policy - are you doing long-term project planning? Do you have the flexibility to change? An audit trail for decisions? Who drafts the statements? And do you have joined-up management? Hopefully the whole team will be involved.'
So does it work for you? 'Leaseholders now have more say on works and service charges, and a chance to influence decisions affecting their flat. For managers, it's a longer, more complicated procedure but it's better once you've done it once. And they have greater accountability to the customer plus a greater risk of a challenge. And potentially, will it lead to higher management costs for both sides?'
Tony Moss, Best Advice Financial Planning Ltd
The effect of the credit crunch on applicants for low-cost home ownership
Tony is the Affordable Home Ownership Director at Best Advice Financial Planning Ltd. For more than seven years, he has championed the cause of low-cost home ownership to the programme supportive lenders.
Tony first talked about shared ownership loan to values. 'A year ago, 100% of share mortgages were available from the following building societies: Cheshire Mortgage Company, Kent Reliance, Manchester, Preferred Mortgages, West Bromwich, Ipswich, Leeds, Newbury, Saffron and the Woolwich.'
But there has been a deterioration in 100% support:
- November 2007 - Leeds Building Society withdrew their Near Prime Product
- January 2008 - Dudley Building Society go regional, lending and intended to purchase in five postcode areas in the West Midlands
- March 2008 - Preferred Mortgages ceased all new lending
- March 2008 - Ipswich Building Society moved from 100% to 95%
- March 2008 - Newbury Building Society go to 95% and regional
- April 2008 - Kent Reliance Building Society reduced all broker fees
- May 2008 - Saffron Building Society suspended all NBHB (new-build home buy) lending
- July 2008 - Kent Reliance Building Society stopped paying all broker fees
- July 2008 - Leeds Building Society from 100% to 95% with two hours' notice
- July 2008 - Newbury went from 95% to 90%
- August 2008 - West Bromwich Building Society suspended all prime lending
- August 2008 - Woolwich from 100% to 90%
- August 2008 - Kent Reliance Building Society control on volume, distribution control and lowering of affordable lending, inhibited total cost of mortgage and credit cards to be no more than 50% of net take-home pay
- October 2008 - Woolwich from 90% to 85%
- October 2008 - Leeds Building Society from 95% to 90%.
Which left:
- Kent Reliance - direct unfriendly, distribution and volume restrictions
- Manchester Building Society - small shared ownership lending allocation (£18m maximum lend from 1 April 2008)
- Cheshire Mortgage Company - Near Prime Lender with an entry rate at 11% interest but they do have a robust affordability calculator.
High-street names, one year ago, included:
- Abbey - 95-97%, now 90%
- Britannia - 95%, now 90%
- Halifax - 95-97%, now 90%
- HSBC - now 90%
- Nationwide - now 90%
- Woolwich - now 85%.
The deterioration in high-street support included the new-build value and LTV policy:
- 2007- National amends valuation policy, copied by Leeds in March 2008
- March 2008 - Abbey restricts new-build LTV to 75% on apartments and 85% on houses
- April 2008 - Britannia restricts new-build LTV to 80% on apartments and 85% on houses
- May 2008 - HSBC restricts new-build LTV to 75%
- June 2008 - Nationwide restricts new-build LTV to 75% on apartments and 90% on houses
- June 2008 - Britannia suspends all lending on new-build apartments and restricts LTV further to 80% on houses.
Lenders' new build options are reduced to 85% LTV for new build or conversions that are newly-converted within two years of construction.
New-build valuation policy:
- National and Leeds automatically value new build as a resale
- Halifax new-build valuations must be carried out by Colleys
- Nationwide of little concern.
The Council of Mortgage Lenders' disclosure of incentives policy was announced on 11 June 2008 and became policy from 1 September. The lender's handbook is now amended to ensure all incentives and discounts are disclosed. The Royal Institution of Chartered Surveyors and Home Builders Federation both support the Council of Mortgage Lenders' changes.
And the lender-to-broker remuneration policies have now changed. Of the 100% share lenders, none really pay broker fees anymore. Tony's company, Best Advice Financial Planning, now charge a flat fee of £350, regardless of the size of the loan. 'The Financial Services Authority prefers fees - it thinks it's more transparent. So we give applicants the opportunity to pay a fee instead.'
There is also very poor lender availability or appetite for section 106/restricted covenants policy.
- March 2008 - the Woolwich withdrew restricted staircasing support
- July 2008 - Leeds Building Society reduced to 95% (then 90%).
It which means that no 'real' 100% lenders remain. 'The Halifax, Nationwide and Leeds Building Society do support R/S but there are layered issues. For example, the Nationwide needs a 25% deposit and has a resale policy. The Leeds Building Society has a resale valuation policy. And the mortgagee protection clause must be in the standard corporation form from the Nationwide and Leeds Building Society. The Halifax wants to see it or an equivalent Local Authority Section 442 agreement to lend 90%. The Cheshire Mortgage Company wants to see it a mortgagee protection clause to lend 75%, otherwise it's 70%. Lenders can be inconsistent with their policies and interpretations, and need to be approached in the right way.'
Read more about low-cost home ownership on the Council of Mortgage Lenders' websites
For applicants with credit problems, there has been a withdrawal by Preferred Mortgages and Leeds Building Society's 'Near Prime' deal, and significant tightening of all other lenders' policies. 'The Cheshire Mortgage Corporation, part of the Blemain Finance Group, is offering terms for these applicants with entry levels currently around 10%.'
The Cheshire Mortgage Corporation aside, if anyone has a credit problem, the credit issue needs to be satisfied historically for a minimum period of a year. Although most lenders prefer three years. 'Defaults and County Court Judgments are generally capped at a level of just £250. We have identified one lender (Ipswich Building Society) than does £500 but any outstanding debt renders the applicant un-mortgageable. And there is no lending to applicants within bankruptcy - those applicants need to be discharged for a minimum of three years, though most lenders prefer six.'
Tony described individual voluntary arrangements (IVAs) as 'the modern credit scourge presented as a government-backed initiative, a quick fix to avoiding bankruptcy and unsustainable debt repayments'. 'Adverts in the paper and on TV suggest 'we can write off most of your debt.' This simply isn't true.'
'Registered social landlords need to be asking applicants robust and probing questions about their credit conduct at the initial application or reservation stage.'
Tony went on to list what he refers to a 'new, underused and niche lenders' though some don't remunerate brokers' commission or fees.
- Furness Building Society - North West only
- Ecology Building Society - 100% (only sustainable buildings)
- Teachers Building Society - 90% (only teachers)
- Dudley Building Society - 100% (Midlands only)
- Other low LTV building society options include Buckingham, Homesdale and the Melton.
Siobhan McGrath, President, London Rent Assessment Panel
The role of the LVT in helping to improve the quality of services to leaseholders
Siobhan was appointed as Senior President of the Residential Property Tribunal Service and President of the London Rent Assessment Panel. Prior to joining the London Panel in 1999, she practiced as a barrister specialising in housing, landlord and tenant law for 16 years. In addition to a variety of publications on landlord and tenant law, she was one of the joint-editors of the Housing Encyclopedia and the Housing Law Reports for six years. She has also been a part-time lecturer at the London School of Economics.
What is the Leasehold Valuation Tribunal? 'It's sponsored by Communities and Local Government (CLG) but independent so neither Communities and Local Government or the political parties can tell us what to decide. The tribunals are made up of three people - a chair (a lawyer or a surveyor), plus a lay person, and a surveyor with expertise in housing management or an expert valuer.'
'It's one of the things that makes us different from the court - we examine things with an expert eye. And the lay person represents the community and ensures that no jargon is used.'
The types of cases dealt with by the Leasehold Valuation Tribunal includes enfranchisement, service and administration charges, the right to manage and variations of leases. 'We deal with forfeiture so, for service and admin charges, a landlord has to get a determination that service charges are payable, ie that they are payable under the terms of the lease, and there is an obligation or discretion, and a mirror obligation on the leaseholder to pay for it. It includes looking at ss18-30 of the Landlord and Tenant Act, 1985, that reasonable consultation has been carried out, and that the tenant has been notified within 18 months.'
The Leasehold Valuation Tribunal deals with 8,000 cases a year of which 2,500 are service charge cases.
Other common applications are about admin charges. 'It isn't that part of the service charge that you allocate to administration. It means those charges that are payable to an individual tenant to a landlord, eg interest payments, permission for information (s11 Commonhold and Leasehold Reform Act 2002).'
Would you use the Leasehold Valuation Tribunal as a management tool? 'No one thinks 'let's go to court' as a management tool, but we hope certain aspects can be of assistance in leasehold management. It's useful in service charge cases - if you anticipate problems, you can make an application for a determination of payability before carrying out works (section 27A (3)). Or, for small flats, make a joint application with the leaseholders if they think the work is reasonable and they don't want to wait three months (section 20ZA dispensation).'
And what about lease variation - is it necessary and can it be done? 'The lease has to fail to make reasonable provision for certain matters.'
Using the LVT for resolving disputes. 'It can be used to prevent disputes from escalating by bringing in an independent (and expert) third party to decide. Once a matter is with the LVT, we have a mediation services and reconciliation. But you have to go in with the attitude that there is room for compromise.'
'It's also about anticipating problems and informing leaseholders of the right of independent adjudication. In that way, I hope we can keep the LVT low key but accessible. It's a staged approach to management.'