Leasehold nightmare: why owning a council flat could land you with a ‘wipeout’ bill

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Like many people, teacher Neil Hosken is being careful with money as the cost of living crisis pushes up his food and energy bills, and his low-cost mortgage deal comes to an end. So he was shocked to receive a letter from the council warning of a bill of up to £44,000 for repairs to his home.

Hosken is one of a growing number of leaseholders being hit with enormous bills from local authorities for their estates. Emma Clarke, a neighbour on the Taverner and Peckett Square estate in Islington, got a bill about the same size as the deposit she put down on her one-bedroom flat last May. Another neighbour, who lives in a three-bed flat, faces a bill of up to £61,000.

Hosken says the cost is completely unaffordable, and even breaking it down over five years – one option available – would almost double his current mortgage. “Even with payment plans, unless they are over decades, it simply won’t be possible to find many hundreds of pounds extra a month,” he says.

The neighbours are part of a group of an estimated 60 leaseholders who own flats on the London estate and are being charged for new windows, electrical work, scaffolding, fire safety measures, painting, roofing and brickwork.

These estimated bills are similar to those received by other leaseholders on council-run estates. Since council tenants are not liable for maintenance and repair costs, the bill for entire blocks is divided between leaseholders and the local authority freeholder.

The system has been criticised by campaigners who say that it undermines right-to-buy legislation set up to get people on the property ladder, and puts low-income leaseholders at risk of bankruptcy.

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Last month, the Observer featured the case of an artist, Jamie Harris, who faces a bill of £98,000 towards repairs to the building in which he owns a flat. Unlike residents in privately owned buildings, local authority leaseholders have no right to decide the scope and timing of proposed works, or to request alternative quotes from contractors.

View image in fullscreenJamie Harris, who faces a bill for £98,000 for repairs. Photograph: Sophia Evans/The Observer

In Islington, Hosken says he had budgeted for major works since he bought the flat in 2015, but the amount quoted “totally eclipses” his savings. Payment plans of up to 10 years have been offered by the council.

When she bought her flat, Clarke estimated the cost of the work would be £10,000. “I don’t feel as if I can enjoy my new home as I have this huge bill looming over me. It has left me with a lot of financial insecurity and, to be honest, a constant state of anxiety and worry.

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“I am feeling more regretful than joy about my purchase,” she adds. “I live alone, and all outgoings come directly from my pay. And I’m truly concerned about whether I can afford to stay in my home.”

Another resident, who asked not to be named, has been living on the estate for almost 20 years and received an estimate of just over £50,000. “As the cost of living crisis deepens this could mean leaseholders simply cannot afford to continue to live in the property,” he says.

I am incredibly worried. I really fear it will sink me both financially, and in terms of my mental healthNeil Hosken, resident

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Another flat owner, who also wished to remain anonymous, completed his purchase earlier last year only to receive an estimate of between £42,000 and £46,000 – similar to the deposit that had taken him a decade to save for. “I finally got my first flat in an area I love, and, in the blink of an eye, I’ve been whacked with this bill. I’m not able to find that sort of money on my salary while also paying my mortgage.”

Augusti George Rego, who is retired, has been in his flat since 1981 and received an estimated bill of between £57,000 and £61,000. “I would expect a Labour council to be more caring to the needs of ordinary citizens. This will take up most of my savings, leaving me at the mercy of friends and family,” he says.

Sebastian O’Kelly of campaign website Leasehold Knowledge Partnership says he receives three calls a week from people faced with “absolute wipeout local authority major works bills”. They are by no means unusual, he says. In many cases, local authorities do not have contingency funds, and the bills come all at once, resulting in private leaseholders having to foot their share.

The attraction of buying a local authority flat is that it puts homeownership within the grasp of those who might otherwise be priced out of the market. “The downside is that a council is your landlord, it has no interest or ability to control costs, and there are very high capital expenditures every so often,” says O’Kelly. However, he adds, one upside for these leaseholders is they do not have to pay for the cladding upgrades that have severely affected people on private estates.

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Islington council’s executive member for homes and communities, councillor Una O’Halloran, says works on the Taverner and Peckett Square estate are at an early stage, and costings are “indicative” and “demonstrate value for money”.

“They will be subject to a statutory consultation with leaseholders, and we’re looking forward to listening carefully to their feedback,” she says. “Leaseholders will only receive a formal invoice for payment once the work is complete and the final costs have been agreed, which we anticipate will be around late 2024 to early 2025.”

The leaseholders are due to receive section 20 consultation notices that will confirm how much they must pay. Hosken says they will try to work with the council to reduce the scope of the works to essential repairs but, if they cannot make headway, may have to resort to legal action. “I am incredibly worried. I really fear it will sink me both financially, and in terms of my mental health,” he adds.

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