[From the Sunday Herald]
HUNDREDS OF furious homeowners are demanding a full refund and “unqualified” apology from Glasgow Housing Association (GHA) this weekend after it emerged the landlord had been charging them undisclosed fees for home improvements.
The Glasgow Homeowners Campaign (GHC) made the discovery after the social landlord supplied homeowners with itemised bills for repairs for the first time last month. The campaigners claim GHA wilfully misled them over the cost of its city-wide home improvement programme by “hiding” a 6% management fee and a 3% contingency fee in the homeowners’ original estimates, which only listed roofing, rendering and VAT charges. Based on average bills ranging from £7000-£14,000 across 26,000 properties, these fees amount to a total cost to homeowners of between £11 million and £21m.
Sean Clerkin, the chairman of the GHC, said: “What the GHA has done by not telling homeowners for three and a half years about management fees amounts to a lie of omission and shows very clearly that there has been a concerted attempt to mislead homeowners. This proves the need for a full and independent financial enquiry.”
The £650m scheme to upgrade the city’s public sector housing stock began in 2005, but only homeowners were able to vote in favour of renovations. As GHA votes on behalf of its renting tenants, they are not liable to pay. In many cases this has meant homeowners in a block where the majority of residents are tenants being overruled by GHA and forced to meet their share of improvements despite voting against the measures.
Although they can apply for a 50% or 100% grant from the Scottish government and, in some cases, financial assistance from a council-run scheme with Glasgow Credit Union, both are means-tested so do not guarantee funding.
According to GHA, 95% of the homeowners have already paid for their improvements in full within the required 12-month period following the receipt of a bill for the works. For the 1300 homeowners with bills outstanding, however, the point of contention now is not the cost itself but the fact they feel their agent has breached its fundamental duty of honesty and transparency – a breach they argue amounts to “fraud” and entitles them to be reimbursed for the management fee.
Mike Dailley, a solicitor at Govan Law Centre, believes they may have a case. “If they were being charged bills and they’ve effectively been charged for something they never consented to, then there is a question mark there over whether they might be in breach of their fiduciary duty. One could have a potential claim on that basis.
“This now makes urgent the case for adding GHA to the Freedom of Information schedule. The Scottish government did introduce a statutory instrument to change FoI recently, but they’ve not done that yet and I think they just need to be questioned why.
“The GHA are not acting in a way any reasonable landlord would act.”
However, Paul Brown, a solicitor at Legal Services Agency, is more sceptical. He said: “I would think the management fee would only really be attackable if it was an excessive amount for the work done.”
He added: “The basic contractual argument sounds fairly weak because even if they were misled, if they actually got the benefit of the management then they’ll have to pay on that basis. The contingency fee should be reimbursed, though, if it doesn’t end up needing to be used, so you need a detailed account of the contingency fund.”
Glasgow Liberal Democrat MSP Robert Brown believes that while the fees themselves are legal, the fact they were initially undisclosed is a cause for concern. “Whatever the rights and wrongs of whether it’s there or not, the whole thing points to the inadequacy of the arrangements for taking instructions for people who are, after all, your principals in the legal sense,” he said.
“A contingency allowance is probably quite reasonable and standard practice for these types of contracts but, again, the issue is whether it’s being used properly or just used in a way which, if you like, soaks up any oddities there may be for the sake of peace and quiet.”
The row is the latest twist in a three-year battle between the landlord and homeowners over the management of the home improvement scheme, which they contend has been poorly run and overly expensive. Last year, Communities Scotland carried out an inspection into the scheme, with mixed conclusions. While it found that the association had procured its contracts “in line with good practice and EU requirements” – contrary to homeowners’ claims that contractors were charging inflated rates – it did identify weaknesses in monitoring contractors and communicating with owners, leading to the introduction of the itemised bills demanded by homeowners.
However, its replacement body, the Scottish Housing Regulator, has rejected calls for an independent financial inquiry and campaigners’ attempts to take their case to Audit Scotland are precluded by GHA’s charitable status.
A spokesperson for GHA said the landlord is “caught between a rock and a hard place” when it comes to balancing the interests of its tenants and homeowners: “To ensure that our tenants are not used to underwrite costs for homeowners, we charge owners a modest administration fee of 6%, which is significantly lower than the 10%-12% management fee charged by most factors.”
Sandra White, SNP MSP for Glasgow, believes that an independent inquiry is the only way to draw a line under the three-year debacle.
She said: “I think we need to have an investigation basically to make the people who are accountable, be accountable. The perceived problem is that many of the people who are now within the Scottish Housing Regulator were actually appointed by the previous executive to set up and work in the GHA, so I think there could be a conflict of interest in that.
“We’ve managed to move forward and get these bills broken down, but as we’ve got further and further into GHA we’re discovering something new every day. They’re duty-bound to tell homeowners what they’re charging them for, but they’d never have known about these fees if we hadn’t fought for it, which is why we have to keep fighting.”