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Volume 2
Annex G Recovery Of Expenses And Repayment Charges

Introduction

G.1. Local authorities have new powers under the 2006 Act to enforce work and demolition notices when owners have failed to comply with them.

G.2. The Act gives local authorities powers to recover costs from the owner in these situations.

G.3. This annex provides information to local authorities on these new powers. This is non-statutory guidance, so local authorities do not have to have to have regard to it. It does not offer a legal interpretation of the Act, and local authorities should seek their own legal advice to ensure they are fulfilling the requirements of the Act.

G.4. But authorities may find it useful to consider the issues which this annex looks at. We provide references to sections of the legislation in the left hand margin where the guidance is referring to specific requirements or powers in the Act.

G.5. Local authorities can also recover expenses and issue repayment charges to recoup costs where they have enforced the repairing standard. The Scottish Government has produced separate guidance on this, which is available at www.scotland.gov.uk.

Summary of new powers

G.6. The following flowchart summarises the key stages of the new powers to recover costs:

Notice to owner on recovery of expenses

G.7. The local authority will want to notify owners if it wishes to recover expenses in a lump sum (although there is no statutory requirement to do so).

s59

G.8. And if the authority decides to allow payment by instalments, it must serve a notice on the owner of the house. This can include the owner of non-residential premises where the local authority has had to enforce a work or demolition notice, or carry out work as part of a maintenance plan. Annex E provides further information on the requirements for serving documents.

G.9. The notice should set out the expenses which the authority is reclaiming from the owner.

s59 (1), (3)

G.10. These expenses can include:

• expenses which the local authority has incurred in carrying out work and demolition notices;
• any administrative expenses which the authority has incurred in connection with the works, or with the payment for the works; and
• interest, at such reasonable rate as the local authority determines. This can apply from the date when it serves a demand for payment until the whole amount is paid.

s59 (6)

G.11. But the expenses cannot include any costs incurred in demolishing a house which the local authority has acquired for demolition.

s59 (4)

G.12. The local authority can declare that owners are to repay these expenses in instalments.

G.13. It can decide the number and time period for these instalments.

s59 (1), (3)

G.14. The local authority will need to consider what costs it includes in the "administrative expenses". But these expenses must be connected with carrying out work or demolition set out in a notice it is enforcing.

G.15. There is no standard form for local authorities to use when issuing a notice on recovery of expenses. But they should ensure that the form they use sets out the expenses that are due, any interest on these, and when instalments are due (if applicable).

Repayment charge

Part 7

G.16. The Act gives a local authority the power to issue a repayment charge against living accommodation to recover these costs. But it cannot issue a repayment charge if it has enforced a notice against non-residential premises. The local authority should pursue businesses through the courts in the usual way to recover these costs.

G.17. Local authorities should continue to issue charging orders under Schedule 9 of the Housing (Scotland) Act 1987 to recover costs where it has enforced notices under that Act.

s174 (a)

G.18. Scottish Ministers have specified the form for a repayment charge ¹¹. Local authorities must use this form when issuing a repayment charge.

s172 (1), (3)

G.19. The standard form ensures that the repayment charge will:

• specify the repayable amount and the living accommodation which it applies to;
• provide that the repayable amount is charged to that living accommodation; and
• specify that it is repayable in 30 equal annual instalments.

s172 (2)

G.20. The repayable amount is the lowest of:

• the expenses which the local authority has incurred in carrying out a work or demolition notice (including any administrative expenses and interest allowed by s59);
• any lower amount which the local authority determines; or
• any amount which Scottish Ministers prescribe by order.

G.21. At the point of publication of this guidance, Scottish Ministers have not prescribed such an amount. Local authorities will be advised if this happens.

G.22. The local authority does not have to issue a repayment charge in every case. For example, an owner might choose to pay off the full sum set out in the notice to recover expenses. Or he or she might agree with the local authority to pay off the amount in instalments as set out in the notice, where this is over a shorter time period than the 30 years which a repayment charge requires.

G.23. It will be up to the local authority to determine in each case whether or not to issue a repayment charge against the property.

Registration of repayment charge

s194 (6)

G.24. The local authority must register the repayment charge in the appropriate land register.

G.25. The authority should already have processes in place for identifying properties and registering notices in the register.

G.26. There will be a cost for registering repayment charges. As at autumn 2007, this was £30 per registration.

s173 (1), (2)

G.27. The registration of the repayment charge by the local authority is proof that there is a charge against that living accommodation. A registered repayment charge has priority over:

• all future burdens and incumbrances on the same living accommodation; and
• all existing burdens and incumbrances on the same living accommodation except any charges created or arising under:
• any provision of the Public Health (Scotland) Act 1897 (c.38) or any Act amending that Act;
• any local Act authorising a charge for recovery of expenses incurred by a local authority;
• Schedule 9 of the 1987 Act (charging order);
• Section 172 of the 2006 Act (repayment charge); or
• any Act authorising advances of public money.

G.28. The repayment charge will remain on the property until it has been paid off or redeemed early (see payment of charge below for more information).

s173 (3), (4)

G.29. The local authority can enforce a registered repayment charge against any person whose name is on the title of the charged living accommodation. But this does not apply to:

• a third party who acquires right to the charged living accommodation (whether title has been completed or not) in good faith and for value before the repayment charge is registered; or
• any person deriving title from such a third party.

Payment of charge

s172 (3)

G.30. The repayment charge will specify that it is recoverable in 30 equal annual instalments, payable on the same date each year.

s172 (5)

G.31. But the person who owns the living accommodation, or any other person who has an interest in it, may pay the repayment charge off early. In this case the person and the local authority should agree the sum for the person to pay. If they cannot come to an agreement on this, the local authority and/or person should apply to the Scottish Ministers to determine the amount.

s174 (b)

G.32. Scottish Ministers can make any provision they think fit about the repayment or early redemption of amounts repayable under a repayment charge. They will do this by order. As at the publication of this document Ministers have not made any such provision. Local authorities will be advised if this happens.

Discharge of repayment charge

s172 (6)

G.33. Once the local authority has received the 30 instalments, or the owner or other interested party has redeemed the charge early, the local authority must register a discharge of the repayment charge.

G.34. Scottish Ministers have specified the form in which the discharge of a repayment charge should be ¹². Local authorities must use this form.

G.35. Again, there will be a charge for registering this (see paragraph G.26).

s173 (5)

G.36. Registering the discharge serves as evidence that the repayment charge has been repaid.

Summary of Key Points

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