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Volume 3
Chapter 5 Maintenance Accounts
Legislation
s194 (1)
What is a "maintenance account"?
5.1. The Act defines a maintenance account as:
"a bank or building society account opened for the purpose of holding money to be used to pay costs incurred in connection with any work carried out for the purpose of maintaining premises consisting of two or more premises".
What new powers do local authorities have?
5.2. Under the 2006 Act, local authorities have new powers to pay missing shares in to maintenance accounts. They can also pay grants to cover certain administration costs of maintenance accounts.
5.3. Local authorities can use these powers in relation to any maintenance accounts which owners have set up. The powers are not restricted to maintenance accounts set up to support maintenance plans following maintenance orders.
s50
Missing share (paragraphs 5.4-5.8 are statutory guidance)
5.4. Local authorities can pay in a missing share only where:
- a majority of owners have agreed to carry out the maintenance (for which they are responsible by virtue of a real burden or otherwise); and
- all owners have received notice that they should pay their share of the funds in to a maintenance account; and
- an owner has not complied with this; and
- any of the other owners have applied to the local authority to pay in the missing share.
5.5. The notice to owners must set out:
- the maintenance which is needed;
- when this is to be started and finished;
- when the maintenance was required and/or agreed (including the names of those who agreed it);
- an estimate of the costs of the work, and why they consider this to be reasonable;
- what the share of the costs is for each owner, with an explanation of how they reached this amount;
- information on the maintenance account, including where it is held and the number of it; and
- the last date for owners to pay their share into the maintenance account.
5.6. Before paying in a missing share, the local authority must satisfy itself that:
- the maintenance is reasonable; and
- the apportionment of costs to that person is correct in terms of real burdens, or any development management scheme or tenement management scheme which applies.
5.7. And, it can only pay in the missing share where:
- the owner is unable to pay in the funds; or
- it is unreasonable to ask them to do so; or
- the owner cannot be identified or found, by reasonable inquiry.
5.8. The local authority should pay the missing share directly in to the maintenance account.
s51
Grants for the administration of maintenance accounts (advisory guidance)
5.9. Local authorities can also pay grants to owners. But these can only be to cover any expenses the owner faces when they open, wind up or close a maintenance account.
s59 & Part 7
Recovery of costs
5.10. The local authority can recover the payments it makes in relation to missing shares. This can include any associated administrative expenses, and interest at a reasonable rate from the date when the authority first serves the request for payment.
5.11. It must serve notice on the owner whose share it paid if it wants to recover the expenses in instalments.
5.12. The local authority can also issue a repayment charge against the property to recover these expenses. See Annex E Recovery Of Expenses And Repayment Charges for more information.
5.13. But the local authority cannot recover the cost of grants given for the administration of maintenance accounts.
Policy and Good Practice
What is a maintenance account?
5.14. The 2006 Act does not introduce the concept of a "maintenance account". The Title Conditions (Scotland) Act 2003 and the Tenements (Scotland) Act 2004 already use this term, and define it in a similar way to the 2006 Act.
5.15. The local authority can use its new powers in relation to any maintenance account. It is not restricted to helping only where owners have set up a maintenance account as part of the implementation of a maintenance plan under the 2006 Act.
5.16. The existing use of maintenance accounts is likely to vary between local authorities. And few banks or building societies will have a particular product which they brand as a "maintenance account". But they may offer similar products, such as a treasurer's account.
5.17. If owners approach the local authority for help with a missing share or with administrative costs, the local authority will want to ask them to show that they have set up the account in question to hold funds for maintenance to common areas.
5.18. Local authorities might want to start thinking about how to encourage the use of maintenance accounts, both as part of maintenance plans and also more broadly for premises which contain 2 or more houses.
5.19. The local authority cannot provide financial advice. But if might find it useful to produce information on the benefits of setting up an account, and on what owners should be looking for (see also Volume 5 Scheme of Assistance). The title deeds of the houses may already make arrangements for maintenance payments or for factoring. But if not, the local authority might advise owners to think about issues such as:
- whether owners will be expected to pay in their shares on the same date;
- how payments will be identified from each owner;
- arrangements for withdrawals; and
- what happens when an owner moves away.
5.20. It might also be useful for the local authority to contact local banks to advise them of the particular features of a maintenance account. The banks might then be able to provide a suitable product more quickly if owners approach them to set up an account.
Missing share (paragraphs 5.21-5.40 are statutory guidance)
5.21. There are restrictions on when the local authority can pay in a missing share, in terms of notification, the maintenance required, the allocation of costs, and the situation of the owner. The following sub-sections (paragraphs 5.25-5.38) provide more information on these.
5.22. Even if these situations are met, there is no obligation for the local authority to pay in the missing share.
5.23. But the local authority will want to think about the potential impact of paying in the share. For example, the owners may have set up the maintenance account to support the implementation of a maintenance plan. If the local authority decides to pay in the missing share, this could avoid the situation of the local authority having to intervene to enforce the maintenance plan, if it is only the lack of one owner's share which is holding up the work.
5.24. Owners have the option of covering the cost of a missing share themselves, and pursuing the non-paying owner through the courts to recover these costs. Local authorities may want to make owners aware of this route in the first instance.
Notification
5.25. Paragraphs 5.4-5.8 set out the situations where the local authority can pay in a missing share.
5.26. All owners must have received notice of the maintenance, its timescales, costs and so on. The local authority will need to ensure that owners are aware that they have to do this before they can approach the authority for a missing share, for example by encouraging one owner to coordinate a notice to all the others. Owners should also be able to prove that they have served this notice when they approach the local authority.
5.27. It would be good practice for any group of owners who are setting up maintenance accounts to follow this procedure. So the local authority might want to highlight this in any information it provides about maintenance accounts.
Is the maintenance reasonable?
5.28. The local authority has to be satisfied that the maintenance is reasonable before it can pay in a missing share.
5.29. If the owners set up the account to implement a maintenance plan, it is likely that the local authority will already have assessed the maintenance as part of its approval of the plan. But if the work in question is additional to what the maintenance plan set out, the local authority will need to assess this separately.
5.30. Similarly, if the local authority has not served a maintenance order on the house, it will need to think about how it will assess the maintenance to ensure that it is reasonable. It might want to use the same process as for assessing maintenance plans.
Allocation of costs
5.31. The local authority can only pay in a missing share if the allocation of costs is correct in terms of liability under real burdens, TMS or DMS.
5.32. As with the assessment of maintenance plans, the local authority will need to think about how it will satisfy itself in relation to this.
Situation of the owner
When is an owner "unable" to pay?
5.33. The Act does not specify when a person is unable to pay. It will be up to the local authority to decide whether or not this is the case.
5.34. It will want to think about what framework to apply when owners have requested the local authority to pay a missing share. It might want to develop a framework which other areas of the authority already use, such as using a means test in cases of debt recovery.
5.35. In all cases the authority will want to ensure that its decision is fair and transparent.
When is it "unreasonable" for an owner to pay?
5.36. Again, this will be up to the local authority to determine. It is likely that local authorities will make this assessment on a case by case basis, but they should ensure that they have a clear framework for making these decisions.
5.37. The local authority should ensure that any information to owners on its power to pay missing shares makes it clear that it can only do this where the owner is unable to pay or it is unreasonable to expect them to pay. It would be helpful if any information also sets out how the local authority will make those decisions.
Owner cannot be found
5.38. It might be that the local authority is able to identify absent owners through, for example, landlord registration. In this situation, local authorities may wish to advise owners of their rights to pursue the absent owners through the courts in the first instance.
Recovery of expenses
5.39. The local authority can recover the costs it incurs in paying in a missing share. This can include the share itself, any administrative expenses in relation to making that payment, and interest at a reasonable rate from when it first serves the request for payment.
5.40. It would be good practice to serve notice on owners it if intends to recover costs. And it must give notice of any decision to recover these costs in instalments.
5.41. Annex E provides further information on the recovery of costs and repayment charges .
Grants for the administration of maintenance accounts (advisory guidance)
5.42. The local authority might want to advise owners that it can provide assistance in these circumstances. The cost of each grant is likely to be fairly small, so the local authority might take the view that it is in its interest to provide this support if it enables owners to set up an account to get maintenance done.
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