Tenement dwellings - provision of Building Reserve Funds: report

9. Conclusion

Our research found general agreement that maintenance and repair of tenements in Scotland needs addressing by a combination of central and local government, professionals, third sector and the general public. This is an important policy area given:

• Prevalence of tenements in urban Scotland;
• variability of effective maintenance and repair of communal assets;
• impacts of disrepair on occupant health and wellbeing, wider safety concerns and communities;
• substantial efforts by pro-active owners and professionals; and
• importance of the housing market within our broader economy.

Responsibility was acknowledged by owners, stakeholders and local government for repair and maintenance. We consulted individuals across these groups who were already proactive in this area for personal and professional reasons.

Although differences depending upon typology of tenements were discussed, the need for policy interventions to address tenement repair and maintenance extended towards:

• All types of tenements, including different configurations and mixed use,
• All ages of tenement, not restricted to pre-1919 properties,
• All tenures of property, with the acknowledgement that factors and/or housing associations are already active in enabling repairs and maintenance of common areas.

The proposal of the Building Reserve Fund is welcomed, but only as part of a wider suite of measures to encourage coordinating and paying for repairs and incentivising regular maintenance of tenements. This is largely because the availability of funds for repair was not the sole reason for disrepair. Other barriers include:

• Property deeds- often unclear, contradictory,
• Multi-units within buildings a difficult legislative area throughout the world, balancing common and individual property,
• Ownership, tenure and circumstances subject to change,
• Some owners will not see opportunity cost of short-term or long-term investment,
• Collective decision making, especially involving money, is challenging,
• Affordability can be a real issue, for example for owner occupiers in lower value properties.

In fact, a sinking fund was seen as a small piece of the jigsaw to encourage long-term behaviour change.

Devising a points system for a BRF which would be regarded as both clear and fair was not seen as practical since:

• Tenements incorporate a mix of number of units, configurations, and ages,
• Buildings are in different existing conditions,
• The construction market and costs of material and labour fluctuates over geography and time,
• People and organisations owning tenements have a host of different circumstances.

Research participants raised the mandate of BRF in itself, would not ensure:

• Understanding of repairs and their priorities,
• Sufficient accumulation of funds to cover all possible repairs,
• Fair coordination of funds amongst tenement owners,
• Agreement from owners on the scenarios to draw down on funds,
• Organising repair work with appropriately skilled contractors.

One local authority member of staff taking part in a discussion group explained:

‘It’s really complicated. Because you are dealing with people. And groups of people, in different circumstances and with different views on what is necessary, and different financial positions. Some people will really value where they live and others don’t. So how do you expect them to agree on when to draw down on any pot, even if they are mandated to pay in. There’s still decision making to do, there’s still work to coordinate. Even with funds available, it’s not easy. And you can’t legislate for that part easily.’

Therefore, the establishment of BRF to help address repairs to tenements would have to be complimented by:

• Regular surveys/ detailed inspection reports (as recommended by the TWG),
• Advice for tenement owners (often provided individual Local Authorities and valuably supported by Under One Roof^[57]),
• Transparency on responsibilities and arrangements at the time of purchase,
• Transparency on coverage and spend through charges by Factors, including Housing Associations,
• A collective arrangement between tenement owners such as an Owner’s Association,
• Tools for tenement owners to coordinate all of the above in a transparent way (such as a digital solution).

Research participants were concerned that any pooling of money should involve two principles which may be contradictory:

• Minimal bureaucracy for members of the public and public bodies to navigate and/or administer,
• Sound financial management procedures and safeguards.

Ultimately for change to be encouraged, there needs to be some incentives that can unite owners to negotiate any barriers in coordination. One tenement owner suggested in their response to TWG’s consultation:

‘The working group has made a good start on the sticks with which to beat tenement owners into maintaining their buildings, but I'd like to see some carrots in the way of grants or, ideally, the removal of VAT from mutual repairs. I am aware this is a Westminster power, but there is surely lobbying which can be done’

In our discussion groups, held in 2021, participants were very conscious of the financial impact of the pandemic for individuals, businesses, local authorities and the Scottish Government.

One of the key learnings from the research is building up a pot of money for repair jobs could be enabled by a BRF, but policy interventions and public funding should be directed towards encouraging regular, high-quality maintenance as a means to:

• Mitigate need for repairs
• Reduce overall costs for owners
• Help spend on tenements to be as regular and predictable as possible for owners.

Indeed, this research flagged the need for collective action to address three related areas for tenements:

1. Outstanding Repairs

2. Future repairs

3. Regular maintenance

Stakeholders’ understanding of the BRF proposal consisted of- a sinking fund being built up over time, through a mandatory contribution by owners, to be utilised by owners for major repairs by collective agreement. It was highlighted by stakeholders that a BRF could potentially help address the third area- future repairs. However, there was concern for the first two areas. Outstanding repairs could be urgent, in which case waiting for pot to build up would be too late. If the fund is to be used for major repairs then there still needs to be arrangements for payment of funds for regular maintenance, on the basis that this would mitigate future repairs.

A Housing Association Representative explained:

“The condition of so many tenement properties are now beyond a sinking fund level. You can't start putting monies into a sinking fund before you start addressing the problems with the building just now so you would need to have major repairs carried out before you bring the building to a level before you can start looking at putting monies into a sinking fund.”

Affordability is a key concern, one Local Authority commented in their TWG Consultation response: ‘Those owning in the properties in need of most repair may be least able to afford to contribute the necessary larger contribution to the sinking fund.’

One tenement owner reflected: ‘isn’t requiring owners to pay into a sinking fund at the same time as payments for a backlog of repairs are needed like trying to fill a bath with the plug out?’

In summary, this research points to Scottish Government considering a combination of legislation, guidance and intervention as follows:

1. Mandatory buildings insurance which covers common areas of tenements,

• addressing gaps in current arrangements.

2. Mandatory factoring for tenements,

• either by professional factors or self-factoring by established Owners Associations.

3. Extending the application of Tenement Management Scheme’s definitions of scheme property, scheme decisions and shared costs to all tenements, not only those with gaps in title deeds,^[58]

• acknowledging a largely archaic system and mitigating costs for changes to title deeds.

4. Mandatory maintenance accounts to utilise for maintenance, including repairs and environmental upgrades,^[59]

• ‘repairs and replacement’ already fall within definition of ‘maintenance’ in the 2014 Tenements Act,
• utilising the management accounts procedures already part of Tenement Management Scheme.

5. Clear communication and checks of the above at point of sale by conveyancing solicitors,

• acknowledging importance of point of sale in explaining legal rights and responsibilities.

6. Prioritisation of outstanding repairs determined by regular professional surveys,

• as a way to clearly establish repair priorities and likely costs.

7. Transparency on projected and actual spend on common maintenance and repair by factors,

• building upon existing best practice.

8. Supporting sources of guidance and new technology to empower groups of owners and Owners Associations to make and follow through TMS scheme decisions,^[60]

• in light of a move away from a culture conducive to in-person stair meetings.

9. Incentives to encourage regular, high quality maintenance supply and demand,^[61]

• even small incentives to encourage behaviour change.