Published: 13 September 2013
COMPARATIVE STUDY: H.P.F. Lease / General Lease.
5 Main Points to consider:
1. Asset Management Fund Fee ( AMFF ).
2. Community Capacity Building ( CCB ) Program.
3. Property Insurance.
4. Security of the Co-op / Ongoing Status.
5. Term of the Lease.
H.P.F. ( Housing Provider Framework) :
1. Asset Management Fund Fee - The AMF fee has been increased by 49%, as from 1/7/13. This represents an annual cost to SEHC of $505,000. This fee is paid to DHS to cover the cost of (i) Local Council Property Rates, (ii) Water Rates (iii) Body Corporate Fees (iv) Upgrading and Structural Maintenance ( Roofs, Carport Roofs, etc.)
2. C.C.B. Program - The Community Capacity Building program operates under a formula that is complicated and outdated, because it is based on a presumed Co-op surplus each year. The nominal or ‘paper’ figure’ for this can be from $250,000 up to $500,000. In reality, any surplus is not normally as high as that.
3. Property Insurance - The DHS self insures the 150 SEHC properties that they own, under a blanket cover ($100m.) for all Govt-owned housing properties. This insurance is managed by the Govt. insurer, Victorian Managed Insurance Association ( VMIA ).
4. Security / Co-op Status - Our Co-op is secure currently, because we have signed the HPF lease until June 30th, 2014. Also, we are registered as a Housing provider with the Housing Registrar, which oversees our financial and regulatory performance and management. As an incorporated RHC we are required to meet key performance markers (KPM’s), and to report these to the Registrar on a regular basis.
5. Term of Lease - The HPF program was originally founded on a 5 year term (Dec2007-12) and it is generally intended to continue on that basis.
General Lease :
1. Asset Management Fund Fee - Under a General Lease, SEHC would no longer have to pay the AMF fee, thereby saving $505,000 per annum. However, we would then be liable to pay council property and water rates, which for this year 2013 are estimated to cost about $182,000. We would also be responsible for Upgrades and Structural maintenance, and all other urgent, periodic and ongoing maintenance. The situation over the last 2-3 years has been that DHS have not spent anything on urgent maintenance, and that the Co-op has been paying for much or most of the Structural maintenance. South East have paid AMF fees of $315,000 (2011-12), $327,500 (2012-13), and projected $505,000 in 2013-14, and we have not seen much result for that money other than local govt and water rates paid. Also, the Co-op Maintenance and Property Officer has estimated that over the next 3 years, up to 5 properties may need major structural maintenance at an estimated overall cost of around $50,000. It is believed that the Co-op could meet that total cost over that 3 year period, without any significant impact on our budget.
2. C.C.B. Program - Under a General Lease, this program would no longer be compulsory, and it would be up to SEHC to decide on (a) what types of community projects or training and educational opportunities to pursue, (b) how much funding $$’s to invest in any project. It is estimated that by being on a general lease, the Co-op could save approx $250,000 p.a.
3. Property Insurance - There would be no effective change here. The DHS have agreed to continue to cover the cost of insuring the 150 Govt-owned Co-op properties. This means that Property Insurance would be ‘cost neutral’, ie. no advantage or disadvantage, but this represents an approximate saving of $75,000 or more p.a., which would have been the estimated cost to the Co-op if we had to insure with a commercial insurer.
4. Security / Co-op Status - Under a General Lease, SEHC would be on a basic 5 yearly commercial lease with the DHS to manage the tenancy and maintenance of the 150 DHS owned properties. There would be no change in the Co-op’s status as a registered Housing provider with the Housing Registrar, and we would still remain as an incorporated not for profit Rental Housing Co-op. The Housing Registrar would still oversee the financial and regulatory performance, and the management and reporting requirements of the Co-op, as is the current situation.
N.B. It is important for members to know that this proposed move to a general lease, will have no bearing on the individual leases of tenants with SEHC. Under a General Lease, the DHS (Owner) would be called Landlord and the Organisation (SEHC) would be called Tenant. These terms would not change the fact that a General Lease is still effectively a Headlease.
5. Term of Lease - A General Lease is a basic commercial lease on a 5 year term, which would only be available to Agencies (Providers) that do their own ongoing maintenance. Most, or all, Co-ops would qualify on that point.