Section 20 is a clause in the Landlord and Tenant Act 1985 that protects leaseholders from landlords and management companies spending money on repair and construction work that is unnecessary at their building.
The clause is designed to make sure leaseholders are informed about any intention to carry out major works and it provides them with an opportunity to consider the proposals and to make observations about them. It is also a chance for leaseholders to object to the work if reasonable grounds can be established.
In this article, we’ll be discussing what triggers a Section 20 consultation, the notices that must be serviced, and what happens if you’re not properly consulted.
What are major works?
For the purpose of Section 20, major works are identified as any repair or construction project that is likely to cost more than £250.00 per leaseholder.
If your landlord or management company is thinking about doing work on your building they must consider how much it’s likely to cost. They have to take into account the total cost of the project, including professional fees and taxes.
The moment your landlord or management company thinks the work is going to exceed £250.00 per leaseholder, they must undertake a Section 20 consultation.
What is a Section 20 consultation?
Whenever a landlord or management company wants to spend more than £250.00 per leaseholder on a major works project they must enter into a consultation with all leaseholders.
The consultation is made up of two notices that must be served to leaseholders.
Notice 1: The Notice of Intention
The Notice of Intention (NOI) must clearly state what work is being proposed and why. It must be dated and signed by an authorised person such as a landlord, management company director or managing agent. It should invite leaseholders to propose contractors that can be invited to tender for the work and it must provide leaseholders with at least thirty days to respond with any written observations about the proposals.
Notice 2: The Statement of Estimates
Once the landlord or management company has obtained at least two estimates for the work they must send these to the leaseholders in a notice called The Statement of Estimates (SOE). The SOE cannot be issued until the thirty-day consultation period in the Notice of Intention has expired. The Statement of Estimates must detail the prices that have been obtained and identify which contractors have submitted the tenders. The SOE must be dated and provide the leaseholder with another thirty days to respond with any further observations about the estimates.
What happens next?
The consultation period will end when the thirty-day period in the statement of estimates expires. At that point, the landlord or management company must decide what to do next.
Any written observations that have been submitted by leaseholders must be taken into consideration, although only reasonable comments or objections with legal standing may be addressed formally.
If the landlord or management company wishes to proceed with the work, they can now go ahead and instruct the contractor that tendered the lowest estimate and raise service charge invoices for the work if there are insufficient funds on the account. No contractor will likely be appointed to begin a project until there is enough money held to pay them.
Before instructing a contractor that did not provide the lowest estimate the landlord or management company should send leaseholders a notice stating the reason for this decision. Sometimes a contractor may have received poor feedback when references have been sought, for example.
How important is the Section 20 consultation?
The Section 20 consultation is a legal requirement for any major work project that is going to cost more than £250.00 per leaseholder.
Failing to complete a consultation could result in leaseholders only having to pay £250.00 each towards the project. This means the landlord or management company directors might be held responsible for the rest of the money if found guilty of negligence by the First-Tier Tribunal.
Even if every leaseholder in a building agrees to complete major works without a Section 20 consultation there is still a risk that things could get messy. Aside from breaking the law, leaseholders could find themselves paying a lot more if, for example, one of the flats is sold before the work is completed and the new leaseholder refuses to contribute because no formal consultation was undertaken or declared when they purchased the property.
A final word on Section 20 and major works
The Section 20 consultation is a really important process that should provide transparency and a degree of collaboration with leaseholders. Managing major work can be a time-consuming and arduous task but now and then it is essential to ensure the maintenance of the building and to comply with the lease.
At Adam Church Ltd, we provide Section 20 consultation services to all our fully-managed blocks and we offer advice and guidance to our self-managed clients to make sure those we work with provide the best service possible to their leaseholders.