What is Section 20?
For those of you with many years experience in the property game there are two answers to this question. The first could be the section 20 notice which, prior to the Housing Act, needed to be served to indicate that the tenancy which was about to be created was to be an assured shorthold tenancy. If memory serves, this requirement was removed in 1997.
The section 20 I want to deal with in this article is the one as laid down by the 1985 Landlord and Tenant Act, as amended by the Commonhold and Leasehold Reform Act 2002, which involves leasehold property and the necessary consultation with leaseholders when major works are being considered.
Landlord and Tenant Act 1985
Section 20 is intended to protect leaseholders from paying unnecessarily large sums for work carried out to their buildings. In essence it conveys that a leasees contribution to the works will be heavily restricted in the event that the landlord fails to follow a strict consultation process.
Section 20 of the Landlord & Tenant Act 1985 sets out a three-stage process which must be followed by landlords or indeed their managing agents where appointed, if carrying out works to a building where the contribution from any one lessee will be in excess of £250, or in respect of a qualifying long-term agreement where the contribution from any one leaseholder may exceed £100 in a single year.
Accordingly, prior to the service of Notice, most landlords will appoint a surveying firm such as ourselves to undertake a schedule of required works in order that they can have an understanding of the nature and extent of the works required.
Stage One – s20
For qualifying works, under Section 20 landlords or their managing agents must serve an initial notice normally referred to as a “Notice of Intention to Carry Out Works” on all leaseholders.
This Notice will describe the proposed works, state in general terms, the reasons for considering the proposed works, and invite leaseholders to make written representations back to the landlord or managing agent within 30 days.
It is law that a postal address for these representations be included within the text of the notice. The Notice of Intention offers leaseholders the opportunity to nominate a contractor from whom a quote for the proposed works can be sought.
Stage Two – s20
Following the initial consultation period (1 month) , at minimum of two estimates should be procured: one of these estimates must be from a firm completely independent of the landlord, managing agent or residents committee.
If nominations were made within the consultation period, then estimates should have been obtained from at least one of these nominations. Once the quotations have been received, the landlord will provide what is normally known as the “Statement of Estimates” which will set out the quotations or estimates that have been obtained.
All estimates and quotes which are obtained under this process must be made available for inspection by the leaseholders.
A “Notice to Accompany the Statement of Estimates” must also be served in conjunction with the Statement of Estimates, which sets out the hours involved, and a place where details of the estimates may be inspected, again inviting leaseholders to make observations, which should be in writing, on the estimates/quotes within a further month.
Stage Three – s20
If, upon the expiration of the consultation period, the chosen contractor did not provide the lowest estimate, then a “Notice of Reasons” must be served upon all leaseholders explaining why the lowest tender has not been selected. This may be as a result of their inability to start in a reasonable timescale, or the fact that their insurance cover is inadequate for the project to be undertaken. Whatever the reasons, they should be disclosed..
The nomination is open to a test of reasonableness by the Leasehold Valuation Tribunal (LVT) under Section 19 of the 1985 Landlord & Tenant Act. For this reason you must ensure that the process is impartial and entirely transparant.
The penalty for not following the procedure correctly can be severe. If the landlord is successfully challenged at the LVT, then the maximum amount recoverable from leaseholders under the service charge is £250 for major works and £100 for long-term agreements.
If any of our readers would like some assistance with S20 works or would like our firm to undertake the initial schedule of works then we would be delighted to hear from you.
We can be contacted on 01843 583000 or [email protected]Back