Why might a leasehold property owner receive a section 20 consultation notice?
Leasehold property owners often find a section 20 consultation notice in their hands.
The situation occurs when their landlord or their managing agent initiates a legally prescribed process. This is typically when there are plans to execute major works on the building or block that houses the leasehold property.
The trigger is when the estimated cost goes beyond £250 per leaseholder.
The notice is given to inform residential leaseholders about the planned works. It gives them the chance to examine the plans, comment, and even suggest businesses they prefer. It also allows them to budget for increased service charges.
The three stages of the section 20 consultation process
The s20 process is a tripartite procedure prescribed by the Landlord and Tenant Act 1985 (the 'LTA').
First stage: notice of intention
The process starts with the landlord issuing a notice of intention to the leaseholders. If a recognised tenants' association is present, they also receive it.
This notice is required to describe the works under consideration and the rationale for them.
Additionally, it invites leaseholders to make observations within a 30-day frame.
This stage provides leaseholders with a platform to voice their feedback or nominate contractors.
Second stage: statement of estimates
After giving the first notice, the landlord then collects quotes from the nominated contractors and others.
The next step is to issue a second notice, called a statement of estimates, to the leaseholders.
This one comprises details of the estimated costs obtained from the different businesses. If leaseholders have nominated businesses, their estimates will be included too.
It also includes an invitation to the leaseholders to make further observations within a stipulated period.
Final stage: notice of reasons
The third and final stage is the notice of reasons.
This one is issued by the landlord after the contract has been awarded. It sets out the costs that the successful contractor will charge. It also indicates if the contract has been awarded to a business nominated by the leaseholders. If that's not the case, it provides an explanation.
If any leaseholder observations have been overlooked, the notice should include reasons for this omission.
The timeline
The duration of the section 20 consultation process varies. It can take a considerable amount of time.
Under the first two steps, leaseholders have a 30-day period to make observations.
The length of the final step depends on when the contract is awarded.
Considering the complexity of proposed works, the responsiveness of leaseholders, and other factors, the entire process could last several months.
What are your rights and responsibilities during the consultation period?
Leaseholders shoulder both rights and responsibilities. At first glance, the long list of procedural steps might seem overwhelming.
But understanding the process can empower leaseholders to participate actively and constructively.
Providing observations: how leaseholders engage in the process
Providing observations is a key right leaseholders have.
Essentially, this entails expressing views and raising concerns about the proposed works or the estimated costs associated with them.
These must be submitted in writing and sent to the specified address in the notice of intention.
The deadline for submission is within 30 days from the date of the notice.
Following this, the agent or residents management company has a legal obligation to consider these comments before proceeding with the award of contract.
Understanding the estimated costs and your obligations
Understanding your financial obligations as a leaseholder is a crucial part of the section 20 consultation process. You have the right to examine the estimates obtained from nominated contractors. You also need to comprehend how these estimates translate into potential costs.
Your responsibility, in turn, lies in being prepared to pay your share of the costs of the proposed works, as detailed in the notice of intention. If you need clarification, consider consulting a solicitor. While you might handle this on your own, a solicitor could save you time and reduce risk by offering professional advice.
Your lease should state when charges for major works can be made. They may have to be included in the annual service charge. Most modern leases allow for payment in advance, on demand and as necessary.
Contractors
The quotes that contractors - the businesses that carry out the work under contract - provide form the basis of the estimated costs.
Contractor selection and engagement is often a topic of interest for leaseholders.
Selection of contractors
Contractor selection can seem complex.
The residents management company or landlord's agent is obliged to obtain at least two estimates from different contractors for the proposed works.
This includes an estimate from a contractor nominated by a leaseholder or a recognised tenants' association. However, this is provided they made such a nomination during the initial stage of the procedure.
Awarding the contract
The contract award decision occurs after the second notice has been issued, and all observations have been received and considered. The contract is typically awarded to the least expensive competent contractor. However, there are circumstances where a more expensive contractor may be selected.
If a pricier contractor is chosen, leaseholders must receive a notice of reasons. This document explains why the contract was not given to the least expensive one.
Identifying qualifying works under section 20
Qualifying works refers to work on a building or any other premises that is likely to cost a leaseholder more than £250.
This could include significant repairs to the structure or exterior of the building, or substantial changes to the communal areas.
Long term agreements
The LTA is the rulebook that sets the framework for the landlord's management of the building and the leaseholders' obligations towards their property.
It is within these regulations that the s20 process is articulated.
Long-term agreements refer to contracts that last for more than a year. These can include agreements for services such as cleaning, gardening, lift maintenance, and so on.
The relevance of these agreements lies in the requirement that any long-term agreement must also be consulted on if the cost to any one leaseholder is likely to exceed £100 in any accounting period.
The importance of adherence
While the process may appear detailed and time-consuming for the landlord, it's one worth embracing.
Non-compliance can lead to a multitude of undesirable consequences.
If the process is not correctly adhered to, the landlord or their agent risks having their recoverable costs capped at £250 or £100 per leaseholder. This cap can result in significant financial loss if the actual costs of the works or services greatly exceed these amounts.
In addition, failure to comply with the consultation process can lead to disputes and breakdowns in the relationship between the landlord, any agent and the leaseholders.
On the other hand, landlords who comply, demonstrating a commitment to transparency and fairness, will likely benefit from improved relationships with leaseholders and a more harmonious living environment within the block.
If a leaseholder believes that the procedure has not been followed correctly, they can take their case to the First-tier Tribunal (Property Chamber). The tribunal has the power to determine the service charge payable.
It's advisable to seek legal advice when pursuing this course of action, but it's also possible for leaseholders to represent themselves at the tribunal.