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Section 20 Notice what is this? (Part 2)

If I have a resident’s management company or a right to manage company do I need to serve a Section 20 Notice?

Yes, of course, because you are under a right to manage you still have to go through the standard legal process to carry out any major works. The procedure can be dispensed with but only rarely if you get an Order from a Tribunal or a Court.

The procedure is prescribed and then detailed by the Government and failure to do so can lead to some form of penalty.

If you do not serve the relevant notices then you are not able to recover more than £250.00 per leaseholder so for instance if there were four flats no more than £1000.00 so if you carried out work of £10,000.00 without consulting you would only be entitled to £1,000.00 back. It is so important thus that you serve the correct notices and in the correct format.

 

What is the procedure?

A Section 20 Consultation must be carried out as stated above if work more than £250.00 per lessee is required. There are three stages in total to be done:-

Stage 1

Serve a Notice of intention to carry out works. The Notice must be served. Setting out what works are proposed, why they need doing and should provide any comments and nomination of contractors from leaseholders. There are very set notices within the provisions of the Act and these should be considered when serving any such notice. You may wish to consult a solicitor or a professional in this regard.

Stage 2

This is the statement of estimates.

This is once estimates for the works have been obtained. The notice must be served to all leaseholders detailing the costs, how to inspect them and inviting any comments. There has to be a minimum of two estimates for any such work together with details of the work itself. The estimates are served with such a notice but a landlord can specify dates where and when documents can be inspected and these must be reasonable.

A landlord does have a duty to have regard to what you have given by way of observations. If a landlord receives written observations during the consultation they have a duty to take them into account. The law doesn’t define unfortunately “have regard to” and it basically means that they must look at the written observations and do a response within 21 days.

Where work is being queried by tenants or a nominated contractor is requested. The landlord doesn’t have to use a nominated contractor or accept the lowest estimate. / You have to be aware that within 21 days of entering the contract the landlord must give a written statement of the reasons for awarding the contract. Which we will come onto later being stage 3 or provide facilities for the tenants where they can inspect the statement of reasons. If at any point the landlord and/or managing agent do not lay out any of the procedures then they cannot recover the money.

Stage 3

Notice of reason.

Once a contract is awarded. The landlord must serve a notice. If they did not choose the cheapest estimate or a contractor nominated by the lessees. They have to explain why they chose that particular option. They have to have a very good commercial or particular reason for not choosing the cheapest quote. For instance, they may say that whilst the quote is cheap it does not take into account all the work that is required. Extras would thus be requested bringing the quote up to exactly what was previously laid out by another contractor i.e. they have not been comprehensive in their quote.

 

How long does this consultation take?

For the stages of 1 and 2 all the leaseholders have to have at least 30 days to reply to any comments. It sometimes takes longer to get estimates obtained so it can take up to at least two to three months as a minimum. It is also laid out in the RICS guidelines for managing agents for them to take into account any delays in the post over and above the 30 days.

So the tenants have at least 30 days to respond to the Notice of Intention served at the pre-tender stage.

The tenants have a further 30 days from the notice of intention of statement of estimates to make any further comments. If the cheapest quote is then accepted the work is then instructed.

 

What if I dispute the works required and want to object to a Notice?

In the first instance you should talk to a solicitor before you do anything further. Section 20 Notices can be very complicated and it is important that you get the best advice as quickly as is possible.

There is a first tier Tribunal that can refer this to, to make a determination on whether it is reasonable or not. The first tier Tribunals role in dealing with service charge dispute is to determine whether the charge is payable and if so whether it is then reasonable.

These issues can either be heard together or separately. Either a leaseholder or a landlord/managing agent can apply for determinations on the following:-

  1. Whether the service charge is payable
  2. To whom it is payable
  3. The amount which is payable
  4. The date which it is payable
  5. The manner in which it is payable

An application would be made in respect of any charges which have been levied or which are proposed on whether they have not yet been charged. Payment of the charge does not amount to an agreement or admission by a tenant that the charge is payable. But you should consult a solicitor on this.

The first tier Tribunal will resolve the dispute and uncertainties on whether a tenant is liable to pay the service charge. They will make a determination on whether it is also reasonable for the service charge. They can deal with any issues or liability before these need to be addressed and paid.

Determinations can be laid out for various different applications such as:-

  1. Whether the costs have reasonably been incurred
  2. Whether the works have been done or the services have been or are presently being provided
  3. Whether the works or services are of a reasonable standard
  4. Whether there is an interim charge before costs can be incurred and it is reasonable
  5. Whether the costs would be reasonable
  6. Whether the services are proposed in the future
  7. What amount can be charged on account
  8. Various different situations and scenarios for leaseholders and freeholders/managing agent.

They can also determine on whether works were required at all. Whether they were enough to remedy a problem. Whether they were adequate enough works. Whether an element of the work was either neglected or mismanaged by the landlord. Were there genuine grounds for extra works of an urgent nature. Were procedures followed and lots of different aspects of a dispute particularly within the content of a lease.

You will find that most leases are different and have a way to lay out exactly how much landlords are entitled to cost and how they must be paid. Section 20 Notices can only be dispensed with by a first tier Tribunal when urgent works are required. So if major works have taken place and they weren’t served then you still have the right to go and object to these.

The above is only a guide and you should take legal advice but the same Act also provided legislation for flat owners to run their own affairs and make their own decisions about management and upkeep of flats. This included dealing with expenditure such as insurance repairs and service charges by way of a Right to manage company.

You will often find that where major works are due to take place or being carried out that this is where most disputes start. You must remember that a landlords consent is not required for their consent to enter into a right to manage. A right to manage process is not to determine fault but enables the leaseholders to manage their own building. There is no rule to prove any form of mismanagement or that the current managing agents have not done the implementation of the lease. This allows lessees to be able to run and set up their own company with a view to reducing their costs. You would need to read our other articles in relation to the Right to manage to see how this works and what the benefits are.

Section 20 Notice what is this? (Part 1)

A Section 20 Notice is an intention to tell you that your landlord/freeholder plan to do some major works to the building. It is the most contentious part of any management. It often leads to lessees considering why they are being charged so much money for repairs.

It often leads to lessees considering whether it is worth considering a Right to Manage. Or to buy the freehold by way of an enfranchisement.

Leaseholders have to pay various charges. But must be consulted by a landlord carrying out qualifying works or entering into a long term agreement for provision of services.

 

Why must they consult you?

Under the terms of your lease, you must pay towards the cost of services or any work to your home that is in or on the estate that you are on. You do this by paying what is known as a service charge which is detailed within the contents of your lease. A Section 20 is a notice under the Landlord & Tenant Act 1985 which was amended by Section 151 on the Commonhold and Leasehold Reform Act in 2002.

The regulations separate the consultant procedures into four schedules each covering different types of contracts. The format of notices is often required by regulations and have not been prescribed in the legislation. There are three main headings in relation to these regulations in respect of qualifying works, qualifying long term agreements and qualifying works under long term agreements.

 

What must they consult you about?

They must consult before doing any work as follows:-

  • Carry out any work that will cost each one leaseholder more than £250.00 including repairs, maintenance and improvements to your building.
  • Enter a long term agreement for more than 12 months with outside contractors for work supplies or services that will cost each leaseholder.
  • Carry out a long term agreement where the work will cost any one leaseholder more than £250.00.

There was a case in the High Court in 2012 of Phillips –v- others and Francis that cast doubt on whether there is a cost threshold which landlords do not need to consult on qualifying works. This was qualified in October 2014 by the Court of Appeal which set out an approach i.e. Section 20 Consultations should be applied to individual sets of qualifying works without reference to either time periods or service charge years.

They gave a guidance on what factors should be taken into account when qualifying works. These were:-

  1. Where the items of work are to be carried out.
  2. Whether they are subject to the same contract
  3. Whether they are to be done at more or less the same time or at different times
  4. Whether the items of the work are different in character from or have no connection with each other
  5. Whether all the works are subject to one contract
  6. The way in which work is planned. Unless there are reasons for the way they are implemented are also of relevance.

What are qualifying long term agreements?

A long term agreement is one that is entered into by the landlord with an independent organization or contractor for more than 12 months. The landlord must consult where the amount payable by any one contributing leaseholder under the agreement in any accounting period exceeds £100.00. A property with unequal service share the landlord must consult all leaseholders if any one of them would have paid more than £100.00 in any one year. There is a calculation for this.

If they do not consult you then the landlord may not be able to recover more than £100.00 per leaseholder in that accounting period for the cost under that agreement.

It is important that you understand what your rights are and at that point contact a solicitor.

 

What is a Section 20 Notice?

A section 20 Notice is to tell you that they intend to carry out work or provide a service to the leaseholders that you have to pay towards. They must serve a Section 20 on any leaseholders affected by the work and/or received a service. They must send a copy of the Section 20 to any registered tenants association that may be associated with your building or home or the estate that it is on. The Section 20 includes certain information thats required.

It will give you the opportunity to take part in the consultation process and everything that may be planned. It is important that if you disagree with the work or want to take part in the consultation that you contact whoever is serving this on you.

A section 20 Consultation is only part of the process. There are other notices that need to be served on you.

You have a right to give your views and comment on any of the works within the consultation period which is normally 30 days. Any managing agents and/or freeholder must take notice of any comments that they require and clearly consider these.

Where they are planning to do major work you have in certain circumstances the right to suggest a person, firm or contractor that you may wish to tender for the work.

 

What does a Section 20 Notice have to include?

It has to do the following:-

  1. Describe what agreement or tell you where you can get information on what work they intend to carry out.
  2. Explain the reasons why they want to carry out the work
  3. Say what work is required
  4. Invite you to make comments and proposals in writing
  5. Invite you to suggest a nominated contractor
  6. Give you a date on which the consultation finishes and this can’t be less than 30 days

It is unlikely at this time that they will give you an indication of what the cost of the work will be. The Section 20 is the way that they serve a schedule of works via a specification from a surveyor and will normally thereafter put it out to tender.

 

Who must be consulted?

Notice must be sent to either individual leaseholders, any residents association and/or any other people.

The Act doesn’t necessarily need a contractor to be nominated by leaseholders but they can do so.

 

What is the second stage of the Consultation?

Once the Section 20 has been served they will then look to send the documentation out by way of a tender to various different companies in order to get quotes so that you have an idea of what the costs will be. A second document is served on you being the statement of estimates which we will mention later.

Tyneside Flats – What are they?

They are a property development scheme in Tyneside. The main difference in these to other flats is the responsibilities laid out in the lease. A Tyneside flat appears from the front as a single fronted terraced house. However, there are two or sometimes three flats on top of each other. Each flat has its own separate front and back door and garden areas.

Construction of Tyneside flats started in the late 1800s as low-cost housing for a growing workforce. With separate floors and staircases, there is no relation between the lessees internally or externally. The backyard is divided in half. Originally each garden would have its own coal house and private outside toilets. It was an ingenious solution at the time for affordable housing. Now they make for profitable investments for landlords. The land was often sold on the condition that only properties with no more than two households could be built. Who enforces these rules now is unclear.

There are complications with the legal status of a Tyneside flat and the responsibilities between the landlords. The upper flat shelters the lower flat and the lower flat supports the upper flat. This has led in the past to specific legal schemes known as Tyneside flats cross or crossover lease arrangements. Under the Tyneside flat scheme, each tenant, even if holding the freehold of their own flat, becomes the landlord of the other. This allows the responsibility to be enforced without an external landlord or management company.

This type of flat ownership has come into context recently as part of the recent Law Commission leasehold reform. Another alternative to leasehold being commonhold which has also been considered. It is something to keep an eye on in the future as what will happen.

How to Insure the building

The terms of the lease dictate the insurance arrangements. Previously there have been two methods. These are as follows: –

The first-floor flat owner will insure the freehold interest of the ground floor as the landlord of the flat and vice versa. The lease may grant each flat owner the right to see proof of the current insurance policy. Or both owners may be required to insure the whole of the property in joint names and split the cost equally.

We now have a policy that covers this type of property, therefore, all the above is no longer required. Solicitors have in the past advised to take out a criss-cross lease indemnity that covers either party in the event of the absence of insurance. However, we now have the policy that you need. Speak to us about these properties and how to insure them.

Our policy includes:
• Replacement value of the property following loss or damage by the insured perils
• Tracing and repair of leaking underground pipes drains and cables
• Accidental breakage of fixed glass, double glazing, ceramic hobs, and sanitary fixtures
Malicious damage by third parties
• Loss of rent or alternative accommodation costs
• Damage to landscaped gardens
• Replacement of keys and lock replacement following a theft
• Accidental loss of metered water
• Emergency access
• Theft of fixed fabric of the property including fixed CCTV equipment and security lighting
• Specified contents cover

Tenants Fee Bill

The new tenants’ fees bill is due to have a second reading in the House of Lords.

 
This bill is going to affect the whole property industry. The same fee ban has already taken place in Scotland and shook the industry to its core. 55% of letting agents disappeared overnight or merged with other companies in that case. It also increased rents for tenants by 7%.
 
The details of the bill are still up for debate. It could extend as far as including renewal fees, arrears fees and anything else that letting agents could charge.
 
Does this mean that landlords will pick up the bills? Will letting agents add it to the rent charge? Will landlords have a choice in future of letting agents? We anticipate that this will rock the market. A lot of landlords will lose out as estate agents who do lettings and sales go into liquidation. It could force Landlords to choose a new agent and the choice could be very limited in the future. How will it affect tenants? It will be good for them as there will be no fees involved. However, will there be a reduction in service? If letting agents are charging tenants for any form of their service the charges will be heavily landlord based.

Update: The Tenants Fees Bill has been Announced

The Government has now confirmed that the tenants’ fee bill will take place from the 1st June 2019. This will dramatically change the whole way that letting agents charge tenants. It could possibly be detrimental to landlords, causing them to increase their rents. The main amendments are:-

  • The maximum security deposit is now limited to five weeks rather than six. The original proposal by the Government capped the deposit at four weeks rent. Various landlords then campaigned to increase it, arguing that the average charged was 4.8 weeks. Hence the increase to five weeks.
  • Default fees are now permitted where costs arise from the fault of a tenant. For instance, where the tenants have lost a key or other security device or where the tenant is two weeks late in paying their rent. Where there are further contractual breaches the landlord will be able to charge for damages. However, if a tenant fails to pay, the landlord will either need to pursue the claim in court or make a claim against the security deposit. There is also a clause in the bill that allows the Government to change the charges in future. This will mean that further changes will not require going back to Parliament.
  • The landlord and/or agents are now only allowed to take one holding fee for a property at any one time. They must pay the first tenants deposit back in full before taking a second holding deposit. That is unless the tenants choose not to enter the tenancy or provide false information. In these cases, the landlord and/or agents can hold the deposit.
  • Where landlords and/or agents retain a deposit they must explain to the tenant in writing why they are doing so.
  • If there is a right to retain the deposit but the tenancy is still not entered into it must be returned to the tenant.
  • The landlord/agent must refund the holding deposit if the landlord/agent breaches any terms. Or if the landlord or existing tenants behave in an unreasonable manner, delaying the tenancy going ahead.

Summary

The tenant fee bill is going to completely transform the letting market. It throws the emphasis from tenants back to landlords for fees. It will be interesting to see how the market changes over a period of time with letting agents not being able to charge fees. A substantial amount, we suspect, will go out of business or change their method to instead charge landlords. This may leave the market with a very small amount of independent letting agents and large corporates.

It will be interesting to see how the market will react over the next few months. The government wanted to put an end to tenant fees so whether that happens remains to be seen. It is surprising to us why all landlords have to take on the burden of the cost. But we understand the frustration from tenants point of view and the amount that they have to pay out. We hope that this will equalize the position for all parties concerned.
 
Mark Harrington
 
Managing Director
 
iInsure365
 

New Fitness for Human Habitation Bill

The Homes Fitness of Human Habitation and Liability for Housing Standards Bill (Fitness for human habitation) is now going through the Commons.

Firstly, how will this affect landlords and tenants in the future? Its report stage is due on the 26th of October this year.  It then goes back to the House of Commons for a third reading before it goes through the House of Lords. It is then considered for amendment at the end with royal consent.  However, it has crossed party support and could well become law.

How will it affect you?

The bill would give private and social tenants the ability to take landlords to court if their homes are unsafe. It means tenants would have rights to repairs for property issues. Things such as mould, excess cold, fire risk etc. It compels landlords to carry out works to their properties. The courts are able to give the Injunction to promote landlords to do work or give large damages. Where landlords fail to carry out works the tenants have rights to take legal action. This is on the grounds that the property is unfit for human habitation.
 
Most Societies and the National Landlord Association have given their backing to the bill.  Keep an eye on our newsletter as we will keep you updated on when this Bill becomes law.  It has wide-ranging consequences for landlords and tenants as well as wide support.

Update

We can confirm that the private members Bill has now passed and is now law. The Bill gives greater responsibility to residential landlords. It implies in a residential tenancy that the property must be fit for human habitation at the beginning of the tenancy and throughout. The Landlord & Tenant Act of 1885 was the original legislation. The latest bill is an update to that. It means that tenants have the right to take legal action if landlords fail to keep properties in a state that is fit for human habitation.
The definition of fit for human habitation is as follows. “So far defective in one or more matters that it is not reasonably suitable for occupation in the condition”

 

What does this mean for landlords?

The bill focusses on landlords making repairs and keeping the property liveable. The items it addresses are below:

  • Stability – this could be due to the property having subsidence etc.
  • Freedom from damp – although a grey area freedom from damp means that landlords now need to ensure that the property is free from all forms of damp
  • Internal arrangement – ensuring that the interior of the property is fit for human habitation
  • Natural lighting – this is to ensure that there is as much natural lighting within the property as is possible.
  • Facilities for the preparation and cooking of food – it is essential now that landlords provide cooking facilities. Landlords must repair these within a set period of time. Landlords can involve the local authority if repairs are not done quick enough.
  • Water supply – landlords need to ensure that they have a consistent water supply.
  • Drainage and sanitary convenience – these need to be free from any form of problems and that they actually work.
  • Ventilation – the landlord needs to ensure that the property is and has a free flow of air.
  • Facilities for the disposal of wastewater – the landlord has the responsibility to make sure that there is a working outlet for waste water.

The above is going to be very important with landlords that deal with HMO Properties.

 

Why is this needed?

There have been long-standing concerns about property standards for a considerable length of time. In 2016/2017 the English Housing Survey found that 38% of private renters lived in poor or substandard housing.
The current Statute of obligations regarding the upkeep of properties has become outdated. They have ceased to become effective as a result of annual rent limits. The bill now applies to all residential property thereby bringing to an end the outdated anomalies. It also gives tenants a civil remedy meaning they can appeal against their living conditions.

 

Are there any exceptions?

There are some exceptions from the implied covenant to keep properties in a suitable state. Landlords will not be liable for the unfitness of a property in the following circumstances:-

  • Natural disaster
  • Tenants failure to use the property in a tenant like manner

The legal remedies are for the tenants to report the matter to the local authority. The local authority will then have the right to impose fines and potentially stop the landlord for re-renting the property. The tenant will also have the right to damages in the Courts. It is therefore important that landlords not only maintain their properties but keep them updated on a regular basis.

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