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 Section 20 process to carry out any major works in order to serve a Section 20 notice. The procedure can be dispensed with but only rarely if you get an Order from a Tribunal or a Court. The rules governing this sit within the Tenant act 1985, which sets out the legal framework for leaseholder consultation.
The procedure is prescribed and then detailed by the Government and failure to do so can lead to some form of penalty. The Consultation process is therefore critical to ensure compliance.
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, particularly when considering the Cost of the work and how it is apportioned.
What is the procedure for a Section 20 Notice?
A Section 20 Consultation must be carried out as stated above if work more than £250.00 per lessee is required. The Section 20 process consists of 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 Tenant act 1985 and these should be considered when serving any such notice.
You may also wish to understand how this ties into wider leaseholder rights by reading Right to Manage – The Criteria, which explains how leaseholders take control of building management.
You may wish to consult a solicitor or a professional in this regard as part of the Consultation process.
Stage 2
This is the statement of estimates.
This stage begins once estimates for the works have been obtained. The notice must be served to all leaseholders. It should detail the costs, explain how to inspect them, and invite comments. There must be a minimum of two estimates for any such work. Details of the work itself must also be included.
This stage is especially important when evaluating the Cost of the work. It also ensures transparency.
A landlord must take into account any observations provided by leaseholders. Written observations received during the Consultation process must be considered.
If tenants query the work or request a nominated contractor, the landlord does not have to use that contractor. They also do not have to accept the lowest estimate. However, the landlord must consider value, especially where Long term contracts are involved. Ongoing obligations can affect the Cost of the work over time.
For more detail on how management decisions are handled once leaseholders take control, see Right to Manage – Management Responsibilities.
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.
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.
This is especially relevant where Long term contracts are being considered, as these can significantly impact the Cost of the work over a prolonged period.
You can also read more about how disputes and decisions arise in practice in Right to Manage – Landlords Counter Notice.
How long does this consultation take?
For stages 1 and 2, all leaseholders must have at least 30 days to reply to any comments. Sometimes it takes longer to obtain estimates. The process can take two to three months as a minimum. This timeframe is part of the statutory Consultation process. It ensures fairness to all parties.
Tenants have at least 30 days to respond to the Notice of Intention served at the pre-tender stage.
They have a further 30 days from the notice of intention of the statement of estimates to make any additional comments. If the cheapest quote is accepted, the work is then instructed. This takes into account the overall Cost of the work.
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, particularly when navigating the Section 20 process.
There is a first tier Tribunal that can refer this to, to make a determination on whether it is reasonable or not.
If you are new to leaseholder rights and responsibilities, you may also find it useful to read Right to Manage – Frequently Asked Questions.
These issues can be heard together or separately. A leaseholder or landlord/managing agent can apply for determinations. This includes disputes over Long term contracts.
Applications are made for charges that have been levied. Paying a charge does not mean a tenant agrees it is payable. It is not an admission of liability. The Tenant act 1985 still applies when assessing responsibility.
The First Tier Tribunal resolves disputes and uncertainties. This includes whether the Cost of the work has been calculated fairly.
They can decide if the works were required. They can assess if the works were adequate. Also they can review whether Long term contracts were reasonable in the circumstances.
Section 20 Notices can only be dispensed with by a First Tier Tribunal in urgent cases. If major works were carried out without notice, you can still object. This applies even if Long term contracts were in place.
Final Thoughts
The above is only a guide and you should take legal advice. 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. If you are considering this route, see Right to Manage Preparation Guide for a full overview of how to get started.
