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 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 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 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. There are three stages in total to be done:-
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.
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.
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:-
- Whether the service charge is payable
- To whom it is payable
- Amount which is payable
- The date which it is payable
- 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:-
- If the costs have reasonably been incurred
- Whether the works have been done or the services have been or are presently being provided
- The works or services are of a reasonable standard
- Whether there is an interim charge before costs can be incurred and it is reasonable
- If the costs would be reasonable
- The services are proposed in the future
- What amount can be charged on account
- 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. If 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.
Click here for Part 1!