What is Section 20 (of the Landlord and Tenant Act 1985)?
Covering work done to residential blocks, Section 20 is designed to regulate the financial contribution leaseholders are required to make towards the works being carried out. Section 20 applies to both qualifying works (work on a building or another premises) and qualifying long term agreements (for periods of over 12 months such as maintenance, insurances or utilities, which impact the service charge).
What qualifies as Qualifying Work?
If a landlord wants to recover more than £100.00 (£250.00 for a qualifying long term agreement) for work being carried out on a block, they need to enter into a consultation with leaseholders or obtain a dispensation from doing so.
The three stages of consultation
The consultation takes three stages. First, a Notice of Intention has to be sent to every leaseholder (and the Registered Tenants’ Association if there is one). This describes the work in general terms and invites the leaseholders to make observations and suggest contractors (if they choose to do so).
The next stage is to send out a Notice of Estimates, which sets out at least two estimates and invites further observations.
Finally when the contract has been awarded a Notice of Award of Contract needs to be sent out within 21 days of the award of contract. In instances where either a nominated contractor has been appointed or the lowest estimate has been accepted, a notice does not need to be sent out but many landlords send them out as best practice anyway. For instances where it is not possible to enter into a consultation, landlords can seek a dispensation from the Tribunal.
Under the Landlord and Tenant Act of 1985, the Tribunal has jurisdiction to dispense with the consultation process if there are reasonable grounds to do so. These usually are emergency situations or cases where only one contractor is qualified and available to do the job.
Consequences for non-compliance
We can’t stress enough how important it is to follow due procedure and not fall foul of Section 20. The failure to adhere to the law has severe financial ramifications. With routine maintenance charges regularly running into thousands of pounds, it’s imperative not to put yourself in a position where you can only charge £100.00 per qualifying work or £250.00 per qualifying long term agreements.
Download the Block Managers’ Fact Sheet on Section 20 and dive deeper into the procedural requirements set out by the legislation. While this blog is intended to provide information on Section 20, it is by no means legal advice. Those unsure of any related issues should speak to a legal professional.