Avoiding section 20 headaches
It is crucial that Landlords, Resident Management Companies, Right to Manage Companies and Leaseholders understand section 20 of the Landlord & Tenant Act 1985 (as amended by the Commonhold and Leasehold Reform Act 2002). Section 20 states that by law leaseholders must be consulted before qualifying works are carried out to a building where the contribution from any leaseholder exceeds £250. It is designed to protect leaseholders from paying unnecessarily large sums for work carried out to their building.
Outlined below is a summary of what section 20 involves and the necessary steps that should be taken so that Landlords, Resident Management Companies and Right to Manage Companies stay compliant.
Stage 1: the Notice of Intention
For qualifying works, it is necessary to issue a “Notice of Intention to Carry Out Works” upon all lessees. The Notice must generally describe the proposed works, state the reasons for considering the proposed works, and invite leaseholders to make written observations within 30 days.
Stage 2: the Statement of Estimates
Once the 30 day consultation period has finished, at least two estimates should be obtained. If any nominations were received from leasees during the consultation period then an estimate should be obtained from at least one of these nominations. Once estimates for the works have been obtained, a notice must be served to all leaseholders detailing the costs, how to inspect them and inviting any comments.
Stage 3: the Notice of Reasons
Once the contract is awarded, the landlord must send notice if they did not choose the cheapest estimate or a contractor nominated by the leaseholders. It must explain why they chose that particular option.
Who does section 20 apply to?
It applies to all Landlords, Resident Management Companies (RMC) and Right to Manage (RTM) Companies. Even if everyone in a block is a member of the RTM a consultation must still be carried out.
How long does a consultation take?
For stages one and two, leaseholders must be given at least 30 days to reply with any comments. So even if estimates can be obtained quickly, it will take at least two to three months as a minimum.
What are the repercussions is section 20 is not carried out properly?
If a consultation is not carried out properly the Landlord/ RMC/ RTM will be subject to a penalty: the maximum costs leaseholders can be made to pay for the work will be limited to £250. This is regardless of the final bill. Where would the rest come from? It is possible the Landlord or RMC/ RTM directors would be liable because they were negligent in not following section 20 procedures.
How Resident® can help
Resident® is a cloud based block management software designed to simplify block management. Resident allows users to log all general repairs and maintenance and will issues users with a warning alerts if proposed expenditure hits the section 20 threshold for major works. The resource centre also includes step by step guides and templates for all the necessary notices that need to be issued throughout a section 20 consultation. If users have further questions they can speak to our experienced team.
Other clever features included with Resident® are: automated service charge demands; communication tools including remote voting and instant messaging; and calendar reminders for repetitive important tasks including insurance renewals, health and safety assessments, and service contract due dates. Resident® also sends email alerts for everything you might need reminding of including: maintenance tasks; insurance renewals; service inspections; meetings and; health and safety checks.
Resident® is the intelligent property management software that does your thinking for you, saving you time, worry, and money.
Kate Boyes MRICS, Resident founder
Resident® was created by Kate Boyes, a chartered surveyor and property manager who has been letting and managing property for twelve years. Kate recognised a need for a more cost-effective solution that modernises block management and makes it more accessible and transparent, and so Resident® was born.
Kate has a first class honours degree in Land Management from the University of Reading specialising in Investment & Finance, and trained at Nelson Bakewell (now Capita Symonds), a Property Consultancy, in London. She qualified as a Chartered Surveyor in 2004, and is a ARLA Board Member.
Kate established Alexandre Boyes Residential Lettings in 2003 and Alexandre Boyes Estate & Block Management in 2007. The award winning teams recently won gold for Property Management Company of the Year at the Negotiator Awards.