Those who deal with residential properties with long lease hold interests may well have heard of the famous ‘section 20’ notices which can get served when there are some hefty project works and costs on the horizon.
They stem from the Landlord & Tenant Act 1985 and are a neat way to calm down an ultimate freeholder, landlord, or management company getting carried away with repairs and projects works to the communal areas of a property and expecting each leaseholder-tenant to pay this through the service charge.
So maybe a fancy new redecoration job, or entering a large regular cleaning contract.
In short, this obliges the ultimate interest to send a series of legal notices to each long leaseholder - not only forewarning them of this, but providing an opportunity for selecting the right contractor and basis.
In Addition to Legal Liability
The actual validity of any such works will be separately covered by the lease and legislation. So whether a landlord can get away with a new roof will be dictated by whether this is clear in the lease, and whether such works are just repairs or full-blown replacements.
Assuming in principle the proposed works are okay, then this ‘section 20’ mechanism through separate legislation controls the practical choice and cost of the contractor then doing this.
The 7 Secrets to Section 20 Notices
There is actually a lot of information available already on these section 20 notices, however it tends to get quite technical on the legal side and working through cases of when it can and can’t work.
For those involved in the reality of these, it’s helpful to have something a bit more practical.
Therefore, whether you’re a property manager organising them, an owner looking to serve them, or a leaseholder receiving them; here are 7 key factors to these to help make them a reality.
1. The 3 Main Notices
There’s three notices needed, all in this order; Notice of Intention, Statement of Estimates, and Notice of Reasons.
You generally need 30 days in between these -, being careful of correct dates being stated in each, taking into account previous dates.
These are in a prescribed format which you can easily get hold of;, the first one simply alerting leaseholders to what’s happening before the second one then offering definite quotes and options to be considered.
If the final decision is to accept the lowest-priced proposal or one that has been suggested by a leaseholder, then you don’t necessarily need this last third notice, which means only two out of three are needed. However, prudence may well dictate that this is still worth serving.
2. Send Them Correctly
It’s obvious, but sometimes easily missed and therefore leaving potential grounds to argue that they’re not valid. That’s making sure they’re sent in the correct format and fashion.
This is to the official long lease hold owners that you have logged, rather than just any intermediaries like managing agents or theactual occupiers.
Actual contact and correspondence details can be as communicated by them, and not necessarily recorded delivery, although it is prudent of course to send recorded and double-check contact details if you think there could be issues emerging.
Also, make sure these are sent in the name of the actual freeholder, and not just a management company, even though a management company may have the authority for normal service charge invoices.
3. Log All replies
You need to log all forms of feedback from people after these notices, and this means all.
So not only obvious letters on file or emails kept safe, but even more informal conversations should be written down and noted, both positive and negative. All of course complying with relevant data protection obligations.
Also, residents may well be more pro-active and use their right to request a certain contractor to quote for works and therefore enforce yet further workload.
4. Have Details to View
The notices will just provide a summary of the works or services, however you need to have full details available at a location for residents to come and consider.
This may not happen that often, and if they do you may end up just sending an email with a more detailed spec or quote, say.
However, technically these need to be ready to view, so files and paperwork at say an office or other location, for example, with clarity on what times these can be seen and any photocopying facilities.
5. Know the Limits
Cutting to the chase, the limits are £250 to each resident for one-off works, and £100 each year for any ongoing services.
As an example, you may have to install new lighting to an area as a one-off cost this year, and therefore you’re making sure the total one-off cost is below £250 to each leaseholder.
On the other side, you may have a regular M&E contract with an electrician to maintain and test all electrical, lighting, and fire equipment at the property. It may be an ongoing contract for 3 years billed every month, where the total annual cost per resident should not be above £100 each.
As soon as you go above these levels, with all the extras like fees and VAT of course, then the obligation triggers, although one good point is that you’re only then dealing with monies above these caps which is unrecoverable rather than the whole amount.
So if the works come out at £310 each, residents still need to pay £250 up to the level; it’s the £60 extra that they don’t.
6. Careful Splitting
One little way around this whole system is to split any proposed works or services so that they fall within different periods. This means the figures can be split, with each one hopefully under the threshold if possible.
In short, there’s three potential ways for this. Firstly, to split the project in different stages or phases, so maybe the electrical and services first, and then re-decoration at some point in the future.
The second is to split by time, so do one part this current service charge year, and the other in a following service charge period.
And the third which is applicable for the ongoing qualifying services is to only enter a contract for 364 days, and therefore not officially being a year long to trigger this duty.
If these are genuine cases then you may well be okay, but if they are more contrived to bypass the system then it can be a grey area as to whether this is allowed. Courts’ or rather tribunals’ input may be needed, after all, this whole piece of legislation is meant to be there for a reason and to limit things.
7. Sorting Out Disputes
As a final pointer, remember that there are ways to progress matters if you simply can’t get them agreed.
That’s the good news, along withnd the fact that even seriously threatening this through the First Tier Tribunal, the official appeal body, can help focus everyone’s mind to come to a fair resolution.
The bad news is that it can take time, costs (which need warding), and just hassle to go down this route, therefore try to avoid where possible.
Making the Most of Section 20 Notices
These series of notices have the right intention behind them; to make sure the ultimate owner and property manager does not get carried away with works and costs at a residential property. After all, someone must pick up the bill.
Those issuing them may well get frustrated by them being a hurdle to cracking on with things, but the reality is that these are a legal requirement whether you like them or not.
So, go through these above seven pointers to cut to the chase and make them work in reality. The actual notices are easily available, and other advisors can help where things get complicated – as someone looking from a property management perspective, these are important practical pointers to then get the noticesm working in reality.
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