Brady Solicitors look at your options for making major works demands if you did not plan ahead – or something unexpected happens.
Once again, spring is nearly upon us – at least we hope so, and many property managers will want to start those major projects. But perhaps something unexpected has occurred or maybe you have just taken over managing a block that needs major works that had not been planned for.
Where do you start with securing contributions?
The first place to start when tackling unexpected or unplanned for major works is to look at the lease: what does it say with regards to demanding the service charge?
Are service charges to be demanded in arrears, demanded in advance – or is it the leaseholders’ responsibility to carry out the work between them?
It is so important to check the lease. For example, if the lease says the service charge is to be demanded in arrears and is only payable once the works have been carried out, you need to be absolutely clear as to who is responsible for the major works and how they will be funded.
A common misunderstanding about section 20 consultation
There is often a perception among property managers that completing the section 20 consultation process allows you to issue a demand to the leaseholder in advance of carrying out the major works.
This perception may not be entirely true; you can only raise a demand in advance of the works being undertaken if the lease allows for it.
Your lease, however, may have a clause that allows you to make a one-off demand for any unplanned works, meaning all may not be lost.
I have seen a number of leases that contain a provision for a reserve fund (be aware it may not be called a reserve fund, but will have the same effect), however property managers have not implemented it.
It is important to implement the reserve fund at the earliest opportunity, which often will have to be the next budget year.
Good practice would be to write to all leaseholders in advance of the demand being raised to advise why you are doing this, how it will benefit them in the future and, if possible, quote the clause in the lease. This should save you lots of questions from leaseholders when they receive their increased demand.
Remember – the reserve fund demand must be reasonable as leaseholders have the right to challenge reserve funds in the same way as their service charge.
Without the relevant clauses in your lease you may not be able to make a major works demand in advance of works starting – even if you have been through the section 20 consultation process.
What can you do if your lease doesn’t have a reserve fund?
The first step is to apply to the First-tier Tribunal (Property Chamber) to vary the lease. The FTT generally welcomes such applications, viewing reserve funds as prudent management.
In the meantime, if you have major works starting in the next financial year then you need to make the demand in line with the service charge clause in your lease and following the s.20 procedures.
Consider a rolling schedule of works
It is good practice to establish a rolling 5 to 10 year schedule of works. This is a very useful approach to take once your lease does contain provision for a reserve fund, as it allows you to make accurate major works demands.
Clearly there will be the odd unplanned project or repair that will need tackling, but some forward thinking will help both you and your leaseholders to plan future expenditure.