It is that time of year when management companies are busy with their service charge budgets, including planning for major works. But have you given consideration to Section 20 of the Landlord and Tenant Act 1985 and the implications of non-compliance?
The 1985 Act requires for notices to be served before a landlord can recover the cost of qualifying works of a value greater than £250 per leaseholder.
The major problem with this procedure is that a small administrative slip-up can mean that the landlord is limited to recovering no more than £250 per leaseholder, which could mean a huge shortfall in the estate’s accounts.
Brady Solicitors’ Harpeet Lehal reminds managing agents of the notices that need to be served to secure the necessary leaseholder contributions to the major works expenditure.
There are three main notices that must be served on the leaseholders:
The first notice is the Notice of Intention and must be given to each leaseholder, describing the works, or saying where and when a description of the works may be inspected, stating the reasons for the works and specifying when and where observations and nominations for contractors should be sent. The expiry date for this is 30 days from the date of the notice. It should also inform the leaseholders of their right to nominate a contractor.
The second notice is the Notice of Estimates where the landlord must issue a statement to the leaseholders with two or more estimates, any responses and a summary of the observations. Any nominees’ estimate has to be included. As with the Notice of Intention, it must also state where and when the estimates can be inspected and where and when the observations must be sent, allowing 30 days.
The third notice, is the Notice of Award of Contract. This notice must be given within 21 days of entering into any contract but only if the chosen contractor did not provide the lowest estimate. It must state the reasons for awarding the contract. Although if a nominee contractor is chosen to carry out the works it might be prudent to serve a Notice of Award of Contract as it can still be objected to on the grounds of reasonableness.
If the strict procedure is not followed as above the landlord will only be able to recover £250 per leaseholder in respect of the major works.
- Serve a Notice of Intention – provide a minimum of 30 days from the date of the notice.
- After the consultation period above, obtain at least two estimates and serve a Notice of Estimates – provide the leaseholders with a minimum of 30 days to make observations and specify the address where observations should be sent.
- After the consultation period above, serve a Notice of Award of Contract if the contractor chosen is not the lowest estimate.
Leaseholder communication is crucial
In addition to the prescribed notices, open dialogue and communication with leaseholders during the section 20 consultation procedure is vital to securing the necessary contributions to your planned projects. Brady Solicitors can support you through the consultation process, attending leaseholder meetings and steering you through the necessary stages.
For expert help with your Section 20 major works consultations please contact Brady Solicitors on 0115 986 3450 or click here to send us an email.
You can also find out more about major works in these recent Brady Solicitors blogs: