I have just received a section 20 notice relating to some repair works to our block. What does the notice mean and what can we do if we think the cost of the works is excessive?
In the circumstances you describe, you will have been served with a Section 20 Notice because your landlord is proposing to carry out repair works to your building that cost over £250, in respect of which the leaseholders will each have to contribute under the terms of the lease through the service charge. You should check your lease to make sure that the landlord is entitled or obliged to carry out the proposed works.
A Section 20 Notice is served pursuant to Section 20 of the Landlord and Tenant Act 1985 (as amended by Section 151 of the Commonhold and Leasehold Reform Act 2002). In relation to proposed major works, Section 20 sets out the framework for a consultation process which has three stages; a notice of intention; notification of estimates; and notification of award of contract.
The notice of intention will generally describe the proposed works, explain why the works are necessary and invite the leaseholders to make observations within a 30 day period and to nominate a contractor from whom the landlord should try to obtain an estimate for the works. This is the leaseholders’ opportunity to formally raise any objections to the proposed works or the costs involved and the landlord must consider any observations received.
The landlord must obtain at least two estimates for the proposed works, including one from any contractor nominated by the leaseholders. At least one of the estimates must be from a contractor wholly unconnected with the landlord. Details of the estimates must be provided to the leaseholders, along with a summary of any observations received within the consultation period. The leaseholders are entitled to inspect the estimates free of charge and they will have 30 days to respond to the landlord’s proposals at the tender stage.
If the chosen contractor is not the lowest estimate, the landlord must explain to the leaseholders his reasons for awarding the contract.
If the consultation procedure is not correctly followed, the leaseholders can apply to the First-tier Tribunal (Property Chamber). If the leaseholders are successful, then the maximum amount recoverable from the leaseholders under the service charge is £250 each for major works.
Even if the landlord is obliged under the lease to carry out the proposed works and the Section 20 consultation process is correctly followed, this does not prevent the leaseholders from challenging the service charge. If the leaseholders feel the amount they are being asked to pay is excessive or unreasonable, they may apply to the First-tier Tribunal under Section 27A of the Landlord and Tenant Act 1985 for a determination of liability to pay and the reasonableness of any service charges demanded. When considering the reasonableness of charges for major works, the landlord ought to consider the financial impact on tenants before commencing the works; for example, could the work be done in stages to reduce the financial impact on tenants?
Bircham Dyson Bell is a multi-disciplinary UK law firm advising private companies, public sector bodies, not-for-profit organisations and individuals since 1834. Visit bdb-law.co.uk to find out more