Richard Owen is an Associate at JB Leitch who acts for landlords and management companies in respect of a variety of property management issues.
Relevant Legislation
The principal legislation relating to major works is Section 20 of the Landlord and Tenant Act 1985. Section 20 is fleshed out by the Service Charges (Consultation Requirements) (England) Regulations 2003.
Section 20 will apply where the landlord/management company carries out works and the service charge contribution of any long residential lessee to the cost of those works is more than £250.00.
For the above purposes, works are defined as works on a building or any other premises. It is thought that the works must involve a degree of permanent modification of the premises for Section 20 to apply. However, it is clear that, for instance, roof repairs, cladding repairs or lift repairs will (subject to the £250.00 threshold) engage Section 20.
Where major works are carried out and the landlord neither (i) carries out the consultation process prescribed by Section 20 and the above mentioned Regulations nor (ii) obtains dispensation (from the First-Tier Tribunal (Property Chamber)) from the requirements of the consultation process, the landlord will be able to recover no more than £250.00 from any tenant in respect of the cost of the works.
The consultation process involves the service of written notices upon all residential tenants. Sample consultation notices are available from the Leasehold Advisory Service website.
Section 20 also applies to qualifying long term agreements – these are agreements entered into by the landlord for a term of more than 12 months where the service charge contribution of any tenant in that period is more than £100.00. However, such agreements are outside the scope of this article (which focusses purely on major works).
Further, as regards the consultation process, certain contracts require “Public Notice”. These are generally contracts made by public authorities. This article only deals with major works contracts for which public notice is not required.
Surveyor’s Report
In many cases, particularly where the works have a technical aspect, it will be advisable for the landlord to instruct a surveyor to produce a specification detailing the requisite works.
Ideally, the surveyor should be asked to produce a tender request (against which all prospective contractors should be asked to tender). This should help to prevent a situation whereby the nature of the works which the contractors offer to carry out differs from contractor to contractor (such a situation could make the consultation process flawed).
The surveyor should also give a rough indication of the likely cost of the works.
Consultation Process
Notice of Intention
The first notice which must be served (upon all residential tenants and any recognised tenants’ association) is the notice of intention.
The notice should:-
- Describe the proposed works in general terms or specify the place and hours at which a description of the works can be inspected.
- State why the landlord considers it necessary to carry out the works.
- Invite the tenant to make, in writing, any observations in relation to the proposed works.
- Invite each tenant to nominate a contractor (that is, to provide the name of a person from whom the landlord should try to obtain an estimate).
- Require observations and nominations to be made within the “relevant period” – that is, 30 days from the date of service of the notice.
Where, in accordance, with paragraph 1 above, the description of the works is made available for inspection (rather than simply given in the notice) both the place and the hours for inspection must be reasonable. The landlord is not allowed to charge for the inspection and the landlord must enable copies to be taken or supply a copy to the tenant (on request) free of charge.
If any observations are received in response to the notice of intention, the landlord must have regard to them. What amounts to having regard to observations is subjective. However, it would be good practice for the landlord to at least respond (in writing) to observations by acknowledging receipt of the observations and stating that the observations have been noted.
In terms of nominations, the legislation states that the landlord should do the following:-
- If a single nomination is made by a recognised tenants’ association, the landlord should try to obtain an estimate from that nominated person.
- If a single nomination is made by only one of the tenants, the landlord should try to obtain an estimate from that nominated person.
- If a single nominee is nominated by more than one tenant, the landlord should try to obtain an estimate from the person who received the most nominations.
- If more than one nomination is made by the tenants but none has multiple nominations and more than one nomination is made by the recognised tenants’ association, the landlord should try to obtain an estimate from at least one person nominated by a tenant and at least one person nominated by a recognised tenants’ association.
Statement of Estimates
Following the expiry of the relevant period in respect of the notice of intention, the landlord must then obtain estimates for carrying out the works. As above, to prevent a situation whereby the scope of the works in respect of which the estimates are given differs from contractor to contractor, ideally the landlord will ask prospective contractors to complete the tender forms produced by the landlord’s surveyor.
At least one of the estimates must be from a person wholly unconnected with the landlord.
The statement of estimates should set out the following:-
- As regards at least two of the estimates, the amount specified in the estimate as the estimated cost of the proposed works.
- Where the landlord has received observations (in response to the notice of intention), a summary of the observations and the landlord’s response to the observations.
- The place and hours at which the estimates may be inspected (and the landlord must then make the estimates available for inspection).
- Invite the making, in writing, of observations in respect of the estimates.
- The address to which observations should be sent, that the observations should be delivered within the relevant period (again, 30 days from the date on which the notice is served upon the tenant) and the date on which the relevant period ends.
Again, if any observations are received within the relevant period, the landlord must have regard to them.
Contract Notice
Finally, if the landlord chooses to enter into a works agreement with a contractor other than contractor who provided the lowest estimate, the landlord must, within 21 days of entering into such agreement, give notice to each of the tenants stating the landlord’s reasons.
Service of Notices
The lease may contain contractual provisions as to how notices relating to the lease are to be served. As such, the landlord should read the lease carefully and ensure that such provisions are followed.
On a practical level, it would be wise for landlords to serve the notices at all addresses (including email addresses) which the landlord has on record for the tenant.
As regards the relevant period (in terms of the notice of intention and statement of estimates), to avoid any suggestion that a tenant has not been given long enough to make observations, it will usually be wise for the landlord to give the tenants a period longer than the statutory minimum (perhaps a period of 35 to 40 days) to make observations/nominations.
Further, the landlord should keep copies of all notices (and any covering letters) as well as any responses/observations received from tenants and the landlord’s responses to any observations.
Such copy documentation may prove extremely useful if a tenant alleges that he/she was not properly consulted.
Dispensation
There will be instances where it is not sensibly possible for the landlord to comply with the consultation requirements, in particular where emergency works are necessary. In such instances, the landlord will (if it wishes to recover more than £250.00 from any tenant in respect of the cost of the works) need to seek dispensation from the requirements of Section 20. Dispensation applications are made to the First-Tier Tribunal (Property Chamber).
The leading case on dispensation is Daejan Investments Limited v Benson [2013] UKSC 14. Daejan establishes that the key focus of the Tribunal (in deciding whether to grant dispensation) is whether the absence of consultation has resulted in tenants paying for inappropriate works or the tenants paying too much for the works. Dispensation will often be granted but the Tribunal regularly attaches terms to the dispensation. One common term is that the landlord pays the tenants’ legal costs of dealing with the dispensation application.
Where major works are not urgent but may become urgent, the landlord should in the first instance attempt to follow the consultation process (rather than refraining from following the process because a dispensation application may ultimately be necessary) – if a dispensation application does prove necessary, the Tribunal is likely to look favourably upon such attempt.
Managing Agents
If major works are forthcoming and the landlord has not appointed a professional managing agent, the landlord should consider doing so. Liaising with surveyors and contractors and serving the relevant notices is likely to be administratively onerous and time consuming for resident management companies. Good managing agents will be familiar with the relevant legislation and procedure and will have a number of useful contacts
In addition, managing agents will be able to make the description of the works and the statement of estimates available for inspection at their offices (as well as providing photocopying facilities).
