Major works are vital for maintaining the safety, structural integrity, and value of a block and its flats. However, they also represent a significant financial demand on leaseholders. For block managers, navigating this space means balancing legal compliance with financial prudence and transparent communication.
Fixflo’s Head of Sales for Block, Joe Goss MTPI, recently met with Adam Coombs MTPI Assoc RICS, founder of Coombs Property Consultancy, to deliver this guide to the basics of managing major works, drawing on their collective 35 years of experience.
Section 20 consultation
When the cost of necessary major works exceeds £250 for any one leaseholder, managing agents must legally comply with the Section 20 consultation process of the Landlord & Tenant Act 1985 and its amendments in the Commonhold & Leasehold Reform Act 2002. This is a crucial three-stage process, designed to ensure transparency and give leaseholders a voice. Embracing the process and allowing sufficient time to complete the full consultation process will help you to achieve the desired result.
1. Notice of Intention (NOI)
A Notice of Intention is the formal start of the process. The NOI informs leaseholders of the intention to carry out specific works in accordance with the terms of the lease. It is key to provide enough details in the description of the works that are planned, and to allow for any unforeseen elements that could arise during the works.
Leaseholders have 30 days to submit written observations on the proposed works. Crucially, they also have the right to nominate suitable contractors they want the landlord/manager to consider for the project.
2. Statement of Estimates
After the NOI period, the property manager assesses the feasibility based on feedback and the anticipated cost of the work. The landlord/manager must obtain at least two estimates, one of which must be from an independent contractor not affiliated with the management company.
The Statement of Estimates document provides the above plus a Summary of Observations if any were received during the NOI period, along with the manager’s response to that feedback.
3. Notice of Reasons
The Notice of Reasons is the final notification before the works are awarded. Alternatively, a relevant form of contract can also be given, i.e. a letter of instruction may be sufficient for smaller works to JCT forms of contract for bigger projects. This notice is only legally required if the lowest tender has not been chosen, but it is always best practice to notify the leaseholders of the chosen contractor, the final total costs including all associated fees, and the reasons for choosing that specific contractor. Good communication should draw attention to the use of provisional sums, contact details of key stakeholders and appendices relevant to the project, such as timeline milestones and the expected behaviour of the contractor(s).
In terms of estimates provided, transparency is key. If a higher bid was chosen over the lowest, the manager must clearly justify the decision (eg. superior warranty, specific expertise, or proven track record) to demonstrate that the choice represents the most reasonable outcome and best value for the leaseholders over the long term.
Reserve Funds
Effective financial planning is the biggest differentiator between smooth block management and conflict.
A Reserve Fund (often called a Sinking Fund) is a dedicated pot of money collected incrementally alongside the service charge over many years. Its sole purpose is to fund anticipated future major works and capital expenditure projects.
A properly funded Reserve Fund avoids the need for massive, disruptive one-off cash calls on leaseholders when an essential project suddenly becomes necessary (like an emergency communal boiler or roof replacement). This proactive approach stops “shock bills” and fosters better leaseholder relationships. A large majority of projects will be cyclical and based on life cycles of materials, so can be planned for well in advance. Where possible, create detailed Planned Maintenance Programmes (PMP’s) which outline all the likely large-scale projects over the next 10–20 years with costs. These can then be fed into service charge budgets, creating accurate Reserve Fund requests each year and aiding transparent project management. Surveyors like Earl Kendrick and Project & Co can support these.
Achieving a balance on overall charges in today’s climate is critical. One approach that some successful block managers utilise is soft-skill communication. This means that a leaseholder will always ‘pay’ for the upkeep of a block, so that if a healthy Reserve Fund is not built up, the property is more likely to miss repair intervals. These blocks are more likely to suffer increased day-to-day maintenance costs, and when a leaseholder comes to sell their flat, the asking price can be subject to undesirable downward negotiation.
Know your lease
While Reserve Funds are best practice, it is not always legally possible to accrue them.
You can only collect a Reserve Fund if the lease specifically permits it. A managing agent’s first duty is to read the lease to confirm what monies can be collected for. The lease might also dictate when any supplementary demand can be raised within the year. This doesn’t just apply to major works; a proper lease analysis is the place to start when working with any block—be it RMC, RTM or Freeholder.
Looking ahead
The block management landscape is always evolving. The Leasehold and Freehold Reform Act (LAFRA) is a significant piece of current legislation that will impact how we handle major works.
The new Act is expected to review and potentially increase the Section 20 financial thresholds (currently £250) which in reality hinder the major works process for some smaller blocks. Regardless of the final legal threshold, best practice management should always opt for full consultation for any substantial work, treating it as an opportunity for transparent communication with all leaseholders.
Final thoughts
Effective block management comes down to proactive planning and rigorous, transparent communication. By meticulously following the three stages of the Section 20 process, prioritising the Reserve Fund (where permitted by the lease), and clearly flagging the lease apportionments, managers can turn necessary major works from a point of conflict into a value-adding investment in the building, ensuring weather resistance and maintaining aesthetics. For more detailed guidance on major works administration, Adam can be reached at [email protected].
Systems such as Fixflo allow you to set your repair and redecoration schedules in accordance with the terms of the lease so that you can prepare and serve notices in good time. You can even share these events with new user permissions for RMC and RTM Directors.
Is your block’s major works plan robust? Contact us for help!
