Definition
Major works are defined within Section 20 of the Landlord and Tenant Act 1985 (amended within the 2002 Act) and are normally major “one-off” works or maintenance, repair or improvements. In terms of works that could be deemed to be an “improvement” the lease must always be checked to ensure that the costs for improvements are specifically recoverable, some leases do not allow for “improvements”.
The responsibility normally sits with the freeholder/landlord/RMC whilst the costs are normally recovered via the service charge and payable by the leaseholder.
Examples could include roof repairs, lift replacements, external redecorations or window replacement. The works could relate to the structure of the building and communal areas, or any major asset on-site (lifts, pumps, gates, fire safety equipment)
Major works benefit leaseholders by ensuring that their building is being maintained, prevention of issues such as water ingress and generally ensuring that the building is kept in a good state of repair throughout its lifetime.
The Landlord & Tenant Act includes a clause known as Section 20 to protect leaseholders and ensure they are consulted throughout the major works process. This allows the opportunity for leaseholders to provide an observation on any intended works of this value and the landlord must “have regard” for their observation. If the managing agent or landlord fails to consult in line with the process, the leaseholder’s contribution may be capped at £250. This could obviously be a severe penalty for landlords or agents if they do not consult correctly and then are left with irrecoverable costs for the final project.
The consultation process applies to landlords, Resident Management companies and Right to Manage companies alike. Managing agents should be equipped to ensure any clients are aware of the duties surrounding the major works consultation process and any liabilities they may face if they do not follow the procedure. Even if all residents within a block agree to the works proceeding, the consultation process should still be followed. Managing agents should always advise clients against proceeding without following the consultation process.
Planned Major Works
A competent property manager would be aware of works that are required in the forthcoming years- normally by way of a Planned Maintenance Programme provided by a qualified surveyor. This would allow the property manager to budget accordingly for the works over say a 10-year period (or longer). By incorporating the anticipated costs into the contributions for the reserve funds within the service charge estimate, this allows the cost of the major works to be spread more evenly over a longer period of time, which means leaseholders are not shocked to receive a large “one-off “demand for the works. It also means that cyclical major works such as external redecorations, which may take place every 5 years are programmed in so that leaseholders can have confidence the works will take place when they are required and ensuring the longevity of the structure/asset.
Some leases may specify the exact year works should take place, such as “in 2020 and every 5 years thereafter” or some may include a clause such as “when reasonably required” which may rely on the Property Manager inspecting and making an informed decision on the works being necessary. In basic terms, the consultation process includes several stages and are triggered if the costs for the works are expected to exceed £250 for any one leaseholder. On sites where leaseholders pay differing percentage contributions, it is important to be aware of the threshold where Section 20 is required for the highest percentage contributor.
Stage 1: The Notice of Intention
A notice is served to leaseholders and any Recognised Tenants Association, informing them of the intention to carry out the Major works and the reason the works are required. Within the notice is an invitation to leaseholders to nominate contractors, provide any observations and also obtain a more detailed copy of a specification or scope of works. The leaseholders have 30 days to provide any information or observations. The managing agent will then seek quotations/tenders from their own nominated contractors, or any nominated by leaseholders. A quote must be invited from any leaseholder or RTA nominated contractor.
Stage 2: The Statement of Estimates
Once the tenders are returned, the agent will provide a summary of the tenders received, outlining all costs and associated fees. The notice will also once again provide a period of 30 days for any observations to be submitted. At least two of the estimates must be included and a summary of any observations that have been received. Any estimates received from leaseholder nominated contractors should be included within the statement of estimates. Details of how estimates can be inspected should also be included within the statement.
Stage 3: The Notice of Reasons
The Landlord or agent must serve this notice, only if they are not proceeding with the cheapest estimate or a contractor nominated by a leaseholder and explain the reasons behind this decision.
Fees
It is standard practice for agents to charge an additional administrative fee for the management of major works and undertaking the consultation process.
Emergency Works
There may be occasions where works are deemed to be of an urgent nature and it would be impossible to wait for the 2-3 month consultation process to be followed (for example, in the case of a collapsed drain, or significant Health & Safety issue).
In this scenario, it is possible to apply to the First Tier Tribunal for “dispensation” from the consultation process if there is a valid reason to do so. This must be a genuine emergency and not a ploy to circumnavigate the consultation process. It is recommended that an application to the FTT for dispensation is made as soon a practically possible. Dispensation is not guaranteed so it may be useful to consider alternative options, to make the area safe until dispensation can be obtained or the consultation process followed in full.
Dispensation can also be sought if the landlord has failed to consult properly and as such an application can be made prior to works starting or retrospectively.
