Major works can be expensive and disruptive, with far-reaching effects on your own investment and the desirability of the building. As leaseholders, you need the assurance that the works are necessary, being carried out by suitable professionals, and for a fair price.
Major works entail a great deal of planning and regulatory compliance, not least of which is the Section 20 process. Your landlord or managing agent must follow this process if the costs are to be covered by service charges.
Here we’ll be discussing what the Section 20 process entails, under what circumstances it can be avoided, and the consequences for non-compliant landlords.
What Are Major Works?
You may hear the term “major works” or “qualifying works” when your landlord or managing agent is describing large-scale works deemed necessary for the property. Both are interchangeable terms, but the latter is used in the Landlord and Tenant Act 1985 to describe works that can be recharged to leaseholders via the service charge.
Sometime, a “reserve” or “sinking” fund is in place which can cover some or all of the costs. If you’ve been paying into such a fund via your service charges, you can expect that this will be used to mitigate the costs of any major works. The amount it will cover will depend on the cost of the work, the terms of your lease and the amount of money currently in the pot.
Depending on what is stated in your lease, the charges may be added to your annual service charge demand, or it may be charged as soon as necessary. More modern leases allow for the works to be paid for in advance of completion.
An Overview of the Regulations
In the UK, regulations for major works in blocks of flats ensure that landlords carry out only necessary repairs and maintenance. These rules also protect tenants from unfair costs. The key legislation that leaseholders need to be aware of is Section 20 of the Act.
Section 20 outlines a process that landlords must follow if they plan any major works to the building that will cost leaseholders more than £250 each. It requires landlords to consult with tenants, ensuring that they are informed and have a say in the work being done, by who and at what cost.
To comply with Section 20, landlords must follow a specific process:
- Notice of Intention
Firstly, the landlord or property management company are required to serve a “Notice of Intention” to the leaseholders. This notice must detail the proposed works and the reasons behind them, inviting leaseholders to submit their responses within a specified timeframe (usually 30 days).
- Obtaining Estimates
Once this timeframe has elapsed, the landlord or property management company must provide leaseholders with at least two estimates for the proposed works. These estimates should be from different contractors and should be sent to the leaseholders along with a summary of the responses received from all residents. Leaseholders should then be given another opportunity to submit their comments.
- Notice of Reasons
After considering the estimates and the observations of leaseholders, the landlord or property management company must send a “Notice of Reasons”. This includes details of the chosen contractor, the costs involved, and any other relevant information. Leaseholders have the right to seek further information and potentially challenge the choice of contractor or the costs. If leaseholders believe that the costs are unreasonable, they can apply to the First-tier Tribunal (Property Chamber) for a determination.
It’s important to note that the Section 20 procedure may vary slightly depending on the specific situation and the value of the works or agreements. In some cases, the procedure may be shorter or have certain exemptions. The goal of the procedure is to ensure that leaseholders are informed, consulted, and have the opportunity to influence decisions that impact their financial responsibilities and the quality of their living environment.
Consequences for Non-Compliance
Failure to comply with the Section 20 procedure can have legal consequences, including potentially limiting the amount that leaseholders are required to pay for the works, or even making the costs entirely unenforceable.
This can result in significant financial losses for landlords. Moreover, non-compliance can damage trust between landlords and tenants, leading to disputes and potential legal action.
Summary
The regulations and compliance requirements for major works in blocks of flats are essential for protecting both landlords and tenants. Understanding and following Section 20 of the Landlord and Tenant Act 1985 is crucial. Proper consultation ensures transparency and fairness, which helps all parties avoid disputes and financial penalties. By adhering to these regulations, landlords can maintain good relationships with tenants and ensure necessary work is completed without issue.
