Ian Hollins of Clear Building Management reminds RMCs of the need to comply with leasehold law when planning repair and maintenance work.
For an RMC, it is essential to be able to recover all the costs of maintenance projects. This means ensuring that every leaseholder understands their obligation to contribute and is willing to do so.
Unfortunately, too many RMC directors still do not fully understand the section 20 consultation (s20) requirements and end up in a pickle when a leaseholder refuses to pay.
“I never wanted a bin store with lights”
For example, at a self-managed development that Clear now looks after, the RMC directors had agreed to replace the bin store with a far more sophisticated solution. The cost of this bin store, with the lighting and lockable gates, tipped it over the £250 per leaseholder threshold, meaning that the s20 consultation process should have been followed.
Instead, the directors discussed it at their board meeting where they all voted in favour of the new bin store. The expenditure was authorised and demands issued to the leaseholders. Unfortunately, a number of the leaseholders objected to the cost – and the RMC was left trying to recover the unpaid demands.
This is a classic case of RMC directors getting confused between company law and leasehold law. It is something we see regularly at self-managed blocks and, sometimes, at blocks managed by estate agents that don’t specialise in block management matters.
A decision by committee is not a substitution for a s20 consultation
RMC directors are not wilfully ignoring the s20 requirements but often hold a misplaced belief that agreement by the directors on expenditure is sufficient to proceed.
Leasehold law sets out that a s20 consultation must be carried out for any expenditure items that will cost any one leaseholder more than £250. And it is surprising how many of the mundane, run of the mill maintenance projects can fall into this category! If the RMC does not follow the s20 process, leaseholders are not obliged to pay towards the costs of the works.
We often find that in a meeting of neighbours at smaller developments, leaseholders may not feel comfortable saying “no” to a plan or admitting that their personal financial situation is different to their neighbours, so may go along with a vote in the room. Even if the vote is unanimous, it cannot force that leaseholder to pay if the s20 consultation has not been completed.
The s20 consultation process is not that onerous but it can’t be ignored – and it is good practice too. The whole point of the consultation is to give leaseholders the chance to have their say on expenditure that affects their development. It is also a powerful opportunity to win the hearts and minds of leaseholders who may be reluctant to contribute.
Don’t let a hole in the roof become a hole in the RMC funds
Even if the company articles give unlimited powers to the company directors, when it comes to spending leasehold funds, lease law takes precedent and cannot be ignored.
By working with a specialist block management company such as Clear, RMC directors can hand over the consultation process and ensure it is done correctly, leaseholders understand the plans and are willing and able to pay for the major works activities that affect their development.
