Darren Bagnall from Flat Living Insurance discusses major works and why Section 20 is important.

Major works include any work carried out on your property which increase the cost of leaseholders’ annual service charge. 

Usually, these are works carried out on a large scale, and may include:

• Window/roof replacement
• Necessary redecoration
• Repairing broken lifts of machinery

Are Major Works Always Essential?

Normally, major works are large ‘one-off’ projects which are considered to be essential for the safety and well-being of tenants. For example, a broken roof or window replacements must be carried out promptly, as they pose a hazard to the tenants living in the property, as well as any works or visitors.

However, major works do not always refer to essential repairs. They may also refer to any work that is deemed necessary for improving the life of the building, such a redecoration. Whilst this type of major work is not urgent, it is still just as essential, as a neglected property can quickly lead to hazards.

It is also important that leaseholders live in a property that is maintained to a decent standard, which is why major works also cover any improvements to the life and quality of the building.

Who Pays for Major Works?

Major works can often be expensive. The cost is usually split between the tenants of the building and charged under the annual service charge or through a reserve fund (if one is available). However, even when split between tenants, the cost can still be significant. That is why Section 20 is so important. It states that if the cost of major works exceeds £250 per tenant, the landlord or RMC must follow a rigorous consultation process (otherwise known as an S20 consultation) in order to proceed.

Expensive annual service charges can often be tricky for leaseholders to afford. That is why it is important for any potential residents to ask for a Leasehold pack before purchasing their property. This pack will contain all information on major works over the next few years, so that leaseholders can be prepared. Normally, the estimated costs for any upcoming works should be highlighted, allowing any tenants to budget in advance and not be caught unawares.

What If There Are Major Works Going On During the Sale of a Property?

If any major works are in progress during the sale of a property, the seller may request that the new leaseholder contributes towards the cost in the same way as the other tenants. 

However, this is not always the case, as sometimes the fees for the major works have already been covered.

In other cases, the works have been carried out and the estimate has been paid, but the final amount has not yet been confirmed. In such scenarios, it is necessary for the buyer’s solicitor to request a ‘retention’ from the seller’s solicitor. 

A retention refers to an amount of money which is retained from the sale amount by the seller’s solicitor and used until the final accounts have been officially published. The retention is normally included as a term in the leasehold contract.

What If Leaseholders Can’t Afford Major Works?

Major works can sometimes pose a significant problem for tenants, especially if they have not had the means to save beforehand. In such cases, landlords usually offer payment plans which mean tenants can pay in yearly instalments.

In some cases, social landlords (a Local Authority or Registered Social Landlord) also have the power to either reduce or waive costs for tenants who are struggling to pay for major works under statutory regulation. Tenants can apply for their fees to be reduced or waived, and the following will be considered:

• Whether the leaseholder was notified of any estimate for major works before the purchasing their lease
• The benefit the leaseholder will receive as a result of the works being carried out, such as an increase in the security of the property, the value of the property, energy efficiency, or an improvement in services or facilities
• The financial position of the leaseholder, their ability to pay over yearly instalments, and whether they would suffer financially in paying the service charge
• The total amount of service charges the leaseholder has paid since they first purchased the property