Nicholas Kissen, Senior Legal Advisor at LEASE looks at what to do to ensure you keep within the law and do not find yourself out of pocket?
You have taken over the management of the building with your fellow leaseholders and the roof needs repairing. It is many years since this was done. The same goes for painting the outside walls and the interior common parts. The lease says this should be done every seven years and the deadline is looming.
So what to do to ensure you keep within the law and do not find yourself out of pocket?
Hopefully you foresaw that these works were coming and over the years you have accumulated a sinking fund to cover all the costs.
But maybe this is over-optimistic. The lease may be ancient and may not provide for such a fund. Or money was set aside each year to go into the fund but it is still not enough to pay for the works.
If the money is not there then follow the basic drill:
- Check that the lease entitles you to ask for payment in advance of the work being done. Without such a provision you will be left having to do the works and trying to recover the costs from the leaseholders afterwards.
- Ensure that any demands for payment are accompanied by a summary of rights and obligations in the required format, with the prescribed wording. Until this has been done, the leaseholder can withhold payment even if they have received the demand.
- Do not on any account overlook the requirement to consult under Section 20 of the Landlord and Tenant Act 1985 (as amended) even if there is enough money available in the sinking fund.
The consultation process requires that before entering into an agreement with a contractor for the works, at least two notices must be served on the leaseholders (and where relevant, any recognised tenants’ association). The first notice must advise what works are intended, state why the works are considered necessary, and give leaseholders a chance to comment on the works and nominate contractors. If any contractors are nominated then you must obtain an estimate from them.
You must also have regard to any written observations received within the 30 day time limit.
When the estimates are in, a second notice must be sent out, giving leaseholders a chance to inspect and comment on them. Again you should have regard to any observations received.
A final notice should be served on leaseholders, notifying them of who the contract has been awarded to and why. This notice does not have to be served if the contract goes to a nominee of the leaseholders or the lowest estimate.
An application can be made to the First Tier Tribunal (Property Chamber) (or Leasehold Valuation Tribunal if you are in Wales) to dispense with the requirement to consult, if the consultation process is not followed. However this is at the tribunal’s discretion and the watchword is to get it right first time.
Failure to stick to the consultation process can have devastating financial results. Unless the tribunal grants a dispensation order you will not be able to recover more than £250 per leaseholder. For example if the project costs £30,000 and there are 10 leaseholders you would find yourself short by a staggering £27,500.
