We know that repairs, maintenance and improvements need to be carried out within apartment buildings and flats. These may be relatively small costs but from time to time they can be much larger. Occasionally there can be instances when leaseholders are forced to pay out ridiculously large sums of money. One particularly shocking recent case was from Oxford in early 2016. Around 50 leaseholders in an apartment block were asked to pay an eye-watering £50,000 pounds each. This was as the result of a regeneration project that reportedly ballooned to a cost of £20 million pounds. This is only one example of how leaseholders can sometimes be subject to what may appear to be high service charges for maintenance and improvement needs. However, the law requires that leaseholders are consulted using what is known as a Section 20 notice which can help to mitigate such situations.
What is a Section 20 Notice?
A Section 20 notice is a form which is intended to clarify any works which are carried out within a building. There are two key points that trigger when this form must be used as part of consultation:
1. If the financial contribution from any one leaseholder is more than £250 pounds.
2. If a qualifying long-term agreement for maintenance and property repairs is being introduced, which dictates that any leaseholder must pay more than £100 pounds per year.
In essence, the Landlord or Residents’ Management Company (RMC) MUST utilise this form if either of these conditions is met. Should a Recognised Tenant’s Association (RTA) exist, this body must also be included within the consultation process.
The Three-Stage Process
The first stage involves a “Notice of Intention to Carry Out Works”. This needs to be distributed to all leaseholders. The reasons and details for these works must be included and leaseholders will have a 30-day period to make any written observations.
The second stage of the Section 20 notice involves two cost estimates from contractors; one of which must be from a company completely separate from the landlord or the RMC. A “Statement of Estimates” should also be included at this time and this must be made available for all leaseholders to examine. Finally a “Notice to Accompany the Statement of Estimates” must be offered. This details how and when the estimates can be inspected for an additional period of 30 days.
The third stage is concerned with a “Notice of Reasons” if the contractor chosen did not provide the lowest estimate. In other words, the landlord or RMC must provide the tenants with reasons why the lowest estimate was not selected. Of course, this is assuming that the lowest bid was not chosen or that the leaseholders have problems with the consultation process.
The Intention of the Section 20 Notice
The Section 20 notice and the associated procedures are intended to avoid situations such as those which were mentioned in the beginning of this article. In terms of landlords who may be served with this notice, there are some fees involved. These can vary, but generally break down as follows:
– Managing agent fee: between 2 and 5 percent of contract cost.
– Surveying fees: between 8 and 15 percent of the contract cost.
These are only general figures and they may be likely to change depending upon jurisdictions. The section 20 form is meant to protect landlords and leaseholders alike and prevent them having to pay unexpected and excessive maintenance and renovation fees.