Section 20 Notice – What is this? Part 2
If I have a resident’s management company? Or a right to manage company? Should I be served with a Section 20 Notice?
Yes, of course. You would still go through the standard legal process. This is the process for carrying out major works. The procedure can be dispensed with. However, only in rare cases. You would have to get an order from a tribunal or a court.
The procedure is prescribed. It is detailed by the Government. Failure to do so can lead to some form of penalty.
If the freeholder does not serve the relevant notices’ then they are not able to recover more than £250.00 per leaseholder. If there were four flats no more than £1,000.00. So, if £10,000.00 of work was done without consulting, they would only be entitled to £1,000.00 back. It is so important then that the freeholder serves the correct notices and in the correct format.
If you haven’t already please see our previous article part 1.
What is the procedure?
A Section 20 Consultation must be carried out. This must be if the works are more than £250.00 per lessee.
There are three stages in total to be done: –
Stage 1
Serve a Notice of intention to carry out works. The Notice must be served. Setting out what works are proposed. Why they need doing. They should provide any comments. There would then be a nomination of contractors from leaseholders. There are very set notices within the provisions of the Act. These should be considered when serving any such notice. You may wish to consult a solicitor or a professional in this regard.
Stage 2
This is the statement of estimates.
This is once estimating for the works have been obtained. The notice must be served to all leaseholders detailing the costs, how to inspect them and inviting any comments. There has to be a minimum of two estimates for any such work together with details of the work itself. The estimates are served with such a notice. The freeholder can specify dates where and when documents can be inspected. These must be reasonable.
A freeholder does have a duty to pay regard to what you have given by way of observations. If the freeholder receives written observations during the consultation, they have a duty to take them into account. The law does not define unfortunately “have regard to”. It basically means that they must look at the written observations. They must do a response within 21 days.
Where work is being queried by tenants or a nominated contractor is requested. The freeholder doesn’t have to use a nominated contractor or accept the lowest estimate. Within 21 days of entering the contract the freeholder must give a written statement. This must include the reasons for awarding the contract. There is then a stage 3 which we will come onto later. They must provide facilities for the tenants where they can inspect the statement of estimates. If at any point the freeholder and/or managing agent does not lay out any of the procedures then they cannot recover the money.
Stage 3
Notice of reason.
Once a contract is awarded. The freeholder must serve a notice. If they did not choose the cheapest estimate or a contractor nominated by the lessees. They must explain why they chose that particular option. They must have a very good commercial or particular reason for not choosing the cheapest quote. For instance, they may say that whilst the quote is cheap it does not consider it. This may then require extras on the contract. Bringing the quote up to previously what was laid out by another contractor. Ie the quotes are comparable.
How long does this consultation take?
For the stages of 1 and 2 all the leaseholders must have at least 30 days. They can then make to any comments. It sometimes takes longer to get estimates obtained. It can take up to at least two to three months as a minimum. RICS guidelines for managing agents does allow for delays in the post. This can be over and above the 30 days.
So, the leaseholders have at least 30 days to respond to the Notice of Intention served at the pre-tender stage.
The tenants have a further 30 days from the notice of intention of statement of estimates to make any further comments. If the cheapest quote is then accepted the work is then instructed.
What if I dispute the works required and want to object to a Notice?
In the first instance you should talk to a solicitor before you do anything further. Section 20 Notices can be very complicated. It is important that you get the best advice.
There is a first tier Tribunal that can refer this to, to decide on whether it is reasonable or not. Tribunals role in dealing with service charge dispute is to determine whether the charge is payable. They also then consider if it is reasonable.
These issues can either be heard together or separately. Either a leaseholder or a landlord can apply for determinations on the following: –
- Whether the service charge is payable
To whom it is payable
3. The amount which is payable
4. The date which it is payable
5. The way it is payable
An application can be made in respect of any charges. These relate to anything that has been levied on the maintenance account. Or anything that is proposed to be charged. Payment of the charge does not amount to an agreement or admission by a leaseholder that the charge is payable. But you should consult a solicitor on this.
The first tier Tribunal will resolve the dispute. Any uncertainties on whether a leaseholder is liable to pay the service charge. They will decide on whether it is also reasonable for the service charge. They can deal with any issues or liability before these need to be addressed and paid.
Determinations can be laid out for various different applications such as: –
- a) Whether the costs have reasonably been incurred
b) Whether the works have been done or the services have been or are presently being provided
c) Whether the works or services are of a reasonable standard
d) Whether there is an interim charge before costs can be incurred and it is reasonable
e) Whether the costs would be reasonable
f) Whether the services are proposed in the future
g) What amount can be charged on account
h) Various different situations and scenarios for leaseholders and freeholders/managing agent.
They can also determine on whether works were required at all. Whether they were enough to remedy a problem. If they were adequate works. Even if an element of the work was either neglected or mismanaged by the freeholder. Were there genuine grounds for extra works of an urgent nature. Were procedures followed and lots of different aspects of a dispute particularly within the content of a lease.
You will find that most leases are different. They are laid out differently. However, they do inform how freeholders are entitled to charge. Section 20 Notices can only be dispensed with by a first tier Tribunal when urgent works are required. So, if major works have taken place you have the right to object. If they were not served properly you have the right to object.
The above is only a guide. You should take legal advice. But the same Act also provided legislation for flat owners to run their own affairs. This is known as Right to Manage. They make their own decisions about management and upkeep of flats. This included dealing with expenditure such as insurance repairs and service charges by way of a Right to manage company.
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