A Section 20 Consultation is a legal consultation under the Landlord and Tenant Act 1985. It is designed to ensure that leaseholders are properly informed and consulted about significant works or long-term agreements that will result in them being charged more than a certain amount.
Here’s a breakdown of the process and its key elements:
Purpose of a Section 20 Consultation
The main goal is to protect leaseholders from unexpected or unreasonable costs by ensuring they are given a chance to be involved in decisions about major works or long-term agreements. This process ensures transparency and accountability in how service charge monies are spent.
When is a Section 20 Consultation Required?
- Major Works: When the cost of work on a building or estate exceeds £250 per leaseholder.
- Long-Term Agreements: When the cost of a contract or agreement lasting more than 12 months exceeds £100 per leaseholder per year.
Key Stages of the Consultation Process
- Notice of Intention:
- Description: The landlord must serve a Notice of Intention to carry out the works or enter into an agreement.
- Contents: This notice should describe the proposed work or agreement, explain why it is necessary, and invite leaseholders to provide their observations and suggest contractors.
- Response Period: Leaseholders typically have 30 days to respond however, Larchfield normally provide 32 days to allow for postage.
- Statement of Estimates:
- Description: After receiving observations, the landlord must obtain at least two estimates for the proposed work or agreement.
- Contents: The landlord then sends a Statement of Estimates to the leaseholders, including the details of the estimates and the opportunity for the leaseholders to inspect them.
- Response Period: Leaseholders have another 30 days to provide their comments on these estimates.
- Notice of Reasons (if applicable):
- Description: If the landlord decides to proceed with a contractor that did not provide the lowest of tenders, or not suggested by the leaseholders, they must issue a Notice of Reasons explaining their decision.
Additional Considerations
- Consultation Exceptions: There are certain exceptions where a Section 20 Consultation might not be required, such as in emergency situations or when a qualified long-term agreement is already in place. This is when an application to the First Tier Tribunal for dispensation would be required.
- Compliance: Failure to properly conduct a Section 20 Consultation can result in the landlord being limited in the amount they can recover from leaseholders, potentially capping it at £250 per leaseholder for major works or £100 per leaseholder per year for long-term agreements, regardless of the actual costs incurred.
Importance of Section 20 Consultation
- For Landlords: Ensures legal compliance and maintains good relations with leaseholders by demonstrating transparency and fairness in managing property expenses.
- For Leaseholders: Provides an opportunity to influence decisions that will affect their service charges and ensures they are not unfairly burdened with excessive costs.
In summary, a Section 20 Consultation is a structured process that mandates landlords to engage with leaseholders about significant costs, ensuring that their voices are heard and that there is clarity and fairness in the financial management of shared properties.
