What is a Section 20 Notice and what are they for?
Occupiers of flats will generally own their property on a long lease, typically of 125/150 years duration, under which they will pay a nominal ground rent and a service charge.
The ground rent is paid to the freeholder of the building and the service charge is normally paid to a managing agents who will manage the communal parts of the building and ensure these are kept in repair and are safe for occupation.
This service charge will usually be paid by tenants on a quarterly or monthly basis based upon a budget produced by the managing agent.
For the majority of the time the managing agents will carry out repairs to the common parts based upon the budget, but after time, the building will require larger works such as redecoration, lift repair, roof repair etc.
On larger blocks these works can add up to a large amount of money and the main point of Section 20 is to ensure that landlords obtain fair and reasonable quotes if the total cost is above a set threshold.
There are strict rules in place to ensure that the landlord complies with the appointment of contractors and the commissioning of major works and there are very severe penalties where this does not take place.
The detailed rules are complex and beyond the scope of this article, but the following is a summary of the main issues that need to be considered.
If a building requires major works that will cost over £250 per lessee then a landlord must consult. This means that they must serve 3 notices upon the lessees.
Is a notice of intent and includes a statement of what the works will comprise and invites the lessees to nominate a contractor, from whom the landlord can gain a quotation. The tenants have a period of 30 days to reply to the landlord. The landlord is required to obtain at least one of the quotations from a person or company that has no connection with them.
When the tenders are received, the second notice accompanies the tenders when they are sent to the tenants. It gives the tenants another 30 days to reply with comments and questions, the landlord is required to have consideration of the tenants comments.
Is a notice that is served advising the tenants of the chosen contractor and may include the landlords reasons for awarding the contract to that contractor.
Long Term Contracts
The procedural items are pretty much the same, but the consultation must be carried out if the amount per tenant amounts to more than £100.
If the landlord doesn’t follow this procedure, then the tenants can refer the matter to the LVT (Leasehold Valuation Tribunal). If the LVT find against the landlord then he will only be able to recover £250 from each tenant in the case of major works, or £100 from each tenant in the case of long-term contracts. Therefore if the works are substantial, the cost to the landlord can be very severe.
This is just a brief overview of the main rules, it is vital that you obtain professional advice from your advisors.
Kevin Cruiks – Ayers & Cruiks