Are you a leaseholder who is unsure about your rights and responsibilities in relation to Section 20 notices? If so, you’ve come to the correct place. The Landlord and Tenant Act of 1985 specifies how leaseholders should be advised of any work or services that would necessitate a financial contribution.
However, with so many things to consider, navigating the consultation process can be difficult. In this post, we’ll go through the essentials of Section 20 notifications, such as what they comprise, how to submit input, and what your rights as a leaseholder are.
By the conclusion, you’ll know exactly what to expect and how to avoid being financially exploited. So, let’s get started!
What is section 20?
If you are a leaseholder, you may be served with a section 20 notice (S20) of the landlord and tenant act 1985 which is a notice to inform you that work or a service will be provided for which you will require you to contribute to financially.
A S20 notice must be given to each affected leaseholder and a copy must also be sent to the registered tenants’ association (RTA) associated with your building or estate.
The S20 notice will specify the scope of the work and the estimated cost and also allows you to participate in the consultation process and provide feedback on the work.
This is a process that helps leaseholders stay involved in what happens in the development of a freehold so is certainly one of the perks, rather than a disadvantage of leasehold property.
However, ultimately, the decision is still made solely by the freeholder but it is in the freeholder’s best interest to consult their leaseholders as they may want to move out if they don’t feel happy in their building.
What is included in a notice to carry out major works?
If you receive a “section 20 notice,” it should include specific information about the proposed works first and foremost as the most important part of the document.
The notice should either describe the proposed works or provide a reasonable location and hours where the leaseholder can inspect the freeholder to have people in on the property to do work.
It should also explain why the proposed works are necessary and invite you as a leaseholder to provide your feedback in writing within 30 days.
Reasons for the work being necessary range from the landlord wanting to install a new unit (in a block of flats for example) or there being the need to install something that affects the entire freehold property such as the need for a new roof.
A section 20 notice should also inform you of your right to nominate a contractor who will be contacted by the landlord to provide an estimated cost for the work, if applicable.
Any observations from the leaseholder received by the due date must be considered by the landlord, and estimates on the price from nominated contractors must also be given to the leaseholder where applicable too.
For instance, if the freeholder knows that the cost for a new roof will be around £20,000 from a contractor, they would contact all of the leaseholders of a property telling them of this price which would help justify the money they are asking for as part of the notice.
If all goes to plan, then another notice as part of section 20 is provided which estimates the price of the major works.
What is included in the notice of estimates for major works?
First of all, it is important to note that an estimate of major works is slightly different to a notice to carry out major works. This document is still part of section 20 but instead gives a predicted price that must be paid to leaseholders.
In the same way, the notice must also be sent to a tenants association if there is one that exists. This notice must include at least two estimates obtained by the landlord and it is critical to note that one of the estimates must come from a contractor with no ties to the landlord.
This prevents the landlord or freeholder from trying to make a profit by charging tenant more than the cost of the works and then keeping the difference in between
Following the distribution of the notice, the landlord must invite written comments from the leaseholder recipients that are valid within 30 days and they must consider each comment too, even if the leasehold is a title good leasehold.
What happens if a leaseholder isn’t consulted?
Most freeholders will always strive to include leaseholders in the decision-making process when necessary maintenance or repairs are covered by the lease.
However, there may be some exceptional circumstances in which consultation with leaseholders is not possible, like if there is an emergency that requires immediate attention.
In situations like this, it is extremely hard to obtain permission in advance and a freeholder may need to seek permission from the first-tier tribunal (Property Chamber) to proceed without first consulting.
However, it’s important to note that the tribunal may impose conditions that should be followed by freeholders anyway and it is likely there will be a limit on the amount that can be charged to leaseholders as a result of notice being so short term in this way.
What is an award of contract for major works from section 20?
An award for a contract for major works from section 20 is given within 21 days of the major work agreement being signed. This notice must include the reasons for the award as well as a summary of the leaseholders’ observations about the estimate of the cost.
It should be noted, however, that in some cases, this notice is not required. For instance, if the contract was awarded to a contractor recommended by a leaseholder or a recognised tenants association (RTA).
Furthermore, if the contract has been awarded to the contractor with the lowest tender, this notice is not required either as it is assumed that the lowest price has been achieved and the leaseholders will be generally happy with this.
What about money that has been paid into a sinking fund?
A sinking fund in your building is similar to a savings account for the property and is usually managed by a block manager or someone in charge of the freehold.
It exists to cover the cost of large expenses that are not covered by day-to-day spending much like why a section 20 would be issued. So why is a section 20 issued instead of using the funds available in a sinking fund?
The answer is, sometimes it is used to pay for costs. However, the fund is typically used to pay for things like maintenance works that mandatorily happen in a freehold every now and then and after a set period of time.
Now, if the sinking fund exceeds the actual cost of the work, then a section 20 is sent to leaseholders that invoice them and details how much of the fund has been spent and what more is needed.
How does the process of sinking funds work?
Sinking funds are a way for property management companies to plan for and budget for future expenses related to property upkeep and maintenance.
Each owner or leaseholder contributes a set amount to a sinking fund, which is then used to cover larger expenses such as building repairs or upgrades.
Sinking funds are a very important tool for preserving a property’s value over time and protecting owners from unexpected costs.
How does Section 20 work in the public sector?
If your landlord is the government instead of a private landlord and you are in a leasehold agreement, then you may not receive the same right as someone who is in the private sector surrounding section 20.
When must leaseholders be consulted in the public sector?
Some freeholders will consult a leaseholder if there is an action needed in a property that goes over a certain amount such as £250 for example. But in cases where there is not much of a charge and the freeholder is the local government, they may just issue a notice.
Again, rules are also different if there is an enfranchisement leasehold but you can read more on the topic using our article.
To conclude
Section 20 is one of the parts of the law when it comes to leaseholds that aren’t quite what people are expecting when they look into it.
There are other important parts of the law besides section 20 when it comes to leaseholds too like what happens when a leasehold expires.
However, given the large number of laws it does not come as a surprise if you wonder why anyone would buy a leasehold in the first place as it does seam leaseholders are at the mercy of freeholders and a section 20 could be issued at any time.
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