WHAT IS A SECTION 20 CONSULTATION AND WHY DOES IT AFFECT ME?
Any one who pays a service charge whether they are a leaseholder, shared owner or tenant maybe be affected by a section 20 consultation.
Through your service charge you pay a proportional share for various services provided to your property or the estate in which you live, for example grounds maintenance.
If you are a leaseholder you have also committed to paying a proportional cost for repairs, maintenance or improvements to your home or to the building or estate in which you live.
The section 20 consultation process (sometimes referred to as S20) was put in place to protect service charge payers and to make sure that landlords only carry out work or enter into service contracts that are necessary and at a reasonable cost.
The process also allows service charge payers the chance to comment on the works and sometimes to suggest contractors for the works depending on the value of the contract.
Because of the legal terminology we are required to include in our letters and notices by law, section 20 consultations can be quite difficult to understand. To help you to understand the process and what you need to do, we’ve included below some useful FAQs.
If you have any questions that haven’t been answered in our FAQs, please email our homeownership team.
WHEN IS THE SECTION 20 CONSULTATION PROCESS USED?
For any one-off work that will cost an individual service charge payer over £250 or for any new service (for example ground maintenance) that lasts longer than 12 months and will cost any service charge payer over £100. If any of those apply we need to let you know and give you the chance to comment on what we are planning.
Your comments on our plans form part of a formal consultation between us and you and it’s our legal requirement under section 20 of the Landlord and Tenant Act 1985 to involve you.
HOW DOES THE SECTION 20 CONSULTATION PROCESS WORK?
This may vary according to the type of work and the cost but it’s usually:
- We send you a notice telling you what work or type of contract we are planning. This will include letting you know where you can find out more details and how you can provide your comments
- We get some quotes from contractors, taking in to account any comments we’ve received from you or other leaseholders
- We send you a ‘notice of estimates’ which gives you the details of the estimated costs. You are also able to provide feedback to us on the estimates
- Taking into account any feedback we receive we award the contract to a preferred supplier to carry out the work
- If the contractor is not the cheapest we will write to explain why they have been awarded the contract
CAN I SUGGEST A CONTRACTOR WHO IS NOT ON YOUR APPROVED LIST?
They will be considered against the same criteria as all other approved contractors.
IS THERE ANY TIME WHEN I CAN’T SUGGEST A CONTRACTOR?
Yes. If the overall value of the contract for major works is over £4.1m or if the overall contract value for services is over £164,000 it has to be advertised in the European Journal. This means that the tender process is significantly larger and as such we are not able to take into account contractors that are suggested as part of a section 20 consultation.
WHAT IS AN OBSERVATION?
You have a right to reply with your comments to a section 20 notice up to 30 calendar days from the date of the notice. Your reply is known as an ‘observation’. We will acknowledge any observations we receive within 21calendar days.
A summary of all the observations received and our responses to them are sent out with the next stage of the consultation documents and may also be available on the website.
All the comments and feedback we receive are taken into consideration when planning the work and awarding the contract.
HOW DO I MAKE AN OBSERVATION?
You can make an observation about a notice in writing either by letter or e-mail. You can’t make observations verbally either over the telephone or in person. Your letter will state the appropriate email address for you to use.
I HAVE RECEIVED A SECTION 20 LETTER, IS THIS NOTICE A BILL?
No, this is not a bill. You don’t need to make any payment in response to receiving this letter or any enclosed notices. If payment is required at a later date, you will receive a letter which will clearly state the amount required and how you can pay.
I HAVE RECEIVED A SECTION 20 NOTICE BUT I DON’T THINK IT’S FOR ME
If you receive a notice to your address but not in your name please let us know, it may be that our records need updating or that the leaseholder is subletting the property to you.
If you are a leaseholder sub-letting your property please let us have a correspondence address so we can send any legal documents to you there.
WILL MY SERVICE CHARGES INCREASE?
Your service charge will depend on the services and works which take place in the building/estate that you live in. We will not be asking you to pay for anything for which you are not receiving or will not receive a service for in the future.
WHAT IS AN ESTIMATE?
Before going out to tender we carry out extensive inspections to produce a specification for any works that need to be carried out. During the tender process suppliers will provide an estimated cost based on this specification and using current market prices. This is the estimated figure that we will send you as part of the S20 consultation. When the work is completed the contractor provides the actual costs and this is the amount leaseholders will be required to pay a proportion of. Actual costs can vary from estimated costs. If you have started paying the estimated costs through your service charge any difference between these and the actual costs will be dealt with at the end of the financial year.
WHAT WILL I PAY FOR WORKS?
You will pay a share of the costs of any major works or cyclical works in accordance with your lease terms. The proportion of costs may be based on equal division or another method but this will be stipulated by your lease. If you contribute towards a reserve or sinking fund we will use this to pay for as much of the cost as possible.
WHAT IS A SINKING FUND/RESERVE FUND?
Each year some home owners pay into a reserve or sinking fund. This fund is money that is set aside, year by year, to pay for longer term maintenance for the development. The amount collected may not always cover the full costs of the works and you may be required to pay a top up, you will be told if this is the case.
The lease may stipulate what the fund can be spent on. It may specify (but not exclusively) one or more of the following:
- Cyclical redecoration and repairs
- Lift (if any) renewal
- Window replacements
- Roof repairs/renewal
If your lease does not include this provision you may be required to pay your share of any major works in full. We strongly advise for you to plan and make provision for any future works costs.
IF A CONTRACT IS FOR A NUMBER OF YEARS WHAT HAPPENS IF THE CONTRACTOR DOESN’T PERFORM WELL, DO THEY KEEP GETTING THE WORK?
The contract will say that if works or services are not delivered or are not value for money, we may end the contract.
I AM PLANNING TO SELL MY PROPERTY BEFORE THE WORK DESCRIBED IN THE SECTION 20 NOTICE IS COMPLETED
You should keep the documents safe and pass them to your solicitor when you have accepted an offer. Any potential purchaser needs to be aware of works that are planned at your property.
WHERE CAN I GO FOR ADVICE?
You can contact your local Citizens Advice Bureau for independent advice. The following websites also have useful information about the section 20 process: