The mysterious Section 20...

Section 20. S20 charges. Major works. Ad-hoc demands. Have you ever heard one of these phrases, and been left completely confused by your managing agent?

Today we're going to try to simplify the Section 20 process and works, to give an overview for those who haven't come across this before.

What is it?

Section 20 of the Landlord and Tenant Act 1985 (as amended) can be viewed here.

In short, there are two parts. The first relates to 'Major Works', or some form of large project or repair. Think roof replacement, external redecorations, lift modernisation, car park resurfacing as the type of large but specific project.

The second part encompasses Qualifying Long Term Agreements (QLTAs). This is for contracts or agreements that exceed 12 months, so can sometimes include management agreements, utility contracts, lift maintenance agreements, even contracts for reactive repairs if the leaseholders are tied in for certain costs.

Major Works

For part one, any work or project for which any leaseholder will be asked to contribute more than £250 requires the Landlord or Manager to comply with Section 20. These contributions will be divided in the same way as the rest of the service charge, and if even one leaseholder should contribute more than £250 (due to unequal percentages between properties) then all leaseholders should be consulted.

QLTA

Part two refers to long term agreements. This is any agreement for works or services that lasts longer than 12 months. If any leaseholder will be asked to contribute more than £100 to this specific agreement, then all leaseholders should be consulted. The act provides for where such a service may only have a single feasible provider, however the Landlord should still complete the consultation.

Why bother?

Section 20 aims to prevent opaque, greedy and negligent Landlords or Managers from taking advantage of leaseholders, by ensuring transparency for large costs. If Section 20 is not complied with, then each leaseholders contribution for the specific work or service is capped at the relevant value (£250 or £100). Where the difference is a few pounds it can be a minor administrative issue, but with larger projects the costs can reach thousands.

Requirements and notices

Section 20 requires two or three notices, depending on the circumstances. The first is the Notice of Intention, in which the Landlord details the work or agreement they intend to enter into, and invite leaseholders to comment on the scope of works and suggest contractors or providers. Leaseholders have 30 days to respond.

The second notice is the Statement of Estimates, which is used to detail the total of the quotes received. If a leaseholder has recommended a contractor, the Landlord must approach them and if they provide a quote, it must be included. Leaseholders again have 30 days to comment on the quotes received, or to view the details and full quotation, if requested.

Often the Landlord will then proceed with the lowest quote provided, but if they don't, they will issue a Notice of Reasons to explain why they have not selected the lowest estimate. Otherwise, there is no requirement to issue further notice as the Landlord would be expected to proceed with the lowest price.

What to expect from your agent

Section 20 sets out the minimum requirements to comply with the legislation. It is however good practice to better communicate with leaseholders, especially for larger projects, for example by informing them of anticipated works the year before or notifying them of chosen contractors and start dates for works (even if not required). Your agent should be able to easily explain a brief overview of the intended work and the reason(s) for it, even if it is managed by an external professional such as a surveyor.

Exceptions and Dispensation

Section 20 must always be complied with, if the requirements are met. That said, it is possible to apply for Dispensation (exception) from Section 20, with the First Tier Tribunal. The FTT will consider each case on its own merits, and this should only be used where there is good reason to disregard Section 20, rather than small time delays, cost pressures or even unwilling clients.

In summary, Section 20 is a practical piece of legislation designed first and foremost to protect leaseholders across the country from poor practices, underhand deals and mismanagement. It can often feel onerous, especially for smaller buildings that have to issue notices every year for relatively minor work, however it does encourage communication and transparency for property owners - a positive move for the industry.

If you self-manage your property and need help complying with Section 20, or are part through an existing consultation and have concerns about the process, please reach out to our team to see if we can help allay concerns and clarify the requirements.