The New Section 20 Consultation Rules

by | Nov 3, 2003 | Contract Administration and Major Works

For freeholders, managing agents and residents’ management companies planning major works to blocks of flats, the rules changed at the end of October 2003. The Service Charges (Consultation Requirements) (England) Regulations 2003 came into force on 31 October 2003. They set out, under the new section 20 introduced by the Commonhold and Leasehold Reform Act 2002, how leaseholders must be consulted before they are asked to pay.

When consultation is required

  • Qualifying works, where any one leaseholder’s contribution will be more than £250.
  • Qualifying long term agreements, such as maintenance or management contracts lasting more than twelve months, where any leaseholder’s contribution will be more than £100 in an accounting period.

If the landlord does not consult properly and the leasehold valuation tribunal does not grant dispensation, the amount recoverable from each leaseholder is limited to those figures.

The stages for qualifying works

For most works the process has distinct stages:

  1. Notice of intention. Describe the works, explain why they are needed and invite observations and nominations of contractors, allowing 30 days for responses.
  2. Estimates. Obtain estimates, including from a contractor nominated by leaseholders where the rules require it.
  3. Statement of estimates. Send leaseholders a statement setting out at least two of the estimates and summarising the observations received, with a further 30 days for comments.
  4. Notice of reasons. If the contract is not awarded to the nominated contractor or the lowest bidder, explain why within 21 days of entering into it.

Practical advice

The new rules reward good preparation. A proper condition survey and a clear specification make the notice of intention easier to write and the estimates easier to compare. Allowing for the consultation periods in the programme avoids pressure to cut corners. Keeping a complete record of every notice, response and decision protects the landlord if the costs are later challenged.

Leaseholders benefit too. They get a real opportunity to understand the works, comment on them and suggest contractors before the money is committed.

See our Major Works service, and how we later took a 1930s mansion block from ten year plan to finished facade.