If you live in a leasehold flat, it’s highly likely you’ve come across Section 20 consultations, and if you haven’t then something could be amiss with the way your building is being managed. But not everyone understands what the rules are and when they’re applicable.
What is a Section 20 consultation?
In essence, the consultation process outlined in Section 20 of the Landlord and Tenant Act 1985 is a way to give leaseholders a bit of control over major expenditure connected to their property. The landlord has to give the leaseholders (and any residents’ association) notice that work is going to be carried out, and a fair tender process needs to be adhered to, in which impartial quotes are sourced and tenants get the opportunity to nominate contractors. The landlord doesn’t have to go with the cheapest or nominated pitch, but they do need to explain their decisions if they don’t.
It’s worth knowing that the landlord in this case doesn’t necessarily have to be the freeholder. It might be the managing agent, or even the right to manage company. Whoever’s commissioning the work.
When should leaseholders be consulted?
For one-off jobs (major works, for example), the landlord is required to carry out the consultation process for any work that is going to cost any individual leaseholder more than £250. Often leaseholders pay unequal shares of the service charges depending on the size of their flat, but if even one leaseholder’s bill looks like it’s going to creep over the £250 threshold then everyone needs to be consulted.
The rules are slightly different for regular contracts. If a long-term agreement with a contractor (a cleaning firm, for example, or an electrical contractor) would mean any individual leaseholder paying more than £100 in a year, then a Section 20 consultation needs to be undertaken.
What’s the process?
It’s a three-stage deal, starting with a notice of intention. This goes to all leaseholders (and any residents’ association), informing them that the work needs doing and inviting them to nominate any preferred contractors within 30 days.
The landlord then needs to get quotes from the most popular contractors nominated (though not necessarily all of them), in addition to anyone they themselves fancy for the job. If no contractors are nominated then at least one quote has to be obtained from someone wholly independent of the management. Freeholders and managing agents often have affiliated contractors, and while these may often be the best option, the consultation process makes sure everything’s competitive.
When the estimates are ready, the leaseholders are then informed of the proposals. They should have access to the relevant documents, and be able to give observations to the landlord. The consultation process allows 30 days for this.
Once quotes have been evaluated and leaseholder feedback has been taken on board, the landlord needs to let the leaseholders know who they’ve awarded the contract to. This should take place within 21 days of the contract being entered into, but isn’t strictly necessary if they’ve gone with a nominated contractor or the lowest tender. Sometimes they won’t go with the cheapest one, but if this is the case then they’ll need to let you know why.
What if you’re not happy with the choice of contractor?
There are lots of valid reasons why a landlord might not go with your preferred contractor, so it’s worth listening carefully to their reasoning and taking it through with them if you’re confused or unhappy. That said, the spirit of Section 20 is to promote a fair, competitive tender process, and if your landlord genuinely hasn’t done this then you can take it to the First-Tier Tribunal.
What happens if there’s no consultation?
If qualifying contracts have been awarded but there’s been no consultation, then you’re within your rights to take it to the First-Tier Tribunal. If the tribunal rules in your favour, then your share will be capped at £250 (or £100 for long-term contracts), and the landlord could be liable for any costs and professional fees you’ve incurred.
Are there exceptions?
If you browse through the First-Tier Tribunal rulings on the LEASE website, you’ll see lots of landlords applying for ‘dispensation from the consultation requirements under Section 20’ (sometimes retrospectively). Look more closely at the successful ones, and it’s almost always to do with roofing, leaks or other matters of urgency. Sometimes it’s simply not practical to undertake a two-month tender process when there’s water trickling through the ceiling. Under such circumstances, a decent landlord will usually try and explain to their leaseholders why a full Section 20 consultation isn’t appropriate, and a decent leaseholder will usually agree.
The process can also be abridged if there is a qualifying long-term arrangement in place with a contractor, though this arrangement in itself should have undergone consultation.
Find out more
The above is only a rough guide, but there’s a more detailed explanation of the Section 20 consultation process on the LEASE website, and it’s also outlined in the context of major works.