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All you need to know about Section 20

Landlords are obliged by law to consult Leaseholders before carrying out any major works to their property above a certain value. This process is called a Section 20 Consultation and the first stage of the process is the Notice of Intention. Below we answer the most frequent questions that we receive from Leaseholders regarding the Section 20 process and how it can impact them.

Why have I received a Section 20 Notice?

Section 20 is part of the Landlord and Tenant Act 1985 (as amended) and requires Landlords to consult with Leaseholders when they intend to carry out qualifying works where any one Leaseholder’s contribution to the cost of those works is expected to be £250 or more (inclusive of VAT).

What is Section 20 Consultation?

The Section 20 Consultation is a legal requirement and has three stages:

The Notice of Intention.  This is the pre-tender stage and sets out what works are proposed and why they need to be done.  Leaseholders can submit comments and nominate contractors within 30 days of this Notice being issued.

The Notice of Estimates.  This is the tender stage and, after the initial 30 days above, the Notice of Estimates is issued to all Leaseholders.  This Notice details the estimated cost of the works.  Leaseholders can submit comments and inspect the Estimates within 30 days of this Notice being issued.

The Notice of Reasons.  This Notice is only issued if the cheapest estimate or a contractor nominated by a Leaseholder is not awarded the contract. The Notice explains the reasons why the Landlord chose a particular option.

What are ‘qualifying works’?

Qualifying works are ‘works on a building or any other premises.

Who is the Landlord?

Depending on the structure of your Lease, the Landlord will be either the Freeholder, the Resident Management Company, Right to Manage Company or Head Lessee.

HML issue the Section 20 Notices on behalf of your Landlord and their details are shown on each Section 20 Notice and the covering letter.

The Section 20 consultation is required by law irrespective of who the Landlord is and regardless of whether or not all the Leaseholders unanimously agree the work should be undertaken.

How has the £250 been calculated?

This is not a calculation it is the amount set by the legislation under the Landlord and Tenant Act 1985 (as amended) and it is not the amount that Leaseholders will have to contribute. If it is anticipated that any one Leaseholder will need to contribute at least £250 towards the cost of works then a Section 20 consultation must be done.

How much will the works cost?

At the initial stage (Notice of Intention), we do not know precisely what the work will cost. The specification of works will be prepared and then tendered under a closed bidding process. Any contractors nominated by Leaseholders during the Notice of Intention consultation period will be included in the tendering process if deemed suitable. The requirements for nominated contractors will be shown on the covering letter.

The estimated costs of the proposed work will be shared with all Leaseholders when the Notice of Estimates is issued. All tenders will be shown on the Notice for comparison.

How much will Leaseholders have to pay?

This will be confirmed once the full costs of the contract has been determined. In some cases, there may be a sufficient reserve/sinking fund which can cover costs of the contract, if not, an invoice will be issued to all Leaseholders for their portion of the cost on expiry of the 30 day consultation period following service of the Notice of Estimates.  The covering letter sent with the Notice of Intention will show how the proposed works are to be funded. All funds must be collected before the works can commence.   Depending on the type of works, it may be cost effective to have other works undertaken at the same time, particularly if scaffold is required.

What is my portion of the cost?

The portion each Leaseholder pays will be determined by their Lease.

What works are to be done?

The proposed works are shown on the Notice of Intention.  A detailed specification of works required will be prepared and you can request a copy along with the tender documentation within the second stage of the consultation process.

Can Leaseholders obtain their own quotes?

No. All contractors need to quote against the same specification of works under the closed bid system.  This ensures the Section 20 legislation is adhered to and estimated costs are comparable. Leaseholders can nominate a preferred contractor during the Notice of Intention consultation period.  Any nominations after that period cannot be accepted.

When will work start?

Once the consultation process has been completed, the start date will be dependent on the funds being available / collected and the availability of the chosen contractor. An estimated start date will be shown on the covering letter.  Once the actual start date has been agreed, all Leaseholders will be sent a Notice of Commencement to confirm that date along with all contact details for HML and the contractor.

Who will manage the project / works?

Where HML Essential Services are engaged as Project Manager for the works, an experienced inspector / surveyor will write the specification, complete the tender analysis and manage the project to completion.