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Section 20 (Landlords must Consult)

Summary

1. The obligation for a landlord to consult arises when either they:

i. Undertake a single identifiable set of works for which they intend to charge £250 or more per leaseholder.

Or

ii. Enter into a contract for more than 12 months which will result in a leaseholder being charged £100 in any accounting period.

2. Works which result in a leaseholder being charged £250 or more are known as ‘Qualifying Works’.

3. Contracts which last more than 12 months are known as ‘Qualifying Long Term Agreements’.

4.  Any relevant VAT, management fees, and other costs to be recharged to leaseholders count towards to the £250 and £100 limits.

4. The law says that the amount of a service charge which a leaseholder is obliged to pay is capped at £250 for Qualifying Works or £100 per year for costs resulting from a Qualifying Long Term Agreement unless:

i. The landlord meets the consultation requirements.

Or

ii. A court or tribunal makes an order dispensing with the consultation requirements.

What are the consultation requirements?

1. The consultation requirements are given in regulations made pursuant to the Landlord and Tenant Act 1985.

2. The regulations which currently apply are the Service Charges (Consultation requirements) (England) Regulations 2003.

3. The regulations describe 5 different consultation processes under Section 20 depending on what the landlord is consulting on.

4. Each process involves sending letters with specific content and giving leaseholders a specific set of rights. These letters are commonly referred to as a ‘Section 20 notice’.

5. In all the process leaseholders have a right to make a formal written reply, which a landlord is obliged to take into account. These replies are known as ‘Observations’.

6. In 2 out of the 5 processes leaseholders and recognised tenants’ associations are also given the right to nominate contractors.

What are the 5 different consultation processes?

1. The 5 different processes are normally identified by the schedule of Service Charges (Consultation requirements) (England) Regulations 2003 in which each of the processes is described:

i. Schedule 1: This process is to be followed when a landlord plans to enters into a qualifying long term agreement, and the law does not require that the relevant contract is advertised by placing an invitation to tender in the Official Journal of the European Union.

ii. Schedule 2: This process is to be followed when a landlord plans to enters into a qualifying long term agreement, and the law requires that the relevant contract is advertised by placing an invitation to tender in the Official Journal of the European Union. The requirement to place such an invitation in the Journal (often referred to as an OJEU notice) applies in respect of publicly funded organisations, such as local authorities and housing associations, when the value of the contract exceeds a threshold value prescribed by law.

iii. Schedule 3: This process is to be followed when a landlord plans to undertake qualifying works, and those works are to be carried out by a company with whom the landlord has already entered into a qualifying long term agreement.

iv. Schedule 4 part 1: This process is to be followed when a landlord intends to carry out qualifying works, and the law requires that the contract to carry out those works is advertised by placing an invitation to tender in the Official Journal of the European Union.

v. Schedule 4 part 2: This process is to be followed when a landlord intends to carry out qualifying works, and the law does not require that the contract to carry out those works is advertised by placing an invitation to tender in the Official Journal of the European Union.

Relevant Case Law

See the section of our case law library on Consultation (Section 20)

Click on the link to read more about the Landlord and Tenant Act 1985