Section 20 consultation: major works and long-term contracts

When it applies

Section 20 applies to "qualifying works", works on the building, when their cost means any one leaseholder’s contribution would be more than £250. It also applies to "qualifying long-term agreements", contracts for more than twelve months such as cleaning or lift maintenance, when any one leaseholder would pay more than £100 in a year.

The threshold is per leaseholder, so work it out from the largest share in the block. With twelve flats paying equal shares, works costing more than £3,000 need consultation.

It applies to resident-run blocks too. For these purposes the Act treats anyone with a right to enforce payment of a service charge as the landlord, so a management company collecting the service charge must consult the leaseholders, its own members included.

The three stages for works

1. Notice of intention. Describe the works, say why they are needed, invite written observations and invite each leaseholder to nominate a contractor. Leaseholders have 30 days.
2. Estimates. Try to get an estimate from a nominated contractor, and obtain at least two estimates, at least one from someone wholly unconnected with the landlord. Send a statement setting out at least two of them, with a summary of the observations made and your response, and allow another 30 days for observations.
3. Reasons. If the contract goes to a contractor who was not nominated and did not give the lowest estimate, write to each leaseholder within 21 days of signing it, with the reasons.

Long-term agreements follow a similar process, set out in Schedule 1 to the Regulations.

If you skip it, or get it wrong

Each leaseholder’s contribution is capped: £250 for the works, or £100 a year for an agreement. The landlord can apply to the First-tier Tribunal (Property Chamber) to dispense with some or all of the requirements under section 20ZA, for urgent works for example, ideally before work starts.

Since the Supreme Court’s decision in Daejan Investments v Benson (2013), the tribunal asks mainly whether the leaseholders were prejudiced by the failure. It can grant dispensation on conditions, such as paying the leaseholders’ costs.

Practical points

• Keep a copy of every notice, and when and how it was sent to each leaseholder.
• Plan the timetable: the two 30-day periods mean at least two months from the first notice to a contract.
• Works split into several small jobs may still count as one set of works.
• Build larger works into the budget and the reserve, so the consultation is not also a request for money nobody expected.