Section 20, which governs the rules around work or services to flats that leaseholders must pay towards, can be quite complex. Failure to follow the rules correctly can result in disagreements, delays, or, more catastrophically, the landlord being unable to recover any costs above the sum of £250 per leaseholder.
Executive Chair of The Property Institute, Nigel Glen, talks us through some of the most common mistakes around the Section 20 procedure and explains the three fundamental errors that can lead to managing agents having to argue their case before a tribunal.
The Property Institute talks to the tribunals and Ombudsman every year to ask them why people end up in front of them. “99% per cent of the time,” says Nigel, “it’s communication. They either didn’t tell people in the right way, use the right mechanism, or they didn’t bother to consult because they didn’t think it was necessary. I know it sounds trite, but good communication solves the bulk of problems.”
Section 20 includes a 30-30-21-day process to notify leaseholders and obtain quotes. This begins with a letter advising leaseholders that you would like to carry out work, giving them 30 days to respond with any observations or nominated contractors. “The point of that first letter,” advises Nigel, “is to notify people, but it’s a benefit to you as a managing agent because you might get some fantastic contractor recommendations.”
After giving 30 days to communicate any quotes to your leaseholders, you must then collate them and choose an option. “If you don’t go for the cheapest option or the one recommended by the leaseholder, you have to say within 21 days why you’ve chosen them via a Notice of Reasons,” says Nigel. “Recently, there was a case when somebody proposed themselves to carry out the works. The landlord just dismissed this out of hand as unsuitable, but because they didn’t follow their duty to have regard, they actually broke the law.”
In certain situations, such as if works are urgent, you can apply for dispensation before a tribunal to skip the Section 20 notice procedure.
“The downfall,” says Nigel, “is that the tribunal is swamped, so you might not get a slot in the timeframe you are looking for. It’s always a big help if you can show you’ve tried your best to explain a situation. Always operate under the assumption that what you write is going to be read out in court. So don’t joke, be professional. Case law sets a precedent, so stay on top of it. Plug into conferences, professional bodies, and newsletters”.
Our Section 20 webinar covered everything from nmajor works to Sections 20B, C and D. Along with Nigel, we gathered Cassandra Zanelli, CEO of Property Management Legal Services, and our very own Joe Goss, an ex-Block Manager, to discuss the pitfalls of the various sub-sections of Section 20 and how best to comply.