Freehold Qualifying Works exceeding statutory limits need Section 20 consultation with leaseholders

welcome to VFM Estate Property Management Company

click here for property management services

property management

  

Statute Requires that Leaseholders Must Be Consulted Regarding Landlord Works

Under Section 20 of the Commonhold and Leasehold Reform Act 2002, Qualifying Works to be funded by the service charge account are subject to stringent consultation procedures with Leaseholders.

As a result of changes to legislation, major works consultation procedures which were previously covered under Section 20 of the Landlord and Tenant Act 1985 are now revised under the Commonhold and Leasehold Reform Act 2002.  Also known as Section 20 under the new Act, it will still be necessary to consult leaseholders when expenditure on specific proposed items will be higher than the new statutory limits. 

Subject to these specific expenditure limits, consultation in the new prescribed form applies to such 'qualifying works' and also to 'qualifying long-term agreements' which are to last longer than 12 months.

There are a number of different stages and consultation periods involved in the process, all being subject to specific and varying requirements. The first stage requires that the landlord issues a 'Notice of Intention'. Following a consultation period, a 'paragraph B statement' must then be issued for qualifying works setting out the estimated costs, again subject to specific details. A further notice must accompany this statement inviting observations from leaseholders. Long term agreements are subject to further and more detailed proposals. Under specific circumstances the landlord must subsequently notify leaseholders once a decision is reached. Such notice being required within a 21 day period giving reasons and responses to observations which have been made.

In view of the above, which is a very brief summary of some of the requirements, it is clear that consultation can be complex and can take some considerable time to complete.  Any works or services likely to fall into this category must therefore be planned well in advance allowing an adequate lead in period.  As a minimum, a period of many months will be necessary, with further time to be provisioned for resolving any issues or observations which may arise during consultation.

The major works consultation procedures which were previously covered under Section 20 of the Landlord and Tenant Act 1985 are now revised under the Commonhold and Leasehold Reform Act 2002.  Also known as Section 20, under the new Act, or S20, it is still necessary to consult leaseholders when expenditure on specific proposed items will be higher than the statutory limits. 

Subject to these specific expenditure limits, S20 consultation in the new prescribed form applies to such 'qualifying works' and also to 'qualifying long-term agreements' which are to last longer than 12 months.

There are a number of different stages and consultation periods involved in the Section 20 process, all being subject to specific and varying requirements.

The first stage requires that the landlord issues a 'Notice of Intention'. Following a consultation period, a 'paragraph B statement' must then be issued for qualifying works setting out the estimated costs, again subject to specific details. A further notice must accompany this statement inviting observations from leaseholders.

Long term agreements of more than a year are subject to further and more detailed proposals. Under specific circumstances the landlord must subsequently notify leaseholders once a decision is reached. Such notice being required within a 21 day period giving reasons and responses to observations which have been made.

Recent case law from the High Court has focussed attention on the application of Section 20 works.

The High Court decision in Phillips & Goddard v Francis  has the potential to throw the currently accepted principals of of S20 on its head however how this should be treated by managing agents  is not definitive at present. (17 Jan 2013)

 

Another landmark Court of Appeal decision was reported under Daejan v Benson only weeks later.

On 28th January 2011 the Court of Appeal delivered judgment in Daejan Investments Ltd v Benson and others. In dismissing the appeal the Court considered how a Leasehold Valuation Tribunal should approach an application to dispense with statutory consultation under the Landlord and Tenant Act 1985 and provided important guidance.

Both the Phillips & Goddard v Francis and Daejan v Benson decisions are likely to have a significant impact on how S20 is treated however more time is needed to fully realise the implications of both of the above cases.

Click property management to visit VFM's home page.

Visitors to our property management web site should take professional advice before acting on any of the content., We do not accept any liability whatsoever for any errors, omissions or inaccuracies in the information provided or for any part of its content nor are we responsible for the content on any links to other sites which are provided in good faith. Copyright VFM Procurement VFM Group. 

 

 

 

VFM Estate Property Management
Provident House, Beckenham, London Borough of Bromley London, Greater London BR3 1AT GB
Phone: 02086586824 Website: http://www.vfmproperty.com/