An unreasonable delay may amount to a breach in the consultation requirements; resulting in the landlord being limited under the Regulations to securing no more than £250 per leaseholder, regardless of the actual cost of the works. This could mean a hefty bill landing squarely on the landlord’s shoulders.
In short, the Section 20 consultation process is a legal requirement for landlords of certain types of building who wish to carry out major works.
Detailed regulations have been produced under section 20 of the Landlord and Tenant Act 1985 (as amended by S151 of the Commonhold and Leasehold Reform Act 2002) which set out the precise procedures landlords must follow; these are the Service Charges (Consultation Requirements) (England) Regulations 2003 (‘the Regulations’).
The Regulations are designed to protect leaseholders providing them with an opportunity to be consulted and to be involved in certain works carried out at their premises and how service charges are incurred. It also allows a landlord to recover the cost of the works through the service charge.
Where a landlord wants to carry out a set of qualifying works that will cost any one individual leaseholder more than £250, the landlord will need to either go through the statutory consultation process or obtain dispensation from the First-tier Tribunal (Property Chamber).
Delay in consultation process creates risk
Where there is a delay in the consultation process landlords or their managing agents can face opposition from leaseholders. Although there is no legislation that sets out the time limit for section 20 consultation, case law suggests that delays in the consultation process or a change in the nature of the works to be carried out can be viewed as a breach.
If there is a delay between the consultation process and the start of the major works, the circumstances may have changed over time and be very different. For example the leaseholders of the various leases in the building might have changed the nature and scope of the works required may have altered compared to the works originally intended and building materials may well have increased in price and earlier contractor estimates may have expired or gone up leading to in a significant increase in the overall cost of carrying out the work. This may mean that the original consultation process is invalid.
The lease may already make provision for a reserve fund allowing the landlord to build up a reserve in advance of anticipated major works. If it does not it is possible to apply to vary the lease. The First-tier Tribunal (Property Chamber) is generally in favour of such applications on the basis of good management.
Keep the process on schedule
Importantly once the consultation process has begun a landlord should push ahead within the guidelines and timescales set out in Regulations in order to carry out the works. Earlier decisions of the First-tier Tribunal (Property Chamber) consider this should be months rather than years.
How Moore Barlow can help
At Moore Barlow we have a specialist real estate disputes team able to advise on the consultation requirements and would be happy to discuss your requirements to see how we can help you.
Please contact Zoe Thompson in our Real Estate Disputes Team for further details.