How to run a section 20 consultation for major works

When you have to consult

Section 20 of the Landlord and Tenant Act 1985 says you must consult leaseholders before:

• Qualifying works: any works where one leaseholder’s share will be more than £250 (including VAT).
• Qualifying long-term agreements: any contract lasting more than 12 months where one leaseholder’s share will be more than £100 in any year. Cleaning, gardening, lift maintenance and software contracts can all count.

The £250 is per flat, so it depends on your percentages. In an 80-flat block with equal shares the trigger is works costing more than £20,000. In a 4-flat block it is about £1,000.

Why it matters

If you do not consult properly, and the tribunal does not grant dispensation, you can only recover £250 per flat for the works (or £100 per flat a year for a contract). The rest falls on the company, which in a leaseholder-owned block means falling on everyone in an unplanned way.

The stages for major works

For most works that are not under an existing long-term agreement, the process has three stages:

1. Notice of intention. Describe the works, say why they are needed, invite written observations and invite leaseholders to nominate a contractor. Leaseholders have 30 days.
2. Estimates. Get at least two estimates, one from a contractor not connected to the company, and one from any contractor nominated by leaseholders. Then send a statement of estimates with a summary of the observations you received and your response, and allow another 30 days for observations.
3. Award. If you do not choose a nominated contractor or the lowest estimate, send a notice of reasons within 21 days of signing the contract.

Allow at least three months from first notice to signing. Urgent work can be done first and dispensation sought afterwards, but only where the urgency is genuine.

Long-term agreements

Contracts over 12 months follow a similar two-stage process before you sign. A simpler alternative many blocks use is to keep contracts to 12 months or less with no automatic renewal.

Common mistakes

• Calculating the threshold on the total cost rather than the highest flat share.
• Counting the 30 days from the date on the letter instead of the date it was served.
• Forgetting VAT or professional fees in the estimate.
• Not replying in writing to observations.
• Splitting one project into small jobs to dodge the threshold. A tribunal can treat them as one set of works.

If something goes wrong

You can apply to the First-tier Tribunal (Property Chamber) for dispensation. Since Daejan v Benson the tribunal focuses on whether leaseholders were actually prejudiced, and may grant dispensation on terms such as paying their costs.