What is a Section 20 notice?

What is a Section 20 notice?

If you are a landlord or leaseholder of a residential property, you may have encountered a Section 20 notice or seen it mentioned in correspondence with your managing agent. This piece of legislation is designed to protect residential leaseholders who pay for services, maintenance and repairs to their property through a service charge.

When issuing a Section 20 notice, the implications of failing to follow the necessary process can be far-reaching. That’s why, whether you’re a landlord or leaseholder, it’s important you understand what a Section 20 notice is and what your rights and obligations are. 

When is a Section 20 notice used?

Under Section 20 of the Landlord and Tenant Act 1985 (as amended by the Commonhold and Leasehold Reform Act 2002) all residential leaseholders must be consulted on any works or ongoing services that will take place in their building that cost over a certain amount.

A landlord must issue a Section 20 notice to the leaseholders if:

• They intend to carry out one-off works, such as repairs, redecorating or construction, with a total cost of over £250 per property; or
• They intend to enter into a long-term agreement (more than 12 months) for services, such as ongoing maintenance or cleaning, with a cost of more than £100 per property in any one year. 

All residential leaseholders must contribute to the cost of major works and ongoing services in their buildings. The legislation is designed to protect them from unnecessarily large sums for work that may not be required.

Crucially, if the landlord or their managing agent does not follow the Section 20 process, the amount the leaseholder has to pay will be capped regardless of the true cost of the works. Leaseholders’ liability will be limited to £250 for one-time projects and £100 per year for long-term contracts. 

What is the process for issuing a Section 20 notice?

Residential leaseholders must be consulted about any works or services that exceed the limits. The aim is to give leaseholders enough information about the works and their costs so they can challenge them if they believe them to be unnecessary or unfair.

This is the process landlords and managing agents must follow:

Stage 1: Issue a notice of intention

The first stage is for the landlord to issue a notice of intention to the leaseholders explaining what work they intend to do and why. It should invite the leaseholders to share their opinions in writing within 30 days and offer a place and time to go over the plans in more detail. It should also inform leaseholders of their right to nominate a contractor the landlord will approach for an estimate. 

Stage 2: Provide a statement of estimates

The landlord must issue a second notice to each leaseholder providing details of at least two estimates they have obtained for the work. The estimates must include at least one from a contractor with no connection to the landlord. Again, leaseholders should be invited to share their opinions in writing within 30 days and the landlord must reply to the observations given by leaseholders in stage one of the consultation. 

Stage 3: Issue a notice of reasons

The third stage of the process is not always necessary - it depends on who you choose to carry out the work. If the landlord picks the cheapest contractor or a contractor nominated by a leaseholder or a Recognised Tenants’ Association (RTA), they can proceed without issuing this third notice.

If the landlord chooses a different contractor, they must issue a notice of reasons within 21 days of entering the contract detailing who the work has been awarded to and why. This notice must also include a summary of the comments leaseholders previously shared regarding the estimates.

How to respond to a Section 20 notice

A Section 20 notice is not only an exercise to inform leaseholders of upcoming works. As well as providing comments and observations, leaseholders are entitled to object to the works outlined in the notice. 

The notice will explain how leaseholders can lodge comments and objections. It may be by email, via post or by completing an online form. Whatever method they use, leaseholders should always put their objection in writing to ensure it is properly recorded.

If the landlord chooses to proceed with the work despite their objections, leaseholders can apply to the First-Tier Tribunal if they feel the amount they are being charged is excessive. It will determine the reasonableness of the service charge and the level of leaseholder liability. 

How long is a Section 20 notice valid for?

There is no specified time limit for serving a Section 20 notice. However, a delay in the consultation process can lead to an increase in opposition from leaseholders. It can also be viewed as a breach of the legislation, which can cause problems when it comes to securing leaseholder contributions.

Generally speaking, the work should begin within months rather than years of the consultation, as the longer the wait, the greater the risk of changes to the information set out in the consultation process. For example, the quotes may have increased due to rising raw material costs or the chosen contractor may no longer be available. In this case, the original consultation would no longer be valid and proceeding with the work without issuing a new Section 20 notice could lead to a cap on leaseholder liability.

Who must issue a Section 20 notice?

The requirement to issue a Section 20 notice applies to all parties who are referred to as ‘landlords’ in the legislation. That includes freeholders, managing agents, right to manage companies and residents’ management companies.

Any of these parties that want to carry out major works costing more than £250 per property or engage services costing more than £100 annually must follow the Section 20 procedure. 

Need advice?

If you need help planning major works or advice about securing leaseholder contributions and issuing Section 20 notices, we can help. Our leasehold specialists act for landlords, right to manage companies, residents’ associations and leaseholders who self-manage a residential block. Find out more about our lease advisory service and get in touch to arrange a free, same-day consultation.