Understanding the Section 20 Process: A Guide for Leaseholders

At M2 Property, we manage residential buildings with a focus on clear communication, transparency, and compliance with UK property law. One of the key responsibilities of any property manager is to ensure that major works are carried out efficiently, cost-effectively, and with the involvement of leaseholders. This is where Section 20 of the Landlord and Tenant Act 1985 comes into play. In this blog, we’ll break down the Section 20 process and what it means for both leaseholders and building managers.

What is Section 20?

Section 20 is a part of UK legislation that ensures leaseholders are consulted before major works are undertaken on their building if those works will result in any leaseholder contributing more than £250. It applies to qualifying works such as significant repairs, improvements, or external decorations. The aim is to provide transparency and give leaseholders a voice in how their service charge contributions are spent.

Why Does Section 20 Matter?

For leaseholders, the Section 20 process ensures that you are informed about planned works, have the opportunity to offer feedback, and can even nominate contractors. For property managers and freeholders, it’s a legal requirement that ensures any major works are properly budgeted, planned, and carried out with leaseholder involvement. Failure to follow the Section 20 process can result in financial penalties, limiting the amount that can be charged to leaseholders. So, it’s critical that all parties understand how it works.

The 3 Stages of the Section 20 Process

The consultation process typically takes place over three stages, and each one is designed to ensure proper communication and transparency:

1. Notice of Intention (Stage 1 Notice)

The first step in the Section 20 process is the Notice of Intention. This is a formal notification to leaseholders that qualifying works are proposed

- What’s included? The notice will detail the type of work that is needed, why it’s necessary, and invite leaseholders to provide their feedback. Leaseholders will also have the opportunity to suggest contractors they would like to be considered.

- Consultation period: Leaseholders have 30 days to submit their observations or nominate contractors for the works.

2. Notice of Estimates (Stage 2 Notice)

After the initial consultation, the property manager will obtain at least two estimates for the proposed works, including one from any contractors nominated by leaseholders (if applicable).

- What’s included? The second notice includes the estimated cost of the works and the chosen contractors. This notice is sent to leaseholders, giving them another opportunity to provide feedback or raise concerns.

- Consultation period: Leaseholders again have 30 days to respond.

3. Notice of Award (Stage 3 Notice)

Once the consultation period is over and feedback has been reviewed, the property manager will make a decision on which contractor will carry out the works.

- What’s included? The final notice will explain the decision and provide a breakdown of the anticipated costs, along with the rationale for the contractor selected.

When Can Section 20 Be Waived?

In some cases, the Section 20 process can be waived if all leaseholders agree in writing. This is often done when the leaseholders are already satisfied with the proposed works and want to speed up the process. At M2 Property, we encourage open dialogue with leaseholders, allowing us to consider this option when appropriate.

Handling Shortfalls and Variations in Costs

Sometimes, the initial budget may not cover the entire cost of the works, or there may be unforeseen variations in the project. If this happens and reserve funds are insufficient, a demand for additional funds may be issued to leaseholders. At M2 Property, we are committed to providing transparent, detailed explanations when this occurs and ensure that any additional costs are communicated clearly and as early as possible.

Emergency Works Outside of Section 20

In situations where emergency works are required to prevent immediate damage or risk to the property, Section 20 consultation can be bypassed. Examples of emergency works include fixing a major water leak, addressing structural damage, or repairing a fire hazard. While consultation may not be feasible in these situations, M2 Property will still notify leaseholders as soon as possible and ensure that any costs are kept reasonable.

Interior Design, Fixtures, and Aesthetic Decisions: Separate from Section 20?

When it comes to fixtures, fittings, colours, carpets, and other design elements, these choices can sometimes overlap with the Section 20 process, but they are typically handled through a separate consultation process. Here’s how this works:

- Section 20 covers major works that affect the building’s structure or services, such as exterior repairs, roofing, or electrical upgrades. It ensures that leaseholders are consulted about the scope and costs of the project, but it doesn’t always delve into the aesthetic details.

- Design elements like choosing paint colours, carpeting, or light fixtures are often part of a separate process. These choices may not significantly affect the cost of the works but are more related to the style and aesthetic preferences of the building’s residents. Property managers usually consult with leaseholders through more informal channels such as meetings or surveys to decide on these elements.

While the Section 20 process ensures legal compliance and cost management, these more aesthetic choices allow for direct collaboration between property managers and leaseholders to create a living space that everyone enjoys.

Long-Term Planning and Transparency

At M2 Property, we believe in taking a proactive approach to building management. We ensure that a long-term capital plan is in place, so leaseholders are aware of when major works like redecorations or structural repairs are likely to occur. This forward planning helps to avoid surprises and ensures that sufficient funds are collected well in advance of any major works.

Additionally, many leases include provisions specifying when certain works should be carried out, such as external decorations at regular intervals. We work closely with leaseholders to align our projects with the lease requirements and ensure smooth delivery of services.

How M2 Property Manages the Section 20 Process

At M2 Property, we strive to make the Section 20 process as smooth as possible for our leaseholders. Our approach includes:

- Clear Communication: We ensure that all notices and updates are delivered promptly, both in writing and through accessible patforms such as email or online portals.

- Stakeholder Engagement: We involve all key stakeholders, including leaseholders, freeholders, contractors, and surveyors, in planning and decision-making.

- Transparency in Costs: We provide a clear breakdown of costs, including any potential shortfalls, to ensure leaseholders understand how their service charges are being used.

- Efficiency and Compliance: We ensure compliance with all legal requirements while keeping the project on time and within budget.

Conclusion

The Section 20 process is an important mechanism for ensuring leaseholders are consulted and involved in decisions about major works on their building. At M2 Property, we are committed to managing this process transparently and effectively, ensuring both the smooth execution of works and the satisfaction of all leaseholders.

Whether it’s dealing with major repairs, handling emergency works, or collaborating on design choices for communal areas, M2 Property makes sure that all parties are informed and engaged. If you have any questions about upcoming works or the Section 20 process, feel free to reach out to us. We're here to help!