Section 20 Series (Part 3) - Major Works under a Qualifying Long Term Agreement
30th June 2022
30th June 2022
This Legal Update is the third and final in our Section 20 series, providing a summary of the statutory consultation requirements in relation to Major Works carried out under a Qualifying Long Term Agreement (“QLTA”). It is concerned with landlords, RMCs and RTM companies in the private sector, and does not cover the public procurement rules which apply to public bodies.
Major Works under a QLTA - When must you consult?
The consultation requirements prescribed by Section 20 of the Landlord and Tenant Act 1985 (“the Act”) and the Service Charges (Consultation Requirements) (England) Regulations 2003 (“the Regulations”) apply in respect where “ qualifying works are the subject (whether alone or with other matters) of a qualifying long term agreement”.
This will apply where :-
The requirement to consult applies (and the landlord has consulted) in respect of a QLTA, e.g. “an agreement entered into, by or on behalf of the landlord or a superior landlord, for a term of more than 12 months” which requires any one leaseholder to pay more than £100 or more in any accounting period (see Part Two of our Section 20 Series here on QLTAs); and
Any qualifying works are proposed to be carried out by that contractor under that QLTA, e.g. “works on a building or other premises”, which requires any one leaseholder to pay more than £250 (see Part One of our Section 20 Series here on qualifying works).
An example includes lift repair works costing over £250 for any one leaseholder being carried out under an existing servicing or maintenance QLTA.
A failure to consult means that the landlord, RMC or RTM company is limited to recovering £250 per leaseholder in respect of those qualifying works, unless dispensation from the consultation requirements is obtained from the FTT.
This also applies to QLTAs which were entered into before the Consultation Regulations came into force on 31 March 2013, where the qualifying works are carried out on or after 31 May 2013.
Major Works under a QLTA - The consultation process
For qualifying works under a QLTAs, the process is set out in Schedule 3, Consultation Regulations. This involves a series of notices to be served on all residential leaseholders who would be required to pay over £250 for the qualifying works under the QLTA. The notices should also be served upon any Recognised Tenants’ Association (“RTA”).
Unlike with qualifying works where there is no QLTA in place (or for QLTAs themselves), there is no requirement for landlord, RMC or RTM company to go out to tender or for the lessees or RTA to be invited to nominate contractors as the landlord, RMC or RTM company will have already consulted with lessees over the proposed contractor when consulting over the proposed QLTA.
Stage 1 - Pre-tender stage
The first notice is a “Notice of Intention”, which must :
Include a general description of the works (or specify place and hours where that description can be inspected);
Set out the reasons for considering works necessary;
Specify the consultation end date;
Specify total amount of estimated expenditure (setting out separately VAT and professional fees); and
Invite observations in writing within consultation period and specify the address where they should be sent.
It is important to stress that the consultation end date is at least 30 days from service of the notice consultation period. Any shorter period will invalidate the consultation and require dispensation. Do remember to allow for time for service of the notice (especially if sending by post). It is always better to err on the side of caution and provide a period of more than 30 days.
Given that the landlord, RMC or RTM company will have already consulted on the proposed contractor appointed under the QLTA,
Stage 2 - Award of contract
The landlord, RMC or RTM company is then to have regard (and respond) to any observations received during the consultation period.
A final notice called a “Notice of Reasons” is required to be served, within 21 days of entering into the contract, which must :
Specify the reasons for awarding the contract (or times and place where reasons can be inspected); and
Summarise the observations received during the consultation period and the responses to them (or times and place where responses can be inspected).
Major Works - other considerations
See our Legal Update here for guidance on service of notices, including Section 20 Notices;
See our Legal Update here for guidance on when dispensation is available;
See our Legal Update here for the Court’s approach when the specification changes, and whether that triggers a requirement to re-consult;
See our Legal Update here for advice on when you can demand the cost for major works. It is important to stress that the timing for demanding the cost for major works is not related to the Section 20 process (where you are collecting service charges in advance), as Section 20 does not apply to on account demands (23 Dollis Avenue (1998) Limited -v- Vejdani  UKUT 0365 (LC)). It is the lease that will dictate how and when you can collect the costs for service charges (including major works costs), as set out in our previous Legal Update. The relevance of timing when it comes to Section 20 consultation is the date the contract is awarded - the landlord, RMC or RTM company must ensure that the consultation process has been followed before awarding the contract (or obtain dispensation).
The Section 20 consultation procedure, whilst cumbersome, should in most cases be relatively straight forward. However, given the prescriptive nature of the procedure, it is rife for problems and disputes. Given the very serious consequences for a failure to consult or any defects invaliding the consultation carried out, it is always best to seek legal advice if you have any doubts as to the action you are taking.
For more information, please feel free to contact a member of the team on 01435 897297 or firstname.lastname@example.org.
This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.
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