A Housing Forum Good Practice Guide 20 Sustainable Leasehold and Long-term Asset Management Failure to follow properly Section 20 consultation Many landlords report that they have failed to recover the full costs of works because of a failure to follow Section 20 consultation properly. Specialist legal advice should be sought to ensure the Section 20 notices and the supporting information are correct. Many leaseholders take their own legal advice on receipt of Section 20 notices. The law requires that leaseholders paying variable service charges must be consulted before a landlord carries out qualifying works or enters into a long-term agreement for the provision of services. Detailed regulations have been produced under Section 20 of the Landlord and Tenant Act 1985 (as amended by Section 151 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. Similar regulations have been enacted in Wales. The regulations separate the consultation procedures into four schedules, each covering different contracts. The requirements in the regulations are defined under three headings: l Qualifying works. l Qualifying long-term agreements. l Qualifying works under long-term agreements. Concerns over affordability Many social landlords have concerns regarding affordability. The leaseholder is required by the terms of the lease to pay the service charges and ground rent. Remember, the relationship between the landlord and the leaseholder is a commercial one and should be considered as such. Any non-payment will result in a breach of the lease. The landlord or residents’ management company will be required to collect the service charges and should therefore initially try proactively to seek to get them paid - for example, finding easy ways for payments to be made, such as direct debit or making a concession as long as a precedent is not set. Many leases allow late payment fees to be charged by the landlord where leaseholders do not pay on time. Often the payment of service charges can be delayed for a variety of reasons; for example, when someone has died, a property has been sold, a leaseholder is made redundant or an investment landlord cannot attract a tenant. It is therefore important that the landlord, managing agent or residents’ management company investigates proactively. Where flats and apartments are subject to mortgages, the leaseholder will not only be breaching the terms of the lease but also the mortgage company’s requirements. Mortgage companies should be made aware of the debt, as they will be keen to protect their investment to avoid any possible forfeiture of the lease and the loss of their security. They may even offer to add the debt to their client’s mortgage with or without Many landlords report that they have failed to recover the full costs of works because of a failure to follow Section 20 consultation properly. Specialist legal advice should be sought to ensure the Section 20 notices and the supporting information are correct.
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