Section 20 - Leasehold Consultation Procedure
Introduction
Section 151 of the Commonhold and Reform Act 2002 amended the statutory requirements
for consulting Leaseholders on Qualifying Works and Qualifying Long Term Agreements. The
consultation process is commonly called the "Section 20 Consultation".
The statutory consultation requirements are set out in a combination of Section 20ZA of the
Landlord and Tenant Act 1985 (the "1985 Act") and the Service Charges (Consultation
Requirements) (England) Regulations 2003 (the "Regulations").
The consultation requirements apply which Herefordshire Housing Limited ("HHL") intend to
either:
(i)
(ii)
(iii)
Carry out "qualifying works" to our premises.
Enter into a "qualifying long term agreement" ("QLTA").
Carry our qualifying works pursuant to a QLTA.
Each of these definitions has a specific statutory meaning and the 1985 Act should be
consulted as required depending on the work type being tendered.
Qualifying Works (e.g. Re-roofing a block of flats)
These are works which might cost any affected Leaseholder over £250.00 by way of service
charge consultation pursuant to the terms of the lease.
If the Section 20 Consultation process is not carried out validly and in accordance with their
lease, then the affected leaseholders would be entitled to refuse to pay more than £250.00
towards the works (no matter what the value of their contribution would otherwise be).
Qualifying Long Term Agreements (“QLTA’s”) (e.g. Grounds Maintenance or
Communal Cleaning)
Broadly speaking, these are contracts to be entered into between HHL and an independent
contractor for works, goods or services where the contract term is over 12 months, and which
could result in any affected Leaseholder incurring a service charge liability of over £100.00
per year.
If the Section 20 Consultation process is not carried out then the affected leaseholders would
(in the absence of a dispensation) be entitled to refuse to pay more than £100.00 per year in
relation to costs incurred under the QLTA.
Dispensation from the First Tier Tribunal (Property Chamber)
In any given case, HHL has the option of applying to the Tribunal for a dispensation order.
This is essentially a permission allowing HHL not to have to comply with some or all of the
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statutory consultation requirements without the statutory caps of £250.00 (for qualifying
works) or £100.00 (for QLTAs) being imposed.
Where works are deemed to be very urgent, for example a badly leaking roof, HHL can apply
to the Tribunal to dispense with some or all of the Section 20 Consultation requirements.
Dispensation may also be sought in non-urgent cases, but where for some other reason strict
compliance with the requirements is going to be difficult or impossible. By doing this, if the
LVT agree to dispense with the Consultation requirements the works could be carried out
more quickly and HHL could still charge the affected Leaseholders more than £250.00 for their
share of the works.
As with qualifying works, HHL has the ability to apply to the Tribunal for dispensation from
some or all of the consultation requirements prior to entering into a QLTA.
Dispensation can be sought prospectively or retrospectively. However, a retrospective
application involves the risk that it could be refused at a point when HHL will already have
committed itself to the works or the contract. For that reason, any application for dispensation
should be sought prospectively.
Who must be consulted?


Individual Leaseholders
Recognised Tenant's Associations (RTA). (Please seek advice from the
Neighbourhood team to establish whether any RTAs are present in the area in which
the properties in question are located).
Any Leaseholders with a Right to Buy leases which commenced less than 5 years ago may
only be charged for service charges arising from major works or under QLTAs if specified in
the Section 125 Offer Notice that was sent as part of their Right to Buy application. If it is not
so specified, the Leaseholder cannot be charged for the works/ service and HHL would have
to bear the cost.
After the first five years any major works/ QLTAs can be carried out/ entered into irrespective
of whether the Leaseholder was notified in the Section 125 Offer Notice or not. The
leaseholder would then be liable to pay for the appropriate share in accordance with the
service charge provisions in their lease.
If a resident in the block in which a Section 20 consultation is to be carried out purchases the
leasehold interest in their property midway through a consultation period the consultation
process does not have to be commenced again but any subsequent notices should be served
on the new Leaseholder.
If HHL have any documents which can be viewed by Leaseholders they must provide free
photocopies of these documents if requested by the Leaseholder or RTA.
Leaseholders can nominate any contractor including themselves, however whether the
contractor meets the requirements of HHLs Standing Orders and Financial Regulations will
need to be taken into account during the evaluation process.
All individual leaseholders must be written to irrespective if they live at the leasehold property
or not. Where a leaseholder does not live at the property then the notices must be sent to
their home address (Postal address). Before producing the relevant Notices, correspondence
addresses should be checked by viewing the “Leaseholder Details” folder held on the main
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computer drive, or by requesting an updated correspondence address list from the Business
Insight team.
The letters can be sent via normal post they do not have to be sent recorded or hand delivered
to each leasehold property. However, colleagues need to make sure that a copy of each
signed notice and accompanying letter that is sent to a leaseholder is kept as proof of the
original being sent out. These letters are to be both scanned and held on the computer within
the relevant Improvement folder and the original copy kept on the contract file.
In addition to the recording of hard copy correspondence the contract team must also take a
range of photographs before, during and after the work has been completed. This will ensure
that we have a detailed audit of the condition of the properties and components to
demonstrate why we undertook the works we did.
Payment terms
Payment for major works or other works costing over the minimum charge, will always be
undertaken in accordance with the lease and the law, therefore, these costs will be included
within the leaseholder’s annual service charge.
In accordance with most leases Herefordshire Housing is obliged to recover costs for major
works through the annual service charge mechanism in the lease. Prior to 1st April each year,
details of the interim charge will be issued. This will be the estimated overall service charge
liability for the coming year, inclusive of any major works that are scheduled to take place
during the year. Leaseholders will be required to pay the interim charge in accordance with
the terms of the lease and this will include an “on-account” payment of the anticipated major
works. HHL’s finance team will require a list of all works that are likely to be completed within
the following financial year so that these costs can be included within the service charge
notifications.
During the Section 20 communication we will give leaseholders an estimate for completing
the works to the property. However, we will only charge leaseholders the actual costs following
the completion of the works. It is important to inform the leaseholders that the estimation
given may go up or down once the actual costs have been calculated. We must endeavour to
keep the leaseholder informed of any major changes to the estimation however, it must be
viewed only as a guide.
Following the completion of the works, a breakdown of the actual costs will be prepared and
these will be used to prepare a final invoice that will be sent to the leaseholder. It is important
to understand that costs may differ between properties due to various variations that may
arise as the improvement is undertaken and this may mean that neighbouring leaseholders
will have different final costs. For example, one property may have more roof repairs than the
neighbouring properties, therefore their costs will be higher. Payment will then follow in
accordance with the original lease. It is important to take photographic evidence of the work
as it proceeds so that this can be used if we get challenged over the work completed and
being charged to leaseholders.
Consultation Process
Properties requiring improvement are identified through our annual budget process and
reviewing our asset database software system. A detailed list of addresses, work content and
budgets are then submitted to our Senior Management Team (SMT) and HHL Board for
approval. Following this approval, improvement works are then consulted following the
Section 20 process and detailed tendering is completed in accordance with the company’s
Financial Regulations and Standing Orders.
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There are 4 main consultation processes to be followed:
1. Qualifying Works for which public notice is not required (Schedule 4 Part 2 of
the Regulations). For example, major works with a cost of less than the relevant EC
procurement threshold which is current at the time. (Please refer to OJEC EC Procurement
threshold levels).
2. Qualifying Works for which public notice under EU procurement rules is required
(Schedule 4 Part 1). For example, major works with a cost that is more than the relevant
threshold which is current at the time. (Please refer to OJEC EC Procurement threshold
levels).
3. QLTAs other than those for which public notice under EU procurement rules is
required (Schedule 1). For example, partnering contract or service contract for 12
months or longer with a value of less than the relevant threshold which is current at the
time. (Please refer to OJEC EC Procurement threshold levels).
4. QLTAs for which public notice under EU procurement rules is required (Schedule
2). For example, partnering contract or service contract for 12 months or longer with a
value of more than the relevant threshold which is current at the time. (Please refer to
OJEC EC Procurement threshold levels).
N.B. in the event that qualifying works are to be undertaken pursuant to a QLTA that HHL has
already entered into, there is a streamlined one-stage consultation process that needs to be
followed. This involves the service of one notice on affected Leaseholders to provide details
of the proposed works and the anticipated expenditure. Leaseholders are to be given the
opportunity to make observations about the works or the anticipated cost but are not able to
nominate contractors. A template form of notice for use in these circumstances can be found
at Appendix 6 of the Leasehold Advisory Service's guide to S.20 Consultation for Council and
Other Public Sector Landlords. Please refer to the following web page:
http://www.leaseadvice.org/publications/documents/document.asp?item=20).
Details of the process to be followed for the 4 main consultation procedures are set out below.
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1, Qualifying Works for which public notice is not required (Schedule 4, Part 2 of
the Regulations)
Prior to beginning the Consultation procedure ensure that no Leases are less than 5 years old.
If there are any then HHL’s Legal Team will need to be contacted to be asked to check the
Offer Notice to establish whether the Leaseholder could be asked to pay towards the works
as part of their service charge obligation.
Major Works 1st Notice needs to be sent to each individual Leaseholder of each Leasehold
Property where works are to be carried out and also to any RTA that has an interest in the
affected block.
Major Works 1st Notice to Leaseholder/ RTA:
This must include:




Describe in general terms the works to be carried out, or advise where a description
of the works can be inspected (with the provision of free photocopies) and the
reason for carrying out the works
Give the reasons for carrying out the proposed works
Invite Leaseholders to make observations and nominate contractors and advise of
the contact details of HHL
Advise of the date when the consultation period ends. This needs to be a minimum
of 35 days after the date of the notice was received by the leaseholders. (The
statutory notice time is 30 days however to ensure that we are within the timescale
we have agreed that this will be 35 days).
At the end of the consultation period:





HHL must 'have regard' to any observations made by the Leaseholders. There is no
definition of what level of regard needs to be had, but should the consultation
process be challenged by any Leaseholder(s) failure to give proper consideration to
observations made by Leaseholders could be relied on as a failure to consult
properly. Therefore HHL should consider any observations and take appropriate
action (if any) in response to them.
HHL should address each observation made (if any) and make available together
with responses to Leaseholders/ RTAs in accordance with Major Works 2nd Notice.
HHL must consider nominations of contractors made by any Leaseholder(s) (and any
RTA(s) if applicable) and must try to obtain at least one estimate (if there is a
nomination) from a nominated contractor(s). However, contractors must meet the
requirements of HHL’s Standing Orders and Financial Regulations.
In total at least one estimate must be requested from a contractor that is wholly
unconnected from HHL (e.g. there is a connection where there a close relative of an
employee of HHL working for the contractor). HHL may then tender for the works in
accordance with HHL’s Standing Orders and Financial Regulations.
Following the Tender period, HHL must prepare at least two Tender returns for the
carrying out of the proposed works, at least one of which must be from a contractor
wholly unconnected with HHL and at least one from a contractor nominated by a
Leaseholder or RTA if there are any nominations made.
Major Works 2nd Notice to Leaseholder/RTA
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This must include:



Details of the various tenders that have been received. (Make sure that they comply
with the requirements of the above paragraph).
Invitation to Leaseholders/ RTA's to make observations on the Tender returns within
35 days and specify the end date of this period.
Include HHL's responses to observations made (if any) following the Major Works 1st
Notice, or notify Leaseholders/ RTAs of a place that these can be inspected.
At the end of the consultation period:


HHL must 'have regard' to any observations made by the Leaseholders. There is no
definition of what level of regard needs to be had, but should the consultation
process be challenged by any Leaseholder(s) failure to give proper consideration to
observations made by Leaseholders could be relied on as a failure to consult
properly. Therefore HHL should consider any observations and take appropriate
action (if any) in response to them.
HHL should address each observation to be made available to Leaseholders/ RTA’s in
accordance with Major Works 3rd Notice.
Major Works 3rd Notice to Leaseholder/RTA
This must include:



This is to be sent after the consultation period 35 days from 2nd Notice and within 21
days of awarding the contract unless the contract has been awarded to a nominated
contractor or to the lowest tenderer.
State reason for awarding the contract, or a place that documented reasons can be
inspected.
Include HHL's responses to observations following the Major Works 2nd Notice, or a
place that these can be inspected.
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1. Qualifying Works for which public notice is not required (Schedule 4, Part 2) Flow Chart
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2. Qualifying Works for which public notice is required (Schedule 4, Part 1)
Prior to beginning the Consultation procedure ensure that no Leases are less than 5 years old.
If there are any then HHL’s Legal Team will need to be contacted to be asked to check the
Offer Notice to establish whether the Leaseholder could be asked to pay towards the works
as part of their service charge obligation.
Major Works Public Notice 1st needs to be sent to each individual Leaseholder of each
Leasehold Property where works are to be carried out and also to any RTA that has an interest
in the affected block.
Major Works Public Notice 1st Notice to Leaseholder/ RTA
Public Notice is to be given and the Tender Process to be carried out under OJEU Procurement
rules.
This must include:





Describe in general terms the works to be carried out, or advise where a description
of the works can be inspected (with the provision of free photocopies) and the
reason for carrying out the works
Give the reasons for carrying out the proposed works
State that HHL will not be inviting nominations of contractors which is due to public
notice being given
Invite observations in writing
Advise of the date when the consultation period ends. This needs to be a minimum
of 35 days after the date of the notice was received by the leaseholders. (The
statutory notice time is 30 days however to ensure that we are within the timescale
we have agreed that this will be 35 days)
At the end of the consultation period:


HHL must 'have regard' to any observations made by the Leaseholders. There is no
definition of what level of regard needs to be had, but should the consultation
process be challenged by any Leaseholder(s) failure to give proper consideration to
observations made by Leaseholders could be relied on as a failure to consult
properly. Therefore HHL should consider any observations and take appropriate
action (if any) in response to them.
HHL should address each observation made (if any) and make available together
with responses to Leaseholders/ RTAs in accordance with Major Works Public Notice
2nd Notice.
Major Works, Public Notice 2nd Notice to Leaseholder/ RTA
This must include:
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




HHL must give notice of the proposed contract to each individual Leaseholder and
any RTA
HHL must prepare a contract statement containing the following:
o The name and address of the proposed contractor
o Advice on any connection between HHL and the contractor
o The Leaseholder's estimated contribution where reasonably practicable, or
estimated cost, or current unit cost, hourly or daily rate where reasonably
practicable, or give reasons why the information cannot currently be provided
and when it has been provided give the information to the Leaseholder within
21 days of receipt of the information
A summary of any observations made following the previous notice and HHL's
responses
Advise of the date when the consultation period ends. This needs to be a minimum
of 35 days after the date of the notice was received by the leaseholders. (The
statutory notice time is 30 days however to ensure that we are within the timescale
we have agreed that this will be 35 days)
Advice about where Leaseholders can inspect the Tender documentation.
At the end of the consultation period:



HHL must 'have regard' to any observations made by the Leaseholders - there is no
definition of what level of regard but should the matter end up in the Leasehold
Valuation Tribunal (LVT) failure to regard observations made by Leaseholders would
imply that HHL have not acted within the spirit of the consultative legislation.
Therefore HHL should consider any observations and take appropriate action (if any).
HHL should address each observation made (if any) and must respond directly, in
writing, to the Leaseholder as an individual reply (not as a general notice)
The works can then proceed
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2. Qualifying Works for which public notice is required (Schedule 4, Part 2) Flow Chart
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3, QLTAs for which public notice is not required (Schedule 1)
Prior to beginning the Consultation procedure ensure that no Leases are less than 5 years old.
If there are any then HHL’s Legal Team will need to be contacted to be asked to check the
Offer Notice to establish whether the Leaseholder could be asked to pay towards the works
as part of their service charge obligation sums incurred under the QLTA as part of their service
charge obligation
QLTA 1st Notice needs to be sent to each individual Leaseholder of each Leasehold Property
that could be affected by the QLTA and also to any RTA that has an interest in the affected
block.
QLTA 1st Notice to Leaseholder/ RTA
This must include:



Describe in general terms the works or services to be provided, or advise where a
description of the works or services can be inspected (with the provision of free
photocopies) and why it is considered necessary. If any qualifying works are also
required as part of the QLTA state the reason for considering it necessary to carry
out the works
Invite Leaseholders to make observations and nominate contractors and advise of
the contact details of HHL
Advise of the date when the consultation period ends. This needs to be a minimum
of 35 days after the date of the notice was received by the leaseholders. (The
statutory notice time is 30 days however to ensure that we are within the timescale
we have agreed that this will be 35 days)
At the end of the consultation period:





HHL must 'have regard' to any observations made by the Leaseholders. There is no
definition of what level of regard needs to be had, but should the consultation
process be challenged by any Leaseholder(s) failure to give proper consideration to
observations made by Leaseholders could be relied on as a failure to consult
properly. Therefore HHL should consider any observations and take appropriate
action (if any) in response to them
HHL should address each observation made (if any) and make available together
with responses to Leaseholders/ RTAs in accordance with QLTA 2nd Notice
HHL must consider nominations of contractors made by any Leaseholder(s) (and any
RTA(s) if applicable) and must try to obtain at least one estimate (if there is a
nomination) from a nominated contractor(s). However, contractors must meet the
requirements of HHL’s Standing Orders and Financial Regulations.
In total at least one estimate must be requested from a contractor that is wholly
unconnected from HHL (e.g. there is a connection where there a close relative of an
employee of HHL working for the contractor). HHL may then tender for the works in
accordance with HHL’s Standing Orders and Financial Regulations.
Following the Tender period, HHL must prepare at least two Tender returns for the
carrying out of the proposed services/ goods/ works, etc. at least one of which must
be from a contractor wholly unconnected with HHL and at least one from a
contractor nominated by a Leaseholder or RTA if there are any nominations made.
QLTA 2nd Notice to Leaseholder/RTA
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Tender Report complying with the requirements of the above paragraph and also including
the following:







Statement of name and address of each tenderer
Any connection between HHL and that tenderer
The Leaseholder's estimated contribution ( or the cost of providing the service/ good
/ works to the building; or the hourly rate)
The provisions for the variation of any amount under the proposed agreement
The intended duration of the agreement
A summary of any observations received by the due date and HHL's responses
Invitation to Leaseholders/ RTA's to visit the Office and view the Tender returns and
make observations on them within 35 days. The notice must specify the end date of
this period and it must give Leaseholders a clear 35 day period within which to
respond.
If HHL are proposing that an agent is to be responsible for the management of the building
the following additional information should be provided;



Whether the proposed agent is or is not a member of a professional body or trade
association and, if so, which one and whether the proposed agent does or does not
subscribe to any code of practice or voluntary accreditation scheme relevant to the
functions of managing agents
The provisions for the variation of any amount under the proposed agreement
The intended duration of the agreement
At the end of the consultation period:


HHL must 'have regard' to any observations made by the Leaseholders. There is no
definition of what level of regard needs to be had, but should the consultation
process be challenged by any Leaseholder(s) failure to give proper consideration to
observations made by Leaseholders could be relied on as a failure to consult
properly. Therefore HHL should consider any observations and take appropriate
action (if any) in response to them.
HHL should address each observation to be made available to Leaseholders/ RTA’s in
accordance with Major Works 3rd Notice.
QLTA 3rd Notice to Leaseholder/RTA:



This is to be sent after the consultation period (35 days from 2nd Notice and within
21 days of awarding the contract). This requirement applies unless the contract has
been awarded to a nominated contractor or to the lowest tenderer, in which case it
is not compulsory to send the notice but HHL may still choose to do so in the spirit of
openness.
If the notice is sent, it should: State the reason for awarding the contract, or a place
that documented reasons can be inspected
Include HHL's responses to observations following the QLTA 2nd Notice, or a place
that these can be inspected
At the end of the consultation period:

HHL must 'have regard' to any observations made by the Leaseholders, there is no
definition of what level of regard but should the matter end up in the LVT failure to
regard observations made by Leaseholders would imply that HHL have not acted
within the spirit of the consultative legislation
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
HHL should address each observation to be made available to Leaseholders/ RTAs in
accordance with Major Works 3rd Notice
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3. QLTA for which public notice is not required (schedule 1) – Flow Chart
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4, QLTAs for which public notice is required (Schedule 2)
Prior to beginning the Consultation procedure ensure that no Leases are less than 5
years old. If there are any then HHL’s Legal Team will need to be contacted to be
asked to check the Offer Notice to establish whether the Leaseholder could be asked
to pay towards the works as part of their service charge obligation sums incurred under
the QLTA as part of their service charge obligation
QLTA Public 1st Notice needs to be sent to each individual Leaseholder of each
Leasehold Property that could be affected by the QLTA and also to any RTA that has
an interest in the affected
Public Notice is to be given and the Tender Process to be carried out under OJEU
rules.
QLTA Public Notice 1st Notice to Leaseholder/ RTA
This must include:




Describe in general terms the works or services to be provided, or advise
where a description of the works or services can be inspected (with the
provision of free photocopies) and why it is considered necessary. If any
qualifying works are also required as part of the QLTA state the reason for
considering it necessary to carry out the works
State that HHL will not be inviting nominations of contractors which is due to
public notice being given
Invite observations in writing
Advise of the date when the consultation period ends. This needs to be a
minimum of 35 days after the date of the notice was received by the
leaseholders. (The statutory notice time is 30 days however to ensure that
we are within the timescale we have agreed that this will be 35 days)
At the end of the consultation period:


HHL must 'have regard' to any observations made by the Leaseholders. There
is no definition of what level of regard needs to be had, but should the
consultation process be challenged by any Leaseholder(s) failure to give
proper consideration to observations made by Leaseholders could be relied on
as a failure to consult properly. Therefore HHL should consider any
observations and take appropriate action (if any) in response to them
HHL should address each observation made (if any) and make available
together with responses to Leaseholders/ RTAs in accordance with QLTA
Public Notice 2nd Notice
QLTA Public Notice 2nd Notice to Leaseholder/RTA

HHL must give notice of the proposed contract to each individual Leaseholder
and any RTA
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



HHL must prepare a contract statement containing the following:
o
The name and address of every party to the proposed agreement
(Other than HHL)
o
Advice on any connection between HHL and any other party
o
The Leaseholder's estimated contribution where reasonably practicable;
or the current unit cost, hourly or daily rate where reasonably
practicable; or give reasons why the information cannot currently be
provided and when it has been provided give the information to the
Leaseholder within 21 days of receipt of the information
o
The intended duration of the agreement
A summary of any observations made following the previous notice and HHL's
responses
An invitation to Leaseholders to make observations and the end date of the
35 day observation period
Advice about where Leaseholders can inspect the Tender documentation
This notice needs to be given to Leaseholders prior to a final decision being taken at the end
of the tender process, so that HHL can have due regard to any observations made by
Leaseholders at this stage in the process. This requires HHL to inform Leaseholders of the
outcome of the tender before the tendering parties are informed because at this point a
decision has not been taken. This needs careful handling and legal advice may need to be
obtained to ensure that HHL complies with the consultation requirements whilst preserving
the integrity of the tender process.
At the end of the consultation period:



HHL must 'have regard' to any observations made by the Leaseholders. There is no
definition of what level of regard needs to be had, but should the consultation
process be challenged by any Leaseholder(s) failure to give proper consideration to
observations made by Leaseholders could be relied on as a failure to consult
properly. Therefore HHL should consider any observations and take appropriate
action (if any) in response to them.
HHL should address each observation made (if any) and must respond directly, in
writing, to the Leaseholder as an individual reply (not as a general notice)
The agreement can then be entered into.
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4. QLTA for which public notice is not required (schedule 1) – Flow Chart
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