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Consultation: major works and long term agreements

This content applies to England

The requirements and procedures for consulting leaseholders about qualifying works and long-term agreements.

When statutory consultation applies

A landlord must follow the statutory consultation process before:[1]

  • entering into a qualifying long-term agreement, or
  • carrying out qualifying works.

In a situation where there is a superior landlord, an intermediate landlord and individual leaseholders, the obligation to consult falls upon the landlord that is carrying out the qualifying works (or entering into a qualifying long-term agreement).[2]

Definitions

Qualifying long term agreements

A qualifying long-term agreement is one for the provision of works or services, which will last for a period of more than 12 months, and where the cost for any leaseholder exceeds £100 per year. For example, it might provide for lift maintenance, cleaning services or gardening. Certain agreements are excluded, including contracts of employment.[3]

An agreement between a freeholder and a property management company for 12 months which would continue thereafter until terminated by notice was held to be an agreement for a period of more than 12 months.[4]

Qualifying works

Qualifying works are proposed works of repair, maintenance or improvement that would cost any leaseholder more than £250.[5] These are sometimes referred to as major works.

The £250 trigger for the consultation requirement refers to the cost of individual or 'sets' of works and not to the aggregated costs of all works (however minor) carried out in a particular service charge year.[6]

Consultation procedures

The applicable consultation procedures is dependent upon what is proposed, namely:

  • entering into a qualifying long-term agreement
  • carrying out qualifying work under a qualifying long-term agreement
  • carrying out qualifying work that is not under a qualifying long-term agreement.

Different procedures also apply to qualifying works/long-term agreements carried out by public authorities within the scope of the Public Contracts Regulations 2006.[7] Details of these procedures are not provided on Shelter Legal.

Qualifying long term agreements: consultation

The landlord must serve on each leaseholder and any recognised tenants' association a notice that:[8]

  • describes the proposed agreement in general terms, or provides a place and times for inspection of the agreement
  • sets out the landlord's reasons for the agreement
  • if the agreement includes qualifying works, sets out the landlord's reasons for those works
  • invites written observations, stating where they should be sent and when by (a period of at least 30 days)
  • invites leaseholders and any recognised tenants' association to nominate an alternative contractor.

The landlord must consider any observations received, and then proceed to obtain estimates from his contractor and any alternative contractor proposed by the leaseholder or tenants' association. Following receipt of the estimates, the landlord must give further notice to leaseholders and tenants' association:

  • setting out the estimates
  • identifying the proposed contractor
  • identifying any connection between the landlord and the proposed contractor
  • if the proposed contractor is a managing agent, a statement as to its membership of a professional body or trade association
  • where reasonably practicable, including an estimate of the cost per leaseholder but if not then an estimate of expenditure pursuant to the agreement
  • a statement as to variations of the sums paid according to the proposed contract
  • a statement as to the expected duration of the agreement
  • a summary of leaseholders' observations and a statement of the landlord's response
  • inviting written observations, stating where they should be sent and when by (a period of at least 30 days).

If the landlord enters into the agreement, s/he must inform leaseholders and any recognised tenants' association within 21 days, giving reasons, or stating where and when such reasons may be inspected. The landlord should also summarise any further observations received and respond to them. This last notice is unnecessary when the contractor was nominated by a leaseholder or association, or had submitted the lowest estimate.

Qualifying works under a long-term agreement: consultation

Where there is a qualifying agreement in place, and the landlord wants to carry out works of repair, maintenance or improvement that will cost more than £250 for any leaseholder under that agreement, there is a limited further requirement for consultation. The landlord must give notice to leaseholders and any recognised tenants' association that:[9]

  • describes the proposed work in general terms, or provides a place and times for inspection of the description
  • sets out the landlord's reasons for the proposed works
  • states the estimated total expenditure on the proposed works
  • invites written observations, stating where they should be sent and when by (a period of at least 30 days).

There is no right to nominate an alternative contractor and, following receipt of observations, the landlord's requirement is to respond within 21 days to the maker of the observations.

Qualifying works not under a long-term agreement: consultation

For qualifying works that do not fall under long-term agreement, the landlord must serve on each leaseholder and any recognised tenants' association a notice that:[10]

  • describes the proposed work in general terms, or provides a place and times for inspection of the description
  • sets out the landlord's reasons for the proposed works
  • invites written observations, stating where they should be sent and when by (a period of at least 30 days)
  • invites leaseholders and any recognised tenants' association to nominate an alternative contractor.

The landlord must consider any observations received, and then proceed to obtain at least two estimates for the proposed works, at least one of them from a contractor unconnected with the landlord, and one from any alternative contractor proposed by the leaseholder or association. Following receipt of the estimates, the landlord must give further notice to leaseholders and any recognised tenants' association:

  • setting out the estimates
  • identifying the proposed contractor
  • identifying any connection between the landlord and the proposed contractor
  • a summary of leaseholders' observations and a statement of the landlord's response
  • invites written observations, stating where they should be sent and when by (a period of at least 30 days).

If the landlord accepts one of the estimates, s/he must inform leaseholders and any recognised tenants' association within 21 days, giving reasons, or stating where and when such reasons may be inspected. The landlord should also summarise any further observations received and respond to them. This last notice is unnecessary when the contractor was nominated by a leaseholder or association, or had submitted the lowest estimate.

For qualifying works that fall under a qualifying long-term agreement the landlord must follow the process outlined for qualifying long-term agreements above.

Recognised tenants' associations

A recognised tenants' association can achieve more effective enforcement of the rights of leaseholders and greater scrutiny of the management of a leasehold property. In particular, a recognised tenants' association has statutory rights to scrutinise service charges, long-term agreements and major works.

Where a landlord refuses to recognise a tenants' association, the leaseholders may apply to the First-tier Tribunal for a certificate of recognition.

With effect from 1 November 2018, regulations replace non-statutory guidance in respect of listing the factors that the First-tier Tribunal must take into account when deciding whether to issue a certificate. Factors include the constitution of the association and the association's rules regarding decision making. The Tribunal may not recognise an association comprising less than 50 per cent of 'qualifying' leaseholders, ie those leaseholders who are required to contribute to the same service charge costs (prior to the 1 November 2018, non-statutory guidance set the figure at 60 per cent).[11]

Also with effect from 1 November 2018, where the secretary of a recognised tenants' association requests it (and the qualifying leaseholder consents), a landlord must provide details of qualifying leaseholders so that they can be asked if they want to join the association, The First-tier Tribunal will order a landlord to comply with such a request if the landlord has no reasonable excuse for failing to do so.[12]

Sanctions

If the landlord fails to follow the consultation procedure, s/he can only recover up to £100 (qualifying long-term agreement) or £250 (qualifying work) per leaseholder for the works or services, unless the First-tier Tribunal (Property Chamber) decides that it is reasonable to dispense with the consultation requirements.[13]

The statutory limit to the amount recoverable only applies to claims where work has been carried out or the service has been provided. For service charges to be paid on account (where allowed for under the lease) the only limit to the amount recoverable is whether the sum is reasonable. A failure to comply with the consultation procedure may be a relevant factor for a Tribunal in determining what is a reasonable amount.[14] For more information about reasonableness and service charges see the page Statutory control of service charges.

Dispensation from consultation

The First-tier Tribunal (Property Chamber) may dispense with any or all of the consultation requirements if it is satisfied that it is reasonable to do so.[15]

The Supreme Court held that:[16]

  • the purpose of the consultation requirements is to ensure that leaseholders are protected from paying for inappropriate works, or paying more than would be appropriate. In considering landlords' dispensation requests, the Tribunal should focus on whether the leaseholders were prejudiced in either respect by the failure of the landlord to comply with the requirements - this is known as 'relevant prejudice'
  • in a dispute as to whether the leaseholders would suffer relevant prejudice if an unconditional dispensation was granted, the main legal burden will be on the landlord, but the factual burden of identifying some relevant prejudice will be on the leaseholders. Once the leaseholders have shown a credible case for prejudice, the Tribunal should look to the landlord to rebut it
  • insofar as the leaseholders will suffer relevant prejudice, the Tribunal should, in the absence of some good reason to the contrary, effectively require the landlord to reduce the amount of service charges claimed in order to compensate the leaseholders fully for that prejudice.
  • the Tribunal's power to grant dispensation is not 'all or nothing'. The Tribunal has power to grant dispensation on appropriate terms and can impose conditions on the grant of dispensation, including a condition that the landlord pays the leaseholders' reasonable costs incurred in connection with the dispensation application.

Wales

The information on this page applies only to England. Go to Shelter Cymru for information relating to Wales.

[1] ss.20 and 20ZA Landlord and Tenant Act 1985 inserted by s.151 Commonhold and Leasehold Reform Act 2002.

[2] Various Occupational Leaseholders of Foundling Court and O’Donnell Court, Brunswick Centre, London v (1) Camden LBC; (2) Allied London (Brunswick) Ltd and others [2016] UKUT 366.

[3] regs 3 and 4 Service Charges (Consultation Requirements) (England) Regulations 2003 SI 2003/1987.

[4] Corvan (Properties) Ltd v Abdel-Mahmoud [2018] EWCA Civ 1102.

[5] reg 6 Service Charges (Consultation Requirements) (England) Regulations 2003 SI 2003/1987.

[6] Francis & Anor v Phillips & Anor & Ors [2014] EWCA Civ 1395.

[7] see Sch.1 and 4 Service Charges (Consultation Requirements) (England) Regulations 2003 SI 2003/1987; Public Contracts Regulations 2006 SI 2006/5.

[8] Sch.1 Service Charges (Consultation Requirements) (England) Regulations 2003 SI 2003/1987.

[9] Sch.3 Service Charges (Consultation Requirements) (England) Regulations 2003 SI 2003/1987.

[10] Sch.4 Service Charges (Consultation Requirements) (England) Regulations 2003 SI 2003/1987.

[11] regs 3 and 4 Tenants' Associations (Provisions Relating to Recognition and Provision of Information) (England) Regulations 2018 SI 2018/1043; s.29A(8) Landlord and Tenant Act 1985.

[12] regs 7 - 11 Tenants' Associations (Provisions Relating to Recognition and Provision of Information) (England) Regulations 2018 SI 2018/1043.

[13] ss.20 and 20ZA Landlord and Tenant Act 1985; regs 4 and 6 Service Charges (Consultation Requirements)(England) Regulations 2003 SI 2003/1987.

[14] 23 Dollis Avenue (1998) Ltd v (1) Vejdani (2) Echragi [2016] UKUT 365 (LC).

[15] ss.20 and 20ZA Landlord and Tenant Act 1985; regs 4 and 6 Service Charges (Consultation Requirements)(England) Regulations 2003 SI 2003/1987; Various Occupational Leaseholders of Foundling Court and O’Donnell Court, Brunswick Centre, London v (1) Camden LBC; (2) Allied London (Brunswick) Ltd and others [2016] UKUT 366; Reedbase Ltd & another v Fattal & others [2018] EWCA Civ 840.

[16] Daejan Investments Ltd v Benson and others [2013] UKSC 14.

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