25 February, 2015
There are two instances of section 20 notices in property in England:
(1) is the notice served in relation to early shorthold tenancies under the Housing Act 1988, and the other,
(2) refers to section 20 of the Landlord and Tenant Act 1985, as amended by the Commonhold and Leasehold Reform Act (CLRA) 2002, which involves leasehold property and consultation with leaseholders on major works.
Housing Act 1988 – Shorthold Tenancies
Prior to 28 February 1997 shorthold tenancies were not automatic (the default tenancy) as they have been for residential tenancies since the amendment brought in by the Housing Act 1996, (effective February 1997) but had to be created by informing the tenant by a prescribed form statutory notice – the section 20 notice.
A landlord wishing to create an assured shorthold tenancy was required to serve a notice under s20 of the Housing Act 1988 before the tenancy was entered into.
If the notice was not properly served (i.e. before the agreement was signed) the tenancy could not be an assured shorthold. In default it became an ordinary assured tenancy which gives the tenant security of tenure. Landlords in this position therefore could not use the not fault, s21 eviction process.
There cannot be many tenancies around dating from pre February 1997 which needed a s20 notice serving at the time, but where they do exist, landlords are unable to evict these tenants unless they can prove a s20 notice was properly served prior to the tenancy. Landlords or agents at the time would normally get the tenant to sign a statement to this effect.
Since 28 February 1997 it has not been necessary to serve a s20 notice for the tenancy to be an assured shorthold tenancy (AST).
Many mistakes were made in respect of s20 notices and many lawyers have since paid for their holidays by challenging them in possession claims.
The most common problem with this was the inability of the landlord or agent to prove that the s20 notice was served prior to the grant of the tenancy, but also in some cases the notice was not in the prescribed form.
Section 20 of the 1988 Act required the notice to be in the prescribed form stipulated in the Assured Tenancies and Agricultural Occupancies (Forms) Regulations 1988 (as amended). The relevant form was Form No.7
Landlord and Tenant Act 1985 – consultation with leaseholders on major works
Section 20 (s20) is a clause in the Landlord and Tenant Act 1985 which is intended to protect leaseholders from paying unnecessarily large sums for work carried out to their building. In effect it says that a leaseholder’s contribution to the cost of works will be capped if the landlord or their managing agent fails to follow a set consultation process.
Section 20 of the Landlord & Tenant Act 1985 (as amended by the Commonhold & Leasehold Reform Act 2002) sets out a three-stage consultation process which must be followed when carrying out qualifying works to a building where the contribution from any one lessee exceeds £250, or a qualifying long-term agreement where the contribution from any one lessee exceeds £100 in one financial year.
Stage One – s20
For qualifying works, under Section 20 managing agents / freeholders must serve a “Notice of Intention to Carry Out Works” on all lessees.
This Notice must generally describe the proposed works, state the reasons for considering the proposed works, and invite leaseholders to make written observations within 30 days.
It is a requirement that a correspondence address for these observations be stated within the s20 notice. The Notice of Intention offers lessees the opportunity to provide the name of a contractor from whom the landlord, managing agents or Resident’s Management Committee (RMC) can try to obtain estimates for the proposed works.
Stage Two – s20
At the expiration of the 30 day consultation period, at least two estimates should be obtained: one of these estimates must be from a person completely independent of the landlord, the managing agent or the RMC.
If nominations were made within the consultation period, then estimates should have been obtained from at least one of these nominations. The landlord/agent/RMC must then provide a “Statement of Estimates” which will set out the details of estimates that have been obtained and a summary of observations received within the consultation period.
All estimates obtained must be made available for inspection by the lessees, including estimates obtained from nominated contractors.
A “Notice to Accompany the Statement of Estimates” must also be served in conjunction with the Statement of Estimates, which sets out the hours involved, and a place where details of the estimates may be inspected, again inviting lessees to make written observations on the estimates within 30 days, and specifying the address to which those observations should be sent.
Stage Three – s20
If, at the expiration of the consultation period, the chosen contractor did not provide the lowest estimate, then a “Notice of Reasons” must be served upon all lessees.
This means that the landlord/agent/RMC must state the reasons for awarding the contract where they do not opt for the lowest estimate.
The nomination is open to a test of reasonableness by the Leasehold Valuation Tribunal (LVT) under Section 19 of the 1985 Landlord & Tenant Act.
Where it can be shown that the consultation procedure is not followed correctly, and the landlord/agent/RMC is successfully challenged at the LVT, then the maximum amount recoverable from lessees under the service charge is £250 for major works and £100 for long-term agreements.
For more information on Section 20 lease matters see these guides:
- The Association of Residential Managing Agents (ARMA) – Advice Note Section 20 Consultation and Major Works – a guide to the S.20 consultation process for major works and long term agreements.
- The Leashold Advisory Service – What is the Section 20 consultation process for major works?©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law; always seek professional advice. Legislation changes, so check dates on these articles. If you have questions go to the LandlordZONE® Forums