Section 20 Consultation not completed before major works

[KTZ32]

In October 2017 I received a letter with an invoice for over £700 for my fifth of the proposed cost of a replacement fire alarm system. Stating works would not be completed until all invoices were settled (one flat was vacant). It is usual practice for the freeholder to split the costs by four instead of five as he owns one of the flats as part of the leasehold purchase.

Of the four occupied flats, we all own our flat on a leasehold with a long lease, in excess of ninety years. The freeholder now uses a letting agent to send offensive letters with demands for payment.

Two flat owners, me and one other both reminded the letting agent that a Section 20 consultation must be completed prior to the works being completed. We received no response, they used 'a known contact' and the electrician just kept knocking on doors, demanding access until he was let in to change the smoke sensors.

In November 2017 we each received a reminder that the work was being completed, we had to pay in advance and we were in breach of the terms of the lease if we did not pay and a charge would be set against each flat. I wrote a second time to the managing agent requesting he complete a Section 20 Consultation, I was not withholding payment but I wanted due process followed.

Then silence, until this week when a letter arrived with an invoice for over £500 as the works have been completed.

Do I have to go straight to First Tier Tribunal?
Do I pay £250 as part, potentially full payment if the Tribunal find in my favour.
Does each leaseholder have to make an individual application for a Tribunal hearing?

The managing agent will not engage in correspondence to address the matter, just keeps sending demand letters with an invoice for settlement so there is no discussion, just demands.

I have checked the Leasehold Advisory Service and there is no clear guidance on whether I have to go straight to Tribunal, appoint a solicitor, if we are collective or individual leaseholders.

[AndrewDod]

Um.... does your lease actually say that costs are divided by 4? - that would be most unusual. he can't just make it up.

What does the lease say about one off payments beyond a scheduled service charge?

[leaseholder64]

I don't understand the first paragraph. Surely he bought the freehold, not the leasehold. Doing so would not change the terms of the lease with regard to the split of payments. At one point you say one fifth, and at another one quarter. It would be unfair, but not illegal, for the split not to include all flats.

It is normal to require payment on account before major work, and that will generally be requested long before the contract is let. As such you should pay the the full £700, reserving the right to challenge its reasonableness. If the contractor is paid without a proper consultation, you can then start an FTT action, or you could do so pre-emptively. (Note the RICS guidelines say not to enter contracts until you have the money in your hands, and, if they tried to call in the money after the consultation, the quotes would probably expire before they succeeded in getting it.)

The FTT fees are split amongst all those joining in the action (I assume that those who don't join in don't benefit).

Tribunals were intended to be appropriate for litigants in person.

In emergencies, there are provisions to dispense with consultation, and there is new case law (Daejan) that means that, it can be possible for more than £250 to be payable, The tribunal can rule that you must pay what it is reasonable to assume you would have paid if a proper consultation had happened.

If the managing agent is not responding, request details of their redress scheme. If they refuse, or ignore the request,, inform the council trading standards people. If they comply, ask for details of their complaints procedure. If they refuse, contact the redress scheme. Otherwise follow the complaints procedure, escalating to the redress scheme only if that fails.

[AndrewDod]

A couple of comments

It is normal to require payment on account before major work, and that will generally be requested long before the contract is let. As such you should pay the the full £700, reserving the right to challenge its reasonableness. If the contractor is paid without a proper consultation, you can then start an FTT action, or you could do so pre-emptively. (Note the RICS guidelines say not to enter contracts until you have the money in your hands, and, if they tried to call in the money after the consultation, the quotes would probably expire before they succeeded in getting it.)

Yes, but there will be many leases with retrospective service charges where this is simply not possible. Regardless of RICS guidance, under such circumstances the lessor simply has to absorb the cost and claim it in retrospect per contract.

The FTT fees are split amongst all those joining in the action (I assume that those who don't join in don't benefit).

An interesting point. Last year in one block where I have a flat, two of 8 lessees took lessor to FTT over falsified service charges. FTT rules that service charges were inadmissible in their entirety. It took 2 years to obtain the refund of SCs already paid -- but is it really the case that the other lessees are not due a refund (the other leases are all owned by the lessor - and there is in fact not enough money to pay them due to thefts from the service charge accounts by the lessor himself).

[KTZ32]

Thanks. I appreciate the lease does not state that costs have been split four ways instead of five. However the freeholder confirmed in writing that he was previously dividing the service charges (insurance) four instead of five ways 'due to a private agreement with one leaseholder'. I contested that and the managing agent contests all claims are now divided between all five flats.

Yet there has been no Section 20 Consultation but I am supposed to pay? We have no written quote and given the shoddy practice from the past it is potential that the claim has been vastly over escalated and far above the actual cost.

[leaseholder64]

If the lease allows payment on account, which is normally the case, you need to either pay the amount demanded, or pay the amount you believe is adequate for the work, including a contingency allowance, and then, immediately, start an FTT action to determine how much is reasonably payable. (Others may say you wait for the county court summons and then put in your defence that the charge is unreasonable, which will result in a redirection to the FTT.)

If it doesn't allow payments on account, you need not pay before the work is done, but best practice is to pay the amount demanded, then start an FTT action to have that adjusted. In particular, nowadays, I believe costs tend to follow the net adjustment made by the tribunal, so you want to be in a position where you are being paid back, rather than paying extra.

Failing to pay up the full amount in the first case would typically result in the work not being put to tender until you do pay up.

I don't think going to the FTT on the basis of an on account payment is going to be a good idea unless the amount demanded is completely out of proportion with your estimate, given that you'll only really have evidence of the cost after the second consultation.

[andydd]

I second most of the above.

The lease should say whether costs are divided by 4 or 5, there should be no assuming.......my lease clearly shows all costs are split between 2 flats, my FH made the mistake of doing works on garages and driveway and assuming cost would be split between the 3 garage owners, the lease made no mention of this..when this was drawn to his attention he aborted the works.

Payments on account are only recoverable IF the lease allows, if not..the FH must bear the cost and recover it later..this may be difficult but if so he shouldnt of bought the freehold.

You could point to the FH/MAs unwillingness to discuss as being unreasonable and go after costs in FTT/Court.

MAs must belong to a redress scheme so you should find out which one and make a complaint to them first, as mentioned though its wise to make an effort to pay something, £250 would be good IMO.

[claire hewitt]

I was served an S20 by Brent Council (freeholder) for approx 15,000. Works were necver started. 3 years approx 22,000 later another S20 all costs have risen because first S20 never began. Any help out there as to my legal situation

[AndrewDod]

You have no real rights. If you really really have to buy a leasehold property, never every buy one that has a city council as freeholder. Unless you want to be very poor and you like being robbed.