S.20 works and difficult leaseholder

[Emilycarter]

Good morning
How much detail around a quote is needed to be give to Leaseholders in an s.20 situation? I am a joint freeholder of a converted building with 5 flats. We have some h&s works to be carried out in communal area and are going through the s.20 process, via Managing Agent. Two leaseholders proposed a number of contractors, one quoted, all others declined to quote.

Freeholders have chosen the cheapest quote of three.

One Leaseholder refuses to pay the full cost as he considers the quote too expensive and has stated on a number of details, that, " 'x' should only cost y amount". He has been provided with the quotations and many emails have been exchanged between Leaseholder and managing agent; asking for detail such as what types of fixings will be used and many other questions. So much that the managing agent proposes adding extra costs to service charge.

Leaseholder has also said he will only pay after the works are completed "to his satisfaction."

Also, is there a certain percentage that should be added to a quote as "contingency" ...

Do we have any option other than to keep going back to contractor with every question asked?

[leaseholder64]

Surely the managing agents know how to handle such situations; that's one of the main things for which you pay them. I don't think the leaseholder has a leg to stand on on most or all these points. If the lease allows money to be taken in advance, the guidance to managing agents is not to start until they have their hands on the money.

The only real remedy the leaseholder has to ask the FTT for a ruling that the service charge is not reasonable, either immediately, or as a defence strategy for a small claims court action for the service charge debt.

Contingency is a matter of judgement, but should only be used up if extra work is actually found necessary.

[ram]

Contingency,

EXAMPLE.
You are having a roof re-slated / tiled, and I always state that as we have not seen the state of the timbers directly below the slates, or at the extreme edges of the timer ( always difficult to see from inside ) it may be necessary to replace / repair the odd batten or timber once we get the tiles off.
If this is the case the quote may increase, and by how much we don't know.

Then if you do find extra work needs doing, you get a rough quote from the roofers, and immediately tell the leaseholders of that fact.
In theory , you have to stop the work, and do another S20, for the increased costs ( and wait another 3 months to go the S20 course, ) but if you add a contingency, stating that of course this is only an estimate, then you should be covered, and not have to do another S20 before the works can resume.

But the Managing agent should be conversant in all this, but not many are.

You tell the problem leaseholder to read the
Summary of tenants' rights and obligations you included with the S20. and that is all you are going to advise ( and the matter is closed unless he refuses to pay the service charge mentioned in the S20 )

and one clause should say :-

3
You have the right to ask a F.T.T to determine whether you are liable to pay service charges for services, repairs, maintenance, improvements, insurance or management. You may make a request before or after you have paid the service charge. If the Tribunal determines that the service charge is payable, the Tribunal may also determine who should pay the service charge and who it should be paid to; the amount; the date it should be paid by; and how it should be paid. However, you do not have these rights where a matter has been agreed or admitted by you; a matter has already been, or is to be, referred to arbitration or has been determined by arbitration and you agreed to go to arbitration after the disagreement about the service charge or costs arose; or a matter has been decided by a court.

that is the leaseholders right, but he still has to pay the service charges demanded, otherwise the jobs can't be started.

[Emilycarter]

Thank you both. The Leaseholder does not want to pay a contingency as say feels it is an excuse to make up further work and will be used???? As freeholders of course we do not want to pay any more than necessary. Leaseholder has been told any contingency unused will be returned.... still not good enough!!

[leaseholder64]

As I said, you are paying the agent to know how to handle such situations, but your choices are:

1) Request a ruling from the FTT that the tenant is in breach of the lease, and if confirmed start forfeiture proceedings.

2) Take the leaseholder to the small claims court.

3) Request a ruling from the FTT that the service charge is reasonable, then proceed with one of the first two options.

I think it would be unusual for the freeholder to initiate option (3); normally the leaseholder would do so in defending against the first two,except they would seeking a ruling that they were not reasonable.

The exact choice may depend on the options you have for recovering costs from the leaseholder..

[eagle2]

You should take into account all comments received from leaseholders. In order to do that, you need to get to know the leaseholders. The leaseholder may be in the building trade and may have greater knowledge of the subject than you or the agent, so his/her comments should not be dismissed out of hand. I would make contact with the leaseholder and enquire what qualifications he/she holds to make the comments.

The question of payment is more simple, the leaseholder should pay in accordance with the lease as long as you are following all the legislation.

I strongly disagree with the action suggested by others, it pays to engage with leaseholders and try to reach an amicable solution to disputes. Being heavy handed, applying to courts and tribunals should be seen as a last resort, it can be expensive for all leaseholders and it can destroy relationships with the leaseholders, including those who are paying promptly. You are required to suggest alternative means of resolving disputes.

[ram]

Leaseholder has been told any contingency unused will be returned.... still not good enough!!

1) Emily, what is your position within the company ?

2) Are you a director, and have been informed by the agent that you have a difficult leaseholder.

3) Is it that you have, just happened to hear of the problem via the grape vine,

But the conclusion to the contingency matter is : -

Dear leaseholder,
As we stated, if a contingency amount is not required, as job was straight forward with no additional work required over and above the quote, that contingency money will be returned.
If you wish to call us liars, then that is a serious allegation.

Contingency unused will be returned, and payment in advance is required.

If we do not include a contingency on items that need one, and more work is required over and above the initial quote, , once the work is started and unforeseen problems arise necessitating additional work, then we have to stop the work, and issue another S20, for the increased costs ( and wait another 3 months to go the S20 course, ) because the original S20 cost is now invalid.

If you wish to cover the cost of the administration charges for additional work, on quotes, S20's. letters to all leaseholders, etc that will be required, please advise us.

It is up to the freeholder to anticipate any "unforseen" circumstances, so that work does not have to be stopped in order to requote, and have the work men remove themselves off the site, with possibly items left inoperable, or in the case or a re-roof, have to fit plastic sheeting over the roof ( tiles have already been removed ) scaffolding removed, and much more while a re-quote is obtained.

We assume you will not cover the cost of Not putting in a contingency, therefore your payment a.s.a.p is required, including contingency.

Yours F.....
Director or managing agent or freeholder

[ram]

RE-write of first paragraph of above Dear Leaseholder. Post number 8.
( I'm on pain killers at present, and i'ts bloody painful, and seems it affected my thoughts.) ( no change there then,, some may say ! )

Dear leaseholder,
As we stated, if a contingency amount is not required, as job was straight forward with no additional work required over and above the quote, then no contingency would be required.
If a contingency was allowed for, there is a valid reason, and if the contingency is found not to have to be used, that contingency money will be returned.
If you wish to call us liars, then that is a serious allegation.

[eagle2]

The important matter to consider is that the freeholder holds sufficient funds to pay for the works when payment is required. All too often, contingency sums are added to quotes, not used and then not returned to leaseholders, so perhaps you can reach a compromise and say that the contingency sum will become payable if and when it is required.

[ram]

so perhaps you can reach a compromise and say that the contingency sum will become payable if and when it is required.

But the leaseholder has said he is not going to pay ANYTHING, hence my post numbers 3 and 7

[eagle2]

We have been told that the leaseholder has agreed to pay part of the cost and that he wants to pay upon completion of the works.

It is important for the freeholder to be seen to be acting reasonably and not be prejudiced with any preconceived idea, rightly or wrongly, that the leaseholder is difficult.

Whether or not the freeholder can collect monies in advance depends on the wording of the lease, so the leaseholder can be referred to the relevant clauses which apply. Offering to accept a payment if and when the contingency sum is required is a gesture which will demonstrate that the freeholder is both listening to comments and also being reasonable,

Other comments received depend on the qualification of the leaseholder but the freeholder should be able if necessary to demonstrate that he/she has considered them,

[Emilycarter]

Thank you all for further comments. Ram, I am joint freeholder. Management company feels we should go ahead with work as they are essential fire and h&s works and go to debt collection. Does not want to rack up further costs that will be added to service charge in dealing with the ongoing queries (we have experience of the leaseholder's usual m.o.). Will approach mortgage company possibly in first instance.

[eagle2]

I don't think that you can rely on what you consider to be the leaseholder's usual m.o., Many management companies do not follow the s20 procedure but as you state that you have done so, you should consider and treat all comments received based on their merits.

Whether or not works should proceed before you have considered all comments, should depend on whether or not they are regarded as urgent.

Beware of managing agents who recommend debt collection and approaching mortgage companies, that can result in additional costs, some f which are payable to the agent, cause distrust and a breakdown of relationships with all the leaseholders, which can take considerable time to restore. It is much better to attempt to reach an amicable agreement.

A mortgage company is unlikely to pay on behalf of a leaseholder unless you obtain a court order or a determination by the FTT that amounts are payable.

[leaseholder64]

When the mortgage comany's solicitor is handling the transaction, they often explicitly request to be informed of such events. Although I don't know if this has been tried within the last decade for our flats, but I've been told that lenders have paid up when approached, in earlier years.

Incidentally, many leases require the freeholder to be notified of charges, so you may not need to go to the Land Registry for that information. That assumes the leaseholder isn't also in breach of the covenant to notify.

[Emilycarter]

Thank you again for comments. I have been written to previously myself by my btl mortgage company as somehow a MA didnt have my home address, tenant didnt advise or forward post sent there to myself and mortgage company wrote to me informing they were going to pay the service charges as I hadnt.