CLRA 2002 -Section 20 observations with draft letter template

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    CLRA 2002 -Section 20 observations with draft letter template



    Draft letter to Local MP’s regarding proposed changes to Commonhold and Leasehold Reform Act 2002 – Section 20

    Dear xxxxxxx MP

    I am writing as members of | leaseholders and would ask that you contact the Secretary of State for Communities & Local Government on our behalf to use their powers under the above Act, to increase the financial limit under Section 20, so as to reflect the effects of building cost inflation since the present £250 limit was set 10 years ago.

    We would welcome your support lobbying the Government on this important issue for leaseholders in our block and many other small Residential Management Companies (RMC’s) that are facing a huge bureaucracy carrying out ordinary day to day maintenance in their buildings.
    Here is an example of the sort of ‘red tape’ we face:-

    You apply for a dispensation from the process for urgent works such as the replacement of a lift at say a cost of approx. £20,000. After the usual tedium of filling in the forms you eventually have a tribunal site visit and hearing.

    As a relatively small group of flats; each having a share of the freehold company, and have previously set aside sufficient monies to cover the cost of the lift as part of responsible budgeting.
    The current problem is:-

    1. Section 20 procedures are far too complex and perplexing to leaseholders who generally want their RMC to just get on with the job..

    2. There are huge costs to the taxpayer in dealing with S20 application when they have to be considered by a Leasehold valuation Tribunal (LVT)

    3. As a small RMC we would rather spend our time getting the best quotes and value for the leaseholders than spend time filling in paper and bombarding leaseholders with statutory letters from both the RMC and the Tribunal service.

    4. The current ‘hurdle’ rate to have to comply with Section 20 is so small there will be many items falling into the S 20 category. e.g. fence repairs, painting, etc. (all very mundane everyday items)

    5. We appreciate the general need for safeguards to tenants but some more leeway needs to be given to small RMCs if we are to avoid a general paralysis in our decision making and implementation.
    1. The alternative to the problems identified above will be to ignore S 20 which would totally counterproductive to good block management., alternatively one way of quickly saving the taxpayer money and meeting the objectives of the ‘Big Society’ by cutting out much of this red tape and to raise the £250 threshold to 'say' £1250 with a corresponding increase for the recurring contracts.


    The Secretary of State could make such a simple change using existing powers under the above Act without the need for primary legislation and I believe free voluntary Directors from RMC’s from a huge amount of pointless ‘red tape’ when managing their blocks of flats.
    We would be grateful if you could raise this matter with Rt Hon Eric Pickles MP at the most appropriate opportunity in Parliament.


    We look forward to hearing from you.

    Yours sincerely


    #2
    Hi,

    From the above i take it you reside in Wales and believe building cost inflation has risen by 500% in the last 10 years?

    ??

    Comment


      #3
      That would give leaseholders even less protection. My freeholder spent £3000 of my money on “nesting” which was her defence in the Tribunal. Had it not been for the £250 section 20 rule I would have lost the lot.

      Comment


        #4
        Originally posted by Paulsen View Post
        That would give leaseholders even less protection. My freeholder spent £3000 of my money on “nesting” which was her defence in the Tribunal. Had it not been for the £250 section 20 rule I would have lost the lot.
        Leaseholders have had less protection since the Supreme court handed down their findings in Daejan Investments Limted v Benson and others, we certainly do not need to increase the threshold to require consultation!

        Comment


          #5
          While I wouldn't consider there to be any good reason to argue against a reasonable increase in the consultation threshold (an increase inline with building costs inflation over the last 10 years would mean a new threshold of about £325 - £350), I wouldn't write to my MP to ask for this.
          On the other hand, if I thought that a larger increase was on the cards, I would be very likely to actively campaign against increasing the threshold.


          I don't consider section 20 requirements to be either onerous on the freeholder (or RMC), or difficult for leaseholders to understand the reasons for.
          Anyone who is managing a property well should know when there would be a need for more expensive work well in advance of it actually needing to be done (the occasional emergency repair excepted and in those cases there is the option of simply writing to leaseholders but going ahead with the repairs anyway - as long as the repairs are necessary and costs are reasonable, there is no real chance of anyone challenging the costs with current legal precedent).

          The reasons why consultation is done can be explained in the first letter, and the same template letter can be used for all occasions that require consultation and sent out with other necessary mail such as service charge demands.

          Comment


            #6
            For our RMC S20 is proving to be onerous.

            The RMC want to phase the refurbishment of the building over a number of years. Even when spreading the works over years the cost per year exceeds the S20 threshold. The alternative is to hit leaseholders with a large 5 figure one-off charge; unfortunately we have no reserve fund due to lack of forward planning over many generations of the RMC board. We have a range of types of resident/leaseholder including some (e.g. pensioners) who would struggle to meet such a large one off demand meaning probably taking out a loan, re-mortgaging or selling up.

            Of course S20 documentation can be copied and pasted each year, the problem is with the practicality of the quotation and award stages. Firstly once we've selected the best contractor for the job we won't want to chop and change each year if they continue to do a good job and year-to-year cost increases are reasonable based on inflation; in this case the S20 process becomes a paper exercise. Secondly even a paper exercise becomes very time consuming and problematic. This is because in my experience the response rate from contractors approached for a quotation is low to start off with and will become lower each year due to losing contractors dropping out as they twig that you have previously selected a competitor and continue to do so. This is ignoring the usual pain of contractors saying they are interested in quoting but can never give you a date to view the job, don't turn up when they do give you a date, or don't get round to providing a written quotation (if ever) unless chased umpteen times.

            I've yet to come with a solution to this problem and have raised the subject previously on this forum.

            Of course self-managed RMCs with unpaid directors who are also leaseholders are very different to professional management companies but that said I can see the benefit of having the same rules apply to both; ensuring leaseholder consultation cannot be a bad thing (even if in practice the majority don't show any interest!) and even unpaid directors could be unscrupulous (e.g. contract awarded to mate/relative).

            Anyway even a 5% per year increase in the S20 threshold (~£400) would not help our very specific situation.

            Comment


              #7
              Originally posted by Jericho View Post
              For our RMC S20 is proving to be onerous.

              The RMC want to phase the refurbishment of the building over a number of years. ...
              That shouldn't make the consultation process any more onerous, and I don't see why it would necessarily require consultation to be repeated every year.

              If the RMC believe that they can justify using the same contractor to complete a number of different jobs over "a number of years", they just need to include all proposed works in the initial consultation, and make it clear that the intention will be to get a single contractor to quote for all works (allowing the contractor to include expected inflation, and sufficient contingency in their quote).
              The RMC can make it clear to the contractors, and to leaseholders, that the continuation of the contract will be dependent on satisfactory completion of work each in previous years.

              Comment


                #8
                My issue with section 20 is not so much around the limits for when it needs to be applied but rather the fact that it supposedly is a key protection for leaseholders but in reality it is nothing of the sort.

                Only really ignorant freeholders or managing agents don't follow it. It seems that the majority do. When we had managing agents I remember getting my first section 20 notice and calling the leasehold advisory service about it. I thought that surely this supposed legal protection included some kind of mechanism for me to challenge, maybe stop the work going ahead.

                However, of course, that is not the case. It is purely a paper exercise to tick a box. Yes you are consulting leaseholders and yes they get to nominate contractors but you don't have to act on any of their comments or use the contractors they nominate. You don't even have to use the lowest priced contractor.

                So your mechanism for actually challenging the charges is to go to tribunal, which you could do anyway without section 20 being in place.

                Therefore, now, running an RTM company and with all but the most basic works requiring a section 20 notice, I can understand the frustration of those with more complicated maintenance plans having to do it on a regular basis.

                Comment


                  #9
                  Macromia thanks for your suggestion regarding including a rolling programme of works in a single consultation and contractor quotation. I have the following observations:

                  Quotations are only valid for a number of months (typically 3 to 6 months); prices increase annually of course

                  For major work the RMC would only deal with largish well established contractors that have a reasonable chance of being around in years to come to give some value to warranties.

                  In my experience such contractors have standard terms and conditions that would not cater for the flexibility to break down work over a number of years including year-on-year material and labour cost increases.

                  Also the contract T&Cs would not allow the client just to cancel mid-fling unless it was first subject to a dispute process. Worst case for us would be that the contractor is doing a bad job but has to be given the opportunity to put things right (this would happen anyway) but then continue on with the contract whereas we would sooner get someone else in for the next phase of work.

                  Of course a special contract could be drawn up but this would require input from legal bods which would cost and the hassle would I'm sure put most contractors off even quoting.

                  Overall I don't see the advantage for the RMC or the contractor of such a convoluted arrangement (just to satisfy S20).

                  Contractors when quoting for initial work are informally made aware that there is the possibility of more of the same if they get the work and do a good job. The S20 notices also inform the residents that it is the intention for the year one scope of qualifying works defined to be extended over a number of future years and contracts.

                  My interpretation is that S20 is looking for a simple one-to-one relationship between S20 notice - quotation - contract which is normally fine. What we would like is for the initial year one S20 and successful quotation to act simply as the basis for choosing the best contractor for year-on-year contracts factoring in reasonable cost inflation.

                  Comment


                    #10
                    Firstly, you either have the wrong section or the wrong Act. CLRA 20 only applies to commonholds, of which extremely few exist. I think you meant section 151, However, that was only a one off change to another Act, so you really mean section 20 of the Landlord and Tenant Act 1985.

                    As others have said, the real problem is that legislation is too weak, not too onerous.

                    Comment


                      #11
                      What Chris1544 says is true of course that S20 is often just a box ticking process where the answer (winning contractor) is often known from the start.

                      However for a leaseholder to challenge the decision at the FTT on the basis on unreasonableness would surely need the kind of evidence that S20 allows for i.e. questions like did the work need doing and if so was the cost and chosen contractor appropriate?

                      It gives leaseholders the opportunity to argue in advance that the work is not required.
                      It forces landlords to attempt to get quotations from unrelated / leaseholder-nominated contractors. Obviously it may be impossible for a leaseholder to get a retrospective quotation to support a FTT dispute if the landlord had ploughed ahead with the work in advance of the demand (say from a reserve fund).
                      It forces the landlord to justify why he didn't choose the lowest quotation but say for example awarded to a contractor he has a relationship with at a much higher cost.

                      Whilst none of the above are blockers on rogue landlords for many having to justify actions and respond to leaseholders comments must be something of a deterrent against not considering the leaseholders best interests.

                      On the flip-side forcing landlords to choose the lowest quotation is too simplistic as there are always a mix of factors involved in making a decision other than cost.

                      Comment


                        #12
                        Originally posted by leaseholder64 View Post
                        Firstly, you either have the wrong section or the wrong Act. CLRA 20 only applies to commonholds, of which extremely few exist. I think you meant section 151, However, that was only a one off change to another Act, so you really mean section 20 of the Landlord and Tenant Act 1985
                        Yeah - I assumed that it was Section 20 of the LTA 1985 that was being referred to (nothing else makes sense).



                        Originally posted by Jericho View Post
                        I have the following observations:

                        ...

                        What we would like is for the initial year one S20 and successful quotation to act simply as the basis for choosing the best contractor for year-on-year contracts factoring in reasonable cost inflation.
                        While my earlier post oversimplified the situation, it sounds to me that you are overcomplicating things.
                        It also seems to me that your primary concern (and that of the OP) is to make things as easy as possible for the RMC/directors, even though this would limit the opportunity for the leaseholders to have their say.

                        If the intention of the RMC will be to use a single company for all of the proposed work (assuming that they perform well on the earlier contracts), you have to ask any contractors who are asked to quote for the work to give an indication of what they think the later jobs will cost prior to them being awarded contracts for any of the work. While it would be unreasonable to expect any contractor to predict exactly what future costs might be, they should at least be able to give you an idea of what to expect.
                        You can't really know that a contractor will be the best to use for later contracts if you only get them to quote for the first job.

                        If you can't get any contractors to provide advanced estimates which would enable you to include discussion of several years worth of work at one time, then the best that you can do is to use the initial section 20 consultation to discuss the reasons why the later work should go ahead, and to allow comment on things like whether or not the proposed specifications are appropriate, how long the work should be spread over (it may be cheaper, and less disruptive, to have most of it done at one time), and whether any leaseholders think that any other work should be carried out at the same time.

                        While it is relevant to consider whether or not individual leaseholders can afford the proposed work, it is also possible for leaseholders to win tribunal cases by arguing that work should have been carried out as a single contract in year one rather than being split over several contracts spread over a number of years.

                        Not carrying out appropriate consultation "because it was onerous" or "because a suitable contract for several jobs, over a number of years, was too complicated to arrange" won't come across well at a tribunal if you do get a challenge to the costs.

                        Whatever you do, you should be keeping leaseholders informed throughout any period of major works, and should be receptive to any comments, or complaints, that they might have.

                        Comment


                          #13
                          Thanks again for your views Macromia:

                          "It also seems to me that your primary concern (and that of the OP) is to make things as easy as possible for the RMC/directors, even though this would limit the opportunity for the leaseholders to have their say."

                          Speaking for myself your impression couldn't be further from reality. As a leaseholder as well as a director and personally knowing and living alongside other leaseholders I want the best solution for everyone and everyone has been consulted.

                          I should have made it clearer that the work proposed each year is exactly the same as that specified on the original S20. Essentially if a S20 notice was issued each year it would specify the same work but for a different set of flats in the building. As I've already said if contractor X had got the initial contract and did a good job then the reality is we'd stick with them if the subsequent contract prices were similar to the original. Going through S20 again would just be ticking a box and waste everyone's time and money.

                          I mentioned in my last post that I do understand the value of S20 just not when we are asking the same question again and again when the sensible answer is known in advance (continue with contractor X for work Y as he's doing a good job at a fair price).

                          This phased maintenance approach has been discussed and agreed with the leaseholders/shareholders at the last AGM and mentioned in numerous newsletters as well as the initial S20 notice.

                          If anyone wanted to suggest that we should go big-bang (regardless of the issues that would raise for some residents) then they have had and continue to have ample opportunity to do this. I think it would be difficult for a leaseholder to say they have been "prejudiced" by this approach.

                          Perhaps we should have this as an agenda item each AGM "is everyone OK to stick with contractor X specifically for work Y?". If a new work stream comes along then of course another S20 consultation would be required.

                          Comment

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