Essential Considerations When Buying a Flat with a Section 20 Notice
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Due to the terms of the lease, purchasing and selling a leasehold apartment can be a time-consuming process. When trying to buy one, ground rent exceeding £250, short leases, and flats with a section 20 notice can be quite stressful and slow down the process.
In this post, we’ll examine what a section 20 notice is, what it means for leasehold apartments, how to object to one, and whether you should still acquire an apartment if one has been served on the building.
Our lease extension experts can guide you through with efficiency.
What Are Section 20 Works?
When there are significant repairs or maintenance needs for the leasehold property, the landlord is required to serve a section 20 notice under the landlord and tenant act. Alternatively, it can be served if the landlord wishes to sign a long-term contract to maintain system doors, fire alarms, etc.
These are works that haven’t been budgeted and can’t be financed by the sinking fund that the landlord should hold from all leaseholders, and a section 20 notice is typically given in addition to your yearly service charge.
Objecting To A Section 20 Notice
When the landlord serves a section 20 notice, they are expected to give you a complete spec of the indicated works and quotations from the contractors they are considering.
Then, each leaseholder typically has one month to react to this notification, choose an alternative contractor, and request documentation of the necessity of the repair.
It is beneficial to invite a few contractors over to offer advice, assess the work, and provide bids. Additionally, you ought to perform due research on the freeholder, the management firm, and other entities operating under different names.
Request to see all invoices, receipts, and copies of accounts if the landlord refuses to disclose this information.
This request must be made in writing to them so that there is a paper trail with dates. You can take them to a first-tier tribunal if they refuse to give you all of this information and you have sufficient proof that the agents are not doing their duties properly, overcharging, charging for arbitrary expenses, etc.
However, you must ensure that everything is documented and that your argument is supported by solid proof. Before taking any action, you should speak with a leasehold solicitor and join forces with other leaseholders to establish a stronger case.
Should I Buy A Flat With A Section 20 Notice
You shouldn’t blatantly invest in a section 20 notification without first understanding the circumstances.
A section 20 notice need not always be detrimental if it is part of a long-term contract; however, there have been instances in which lawyers have suggested that because the notice is part of a long-term contract with contractors for the upkeep and repair of the building and grounds, major work and high costs aren’t involved. Once these people acquired ownership of the houses, they discovered that they had been given a work estimate in the tens of thousands of pounds. None of this came up during the court case.
If you’re in the process of purchasing a flat that has a section 20 notice, you must be aware of all of its implications. If the present leaseholder wants the sale to go through, it would be preferable if they paid it in full upfront. Alternatively, request a price reduction based on the section 20 notice’s costs.
Additionally, if there is an unpaid section 20 notice, your mortgage lender may have problems with you because it may hinder your capacity to repay the loan.
If you decide to accept the section 20 notice because you genuinely love the apartment, you won’t likely see an improvement in the value of your home when the renovations are finished, thus spending the full amount on both the renovations and the repairs would merely deplete your investment.
Since the sellers won’t find a better offer elsewhere and all other prospective purchasers will be dealing with the same problems, asking for a price reduction may be successful.
In conclusion, based on my personal experience owning a leasehold apartment, I would steer clear of anything that screams “Section 20” because it will only lead to difficulties and cost extra money right away.
As your solicitors won’t do this, you should also conduct your research on the landlord and managing agent beforehand. Given that there are so many parties involved when purchasing a leasehold property, this is a crucial step.
For further questions related to lease extensions and property, contact one of our experienced chartered surveyors at Leasehold Valuations.
1.What is a Section 20 on a flat?
– A Section 20 notice on a flat is a legal requirement in the UK that landlords must follow when planning significant building works or long-term service agreements. It ensures that flat owners are informed about and have the chance to give their input on these changes, promoting transparency and fairness. There are two types: a “Notice of Intention” before the works begin and a “Notice of Estimates” with cost details after considering owners’ feedback. This process helps prevent unexpected costs and ensures collaboration between landlords and flat owners.
2.How long is a Section 20 notice valid for?
– A Section 20 notice is generally valid for 12 months from the date it is served to leaseholders.
3.How do I serve a section 20 notice?
Serving a Section 20 notice involves a specific process to ensure compliance with UK leasehold regulations. Here’s a step-by-step guide on how to serve a Section 20 notice:
- Preparation and Planning:
Identify the proposed major works or long-term service agreements that you intend to carry out within your leasehold property. This could include renovations, repairs, or any services that will last over 12 months.
- Form of Notice:
Draft the Section 20 Notice, clearly outlining the nature and scope of the proposed works or services. Include details about why the changes are necessary and the expected timeframe for the project. This notice can be provided in writing or electronically, depending on your lease agreement and communication preferences.
- Consultation Requirements:
Determine whether you need to consult with a recognized tenants’ association (if one exists) or follow the non-recognition procedure if there isn’t one. The consultation process is a crucial aspect of serving a Section 20 notice, ensuring that leaseholders have an opportunity to provide their input.
- Notice of Intention:
Serve the Notice of Intention to all affected leaseholders. This notice should be sent individually to each leaseholder’s correspondence address, as specified in the lease or as updated by the leaseholder. Ensure that the notice contains accurate and detailed information about the proposed works or agreements.
- Observation Period:
Allow a reasonable period (usually around 30 days) for leaseholders to review the Notice of Intention and provide their observations, suggestions, or objections. Leaseholders have the right to express their concerns or nominate contractors during this period.
- Consider Leaseholder Feedback:
Carefully review the observations and feedback submitted by leaseholders. Take their input into account when making decisions about the project, such as selecting contractors or adjusting the scope of work based on valid concerns.
- Estimates and Section 20 Notice of Estimates:Obtain detailed estimates for the proposed works or services. Prepare a Section 20 Notice of Estimates that includes the estimates’ breakdown, costs, and any other relevant financial information. Ensure that this notice is comprehensive and transparent.
- Serve the Section 20 Notice of Estimates:Send the Section 20 Notice of Estimates to all affected leaseholders. Similar to the Notice of Intention, this notice should be served individually and include accurate details about the financial aspects of the project.
- Leaseholder Review and Further Observations:
Allow leaseholders a period to review the Section 20 Notice of Estimates and provide any additional observations or feedback they may have. This step ensures that leaseholders are fully informed about the financial implications of the proposed changes.
- Decision and Consent (if applicable):
Based on the feedback received and the estimates obtained, make a decision about proceeding with the proposed works or services. If the projected costs exceed a specific threshold, consult with legal advisors and consider whether formal consent from the Leasehold Valuation Tribunal (First-tier Tribunal, Property Chamber) is required.
- Document and Record Keeping:
Maintain comprehensive records of all communications, notices served, leaseholder feedback, estimates, decisions, and any relevant correspondence. These records will be essential for demonstrating compliance with the Section 20 process if needed in the future.
- Completion of Works or Agreements:
If you receive the necessary approvals and consents, proceed with the major works or long-term service agreements according to the agreed-upon plans and schedule.
- Preparation and Planning:
- It’s important to note that the process and specific requirements for serving a Section 20 notice may vary based on individual circumstances, lease agreements, and any updates to leasehold legislation. To ensure full compliance and legal adherence, it is advisable to seek legal advice or consult with property management professionals who are well-versed in leasehold regulations and procedure.
4.What are the stages of Section 20 consultation?
The Section 20 consultation process involves three main stages:
- Notice of Intention:
The landlord notifies leaseholders about planned works or services and invites their input.
- Notice of Estimates:
The landlord provides cost estimates based on input and allows leaseholders to review and comment.
- Decision and Consent:
Landlord decides whether to proceed, considering feedback. If costs exceed a threshold, formal consent might be needed from a tribunal.
- Notice of Intention:
These stages ensure transparency and tenant involvement in significant property changes.