Section 20 Notice - Frequently Asked Questions
Why we are serving this Notice?
Section 20 of the Landlord and Tenant Act 1985 (as amended) provides that a landlord must consult leaseholders who are required under the terms of their lease to contribute to costs incurred through their service charges where any one leaseholder’s contribution will be over £250.
What is my share of the costs?
Please note that you are not obligated to pay the full cost of these works. Your lease determines the apportionment of costs you are liable to pay. Further details of this are found on the notice however should you require further clarification on your lease apportionment please do contact the Section 20 team.
What is the £10,000 Cap?
Under the Social Landlord’s Mandatory Reduction of Service Charges (England) Directions 1999 Partners cannot charge you more than £10,000 for works in any rolling 5 year period. This applies to work completed under the long term PFI contracts with Islington Council. Therefore if your final account exceeds £10,000 you can only be charged a maximum of £10,000.
Before we issue your final account we will review the repairs costs we have charged over the last 5 years to ensure that you are not charged more than £10,000 in that 5 year period.
The statutory £10,000 cap applies only to work completed under the PFI contracts – when do the PFI contracts end?
The PFI1 contract ends in 2033 and the PFI2 contract ends in July 2022. The homes we manage are included in either PFI1 or PFI2, not both. Therefore how long you benefit from the £10k cap will depend on which contract your home is managed under.
Is my home managed under the PFI1 or PFI2 contract?
You can search Islington Council’s housing index to find out whether you're in PFI1 or PFI2.
Is the estimated cost likely to change?
It may be that when the contractors and surveyor are on site, more or less works are found. We have included provisional sum(s) for unforeseen repairs within the estimated costs to allow for additional unforeseen works. If further substantial works are noted which are not covered by provisional sums, we will write to you to inform you of these and any likely increase in costs.
When will we bill you?
We are obligated to notify you of all costs incurred within 18 months after the first payment is made to the contractor. If we do not have the final costs available we will send you a Section 20B notice which is to advise you of the costs incurred to date in advance of final billing.
When will you start the works?
We need to complete the consultation period which will end 30 days from the date on this letter. We will then respond to any observations and if necessary provide further information. We will start once this process is completed.
Why are the provisional sums in my Section 20 notice so high?
The estimate of works included in the Section 20 notice is detailed and includes contingencies and provisional sums for unforeseen work. This schedule is taken from a ground level survey and is informed by the property’s repairs history.
Because the Section 20 notice includes a broad specification of works and contingency and provisional sums, if we find other works are needed after the detailed survey we are able to proceed without the need for a further Section 20 notice and 30 day consultation period.
Due to the wide scope of work, contingencies and provisional sums included in the Section 20 notice, final accounts will usually be lower than the amount detailed in the Section 20.
Remember, you’ll never be charged more than £10,000 for works in any 5 year period.
Why is there a provisional sum for scaffolding?
- We can accurately calculate the volume scaffolding that will be needed to complete your works based on the size of your home.
- The scaffolding contingency is included in the unlikely event that we have disrupted access and cannot complete the work.
- if we are unable to access the rear of the property we might add an ‘up and over’ scaffold to complete the work.
I have received a revised Section 20 for the proposed cyclical work and the cost estimate is significantly higher. Why is this?
This was because the detailed survey which is completed once scaffolding is available can often identify additional works which were not apparent from the ground level survey. This meant that we had to issue replacement Section 20 notices to include these works which added an additional observation period to the process.
What are unforeseen works?
We consider the repairs history and use our experience of similar blocks to determine possible scenarios for every aspect of the work that we’re undertaking.
It is extremely unlikely that these provisions would be required for every aspect of the work.
What are Preliminary costs? (15.5%)
Preliminaries are the costs incurred in carrying out the contract, the largest element of which is staff based in Islington. This includes:-
- an Asset Manager;
- a Building Surveyor;
- a Site Supervisor;
- a Resident Liaison Officer;
- an Administrator.
The Preliminaries also cover the hire of the site set-up and welfare facilities including; temporary buildings, fencing, electric & water supplies, cleaning, safety & corporate signage and parking.
These costs are expressed as a percentage of the direct cost of carrying out the works.
What are Overheads costs? (7.5%)
These are the back office costs of running the work, the largest element is Head Office based staff, such as Human Resources, Health and Safety, Finance & Accounts, Plant & Transport and Legal Services, who provide support for the project.
These costs are expressed as percentage of the direct costs of carrying out the works and the preliminary costs.
What is the Profit cost? (3.29%)
These costs are expressed as percentage of the direct costs of carrying out the work including the preliminary costs and the overhead costs.
What is the Management Fee?
Preliminary costs, overheads and profit are what make up your management fee which is included in all Section 20 notices and final accounts
How do you calculate Preliminary costs, Overhead costs and Profit?
If work with a direct cost (operatives, materials, scaffolding, subcontractors) of £100 is carried out, 15.5% or £15.50 would be added as Preliminaries, giving a total of £115.50.
We then add the Overhead costs to this amount, so 7.5% of £115.50, which is £8.66 to give a total of £124.16.
Finally the Profit calculation is applied and would be added to this total, so 3.29% of £124.16, which is £4.08 giving a final figure of £128.25.
Why can’t I choose my own contractor?
London Borough of Islington undertook a large scale re-procurement exercise in 2002-2006, to enter into a long term agreements (contracts) with contractors for property maintenance services. The contract for reactive and major repair services in your area was awarded to Partners for Improvement.
The law requires that the leaseholder must be consulted before the landlord carries out qualifying works or enters into a long-term agreement for the provision of services. The Commonhold and Leasehold Reform Act 2002, Section 151, introduces new requirements for the statutory consultation of leaseholders. It replaces the old statutory consultation procedure (Landlord & Tenant Act 1985, Section 20), but the title ‘Section 20’ is retained.
Detailed regulations have been enacted under Section 151 which set out the precise procedures landlords must follow; these are the Service Charges (Consultation Requirements) (England) Regulations 2003 (‘the 2003 service charge regulations’). These regulations separate the consultation procedures into four schedules, each covering different contracts.
The procedures provide for two separate 30-day periods for leaseholders to make observations
What are Qualifying works?
“works on a building or any other premises’ with the addition of works of improvement.
When calculating the estimated cost, VAT on works must be included. It had been thought that landlords must consult if these works will cost over £250 for any one leaseholder. Thus, in a property with unequal service charge contributions, the landlord must consult all leaseholders if any one leaseholder would have to pay more than £250. If consultation is not undertaken, the landlord will not be able to collect service charges over £250 per leaseholder. The consultation requirements for qualifying works are contained in Schedules 3 and 4 of the 2003 service charge regulations.
What is a long-term agreement?
A long-term agreement is an agreement entered into by the landlord with a wholly independent organisation or contractor for a period of more than 12 months after 31 October 2003. (Agreements before this are exempt.)
The consultation requirements for qualifying long-term agreements are contained in Schedules 1 and 2 of the 2003 service charge regulations.
Examples of potential long-term agreements include:
- agreements affecting the building generally (e.g. lifts, entry-phone systems, waste management or maintenance contracts);
- cleaning and gardening;
Where the long-term agreement includes provision for the carrying out of works to the property (for example, a schedule of rates agreement for general maintenance), and these works will result in a charge to any one tenant of more than £250, then a separate consultation must be carried out under the provisions of Schedule 3. The original consultation under Schedules 1 or 2 in respect of the agreement itself does not provide any exemption from consultation for the works.
The first Notice of Intention for PFI1 properties was issued in 2002 and the Notice of Proposal was issued 2003. This was prior to the creation of the Long Term Agreement legislation which came into force after 31 October 2003 and applies solely to contractual arrangements after this date.
The first Notice of Intention for PFI2 properties was issued in 2005 and the Notice of Proposal was issued 2006. This was after the creation of the Long Term Agreement legislation and is therefore compliant.
A second quotation is not required as London Borough of Islington have entered into a long term agreement with Partners for Improvement, and are therefore requesting that we complete the works in line with our contractual arrangement. This contract has been consulted under Schedule 2 (for the award of the long term agreement) and therefore Schedule 3 (Consultation requirements for qualifying works under a qualifying long-term agreement). Where qualifying works are undertaken under a qualifying long-term agreement, then competitive tendering is not required in that the contractor is already in place.
Rydon are the repairs arm of the Partners for Improvement group, therefore there is no requirement to complete further tenders or procure alternative quotations.
How were the costs in the Section 20 notice calculated?
The cost for the works identified within your Section 20 notice have been calculated using an industry standard set of rates produced by The National Housing Federation (NHF). The NHF Schedule of Rates contains full descriptions and costs of all social housing repairs. Where quantities are specified in the unit column within the notice, LM stands for linear metres (decoration to door frames are measured in metre lengths for example), SM for square metres (the decoration of windows is measured in square metres for example). IT and NO stand for Item and Number which usually is used to describe a single item or one work item.
The NHF are recognised industry wide as the producers of the most reliable building cost data in terms of technical content and robust monetary levels, taking into account market trends and technological changes.
The Schedules of Rates extend across nearly all building elements and are comprehensively and periodically reviewed and updated by the National Housing Federation, offering a robust mechanism for benchmarking costs.
How were scaffolding costs arrived at?
Before choosing these contractors we spoke to five individual scaffold contractors, who have experience in working in occupied residential properties, to ensure they fully understood the requirements and had the work force who would ensure that each of the properties they worked in were shown the utmost respect.
We then asked these five contractors to attend and price several sample properties. We reviewed these costs against the current market rates to ensure they were being competitively priced. All sample properties had also been checked by one of our building surveyors to calculate the size of the scaffolding required.
The list was then reduced to three scaffold contractors and a further pre contract meeting took place where quality of service, health & safety and costs were reviewed and discussed. We also drew up a standard document to identify our scaffold requirements and to ensure each of the scaffold contractors were fully aware of our commitments.
This approach will ensure each scaffold is priced individually for more realistic costs. These costs were also cross checked with the National Housing Federation’s Schedule of Rates to ensure that they were in line with national rates.
We secured very competitive rates with all three contractors due to the contract length and the current economic climate and after much consideration decided to use two of the contractors. We may increase the number of scaffold contractors as the amount of work increases.
What is the Agreed Maximum Price Policy?
Partners and the Council have agreed that leaseholders’ recharges will not exceed the estimated sum detailed on your Section 20 Notice.
However, if whilst undertaking the work we identify further work that is required we will write to you and notify you of what needs to be done. If this further work is of a different nature then we will send you another Section 20 notice.
For example, if we send you a Section 20 notice to complete damp works in your bathroom, but later realise damp work is required in another room we will write to you and notify you that the costs will increase but not serve a new Section 20. However, if whilst completing roof works we discover damp work that needs completing we would be required to serve a new Section 20 notice as the works are of a different nature.
What will my Payment Options be?
Assuming the work goes ahead then after completion of the work you will be sent a Final Account. The Final Account will set out the costs of the work actually completed, and your contribution to those costs. In many cases the Final Account is lower than the estimated cost in the Section 20 Notice. There are various ways you can pay your bill, please see our Payment Options leaflet or speak to the Home Ownership Team.
Who do I contact if I have a Query?
Partners Home Ownership Team
- Written observations to your section 20 notice.
- Discuss payment options or queries.
- Queries about your lease and what works you should pay for.
- Queries about how your charges are calculated.
- Any formal disputes about the charges.
Tel: 0800 587 3595 or 020 7288 8310
Address: 4-6 Colebrooke Place, Islington, London, N1 8HZ
Partners Repairs or Planned Repairs Team
Any queries relating to the works that are due, or currently being carried out at your property.
To request an onsite meeting to discuss the proposed works to your building or the outcome from the off-scaffold survey.
Tel: 0800 587 3595 or 020 7288 8310
Address: 4-6 Colebrooke Place, Islington, London, N1 8HZ