What Are They?
“Major works” or often referred to as “Qualifying Works” are terms used to describe substantial maintenance, repair or improvement to a building, structure, common part or apparatus that a Landlord or Management Company is responsible for which leaseholders are required to contribute towards under the terms of the lease. Examples of works include redecorations, roof replacements or lift refurbishments etc.
The purpose of these works is to keep the development looking good and working correctly. The lease will usually specify the frequency for carrying out redecorations, although this varies from lease to lease. The lease will also contain further covenants for the Landlord or Management Company to maintain, repair and replace as required the structure of the building and common parts including apparatus within.
Who Must be Consulted?
The law requires that where any individual leaseholder contributes more than £250.00 to a set of identifiable works that consultation is carried out, this is referred to as Section 20 Consultation. For example, in a development with unequal service charge contributions, all leaseholders would be consulted if any single leaseholder had to pay more than £250.00. Any Recognised Tenants Association must also be consulted (if one exists).
Section 20 Consultation is intended to protect leaseholders from having to pay unnecessarily large sums for works. Unfortunately, freehold houses on private estates or mixed-use developments are not offered the same statutory protection at present as leasehold properties.
On occasions emergency works which cannot be planned may fall into this category such as a major roof leak or major drain repair. The protocol for instances such as these is communicating with leaseholders, arranging for the works and making a retrospective application for dispensation, although each situation will have its own merits.
The process can be broken down into the following stages
1. Notice of intention (1st Statutory notice)
2. Tender stage
3. Notification of the estimates (2nd Statutory notice)
4. Awarding of contract
5. Notice of reasons for awarding the contract (3rd Statutory notice)
6. Commencement of contract
1. Notice of Intention
A notice will be served to each leaseholder and any Recognised Tenants Association describing the general terms of the works, the reasons for carrying out the works along with a reasonable place and hours at which the description can be inspected.
The notice will also detail leaseholders and any Recognised Tenants Association right to make written observations and nominate contractors within 30 days from the date of the notice. Generally, an additional 3-5 days are added to the 30 days to allow for time taken in posting notices. Due regard must be given to any written observations received.
2. Tender stage
After the notice of intention consultation period has expired and any observations considered, estimates will be sought from a range of contractors against a specification of works. Any nominations from leaseholders or a Recognised Tenants Association will be considered.
3. Notification of the estimates
Once contractors have submitted their estimates a notice will be served to each leaseholder and any Recognised Tenants Association detailing the estimates obtained along with a reasonable place and hours at which the estimates can be inspected.
The notice will also detail leaseholders and any Recognised Tenants Association right to make written observations within 30 days from the date of the notice. Any written observations received within the consultation period following the Notice of Intention will also be summarised and responses included. Generally, an additional 3-5 days are added to the 30 days to allow for time taken in posting notices. Again, due regard must be given to any written observations received.
4. Awarding of contract
Once the notification of the estimate’s consultation period has expired and any observations considered, a contractor can be selected, and a contract entered into.
5. Notice of Reasons for Awarding the Contract
This notice should be served to each leaseholder and any Recognised Tenants Association within 21 days of entering into the contract if the contractor chosen was not a nomination or the lowest estimate. Any written observations received within the consultation period following the Notification of the estimates will also be summarised and responses included. It is considered best practice to serve this notice even if no nominations are received and the chosen contractor is the lowest estimate.
6. Commencement of Contract
Once the consultation has been carried out and a contract entered into the works can commence. Depending on the type of work the contractor may be asked to contact leaseholders directly in respect of giving notice for access to paint doors or windows etc. Leaseholders are also encouraged to report any concerns or issues they have during the works. Inspections of the works are usually carried out periodically over the course of the contract.
Once the works have been completed, a snagging inspection will be carried out to check the works have been carried out correctly. A retention is typically held for around six months after practical completion which allows for the contractor to return and rectify any issues that arise following completion.
Nominations made by leaseholders or a Recognised Tenant Association must be made within the consolation period following the Notice of Intention.
Whilst under legislation there is no set criteria for approaching nominations most Landlord’s or Managing Agent’s will have certain fundamental criteria from contractors which must be complied with, such as public liability insurance, valid tax exemption certificate, confirmation of VAT status, copies of health and safety policy and confirmation of company status.
How are the Works Funded?
Most modern leases allow for a reserve or 'sinking' fund; therefore, a contribution is usually included within the service charge each year. The fund means that leaseholders can effectively pay in advance for major works over a period of time avoiding sudden demands for huge sums of money.
In older leases it is not uncommon for no provisions allowing a reserve or 'sinking' fund. This poses challenges in that funds cannot be built up over a period of time resulting in funds having to be demanded from leaseholders when the works fall due. It is important to remember that additional contributions can only be requested off leaseholders if the lease permits, otherwise the provision for major works will have to be included in the preceding budget period. Best practice dictates that where a reserve fund or “sinking fund” is not permitted adequate future planning is carried out and communicated with leaseholders to enable adequate saving allowances avoiding unnecessary shocks.
At Aspire we have many years’ experience of major works, Section 20 Consultation, dispensation and reserve fund planning.
Aspire Block and Estate Management – 01923 372169