Companies that look after the grounds of blocks of flats are restricted on how much they can charge without first asking the owners of the flats. Section 20 of the Landlord and Tenant Act 1985 clearly states the procedure that must be followed and the severe penalties if it is ignored.

The law requires that leaseholders paying variable service charges must be consulted before a landlord carries out works above a certain value or enters into a long-term agreement for the provision of services.

The main stipulation is that landlords must consult if these works will cost over £250 for any one leaseholder. That means that, in a development with unequal service charge contributions between the flats, the landlord must consult all leaseholders if any one of them would have to pay more than £250. If the landlord does not undertake this consultation, they may then not be entitled to collect the money.

Section 20 has something to say about ongoing agreements as well as one-off charges.
Landlords must consult where the amount payable by any one contributing leaseholder under the agreement in any accounting period exceeds £100. The figure is to be calculated on the basis of the leaseholder's total contribution resulting from the agreement, including VAT.

Consultation notices must be sent both to individual leaseholders and to any recognised tenants association or RTA. Landlords must invite leaseholders to nominate possible contractors. Under The 1985 Landlord and Tenant Act, the contractors nominated by leaseholders or RTAs do not necessarily need to be unconnected with the leaseholder or RTA concerned and the landlord does not need to be told if there is a relations. However, where such a relationship is or becomes known to the landlord, that may be a factor taken into account when determining which contractor to use.

Where the landlord places a contract with a contractor that neither submitted the lowest estimate nor was nominated by a leaseholder or RTA then he is under a duty to state in writing the reasons for awarding the contract or specify the place and hours where the reasons may be inspected. If he does not do this, it will be taken into account by a Leasehold Valuation Tribunal if there is a dispute. In contrast, the regulations do require that at least one of the estimates provided must be from a contractor 'wholly unconnected' with the landlord.

This consultation can be a lengthy process. Leaseholders have 30 days to respond to a notice of intention served at the pre-tender stage. If a contractor is nominated by a leaseholder or RTA, the contractor may need to be invited to tender. If contractors nominated by leaseholders or an RTA submit a tender, landlords will need to check whether the contractor meets the necessary criteria. The freeholder then needs to spend time having regard to observations from leaseholders. They must then in turn
make a summary of the observations and responses to the notice of intention (first notice), which must be sent to leaseholders with the notice of landlord's proposals or statement of estimates (second notice). Leaseholders then have a further 30 days to respond to the notice of landlord's proposals served at the tender stage.

If the landlord fails to carry out the full consultation procedures in the correct manner, he may not able to collect or recover service charges above the level of the statutory minimum amounts - £100 per lease-holder per year in respect of a long-term contract, or £250 per leaseholder for works to the building.

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Colin Cohen is a partner in Colin Cohen Property Management. CCPM is the premier managing agent and property management company in North London and Colin is based in Finchley. For a no-obligation consultation please contact us using the link above.