Buying a leasehold flat with s20 notices

ryngo

Hi all.

I'm in the process of buying an ex-LA leasehold flat and have uncovered a potential nasty surprise. The jargon is new to me but I'll try to explain.

My solicitor has conducted the searches and uncovered four section 20 notices. They are qualifying long term agreement, schedule 2, notice of intentions for Services, lift services, major works & consultant. These are dated July 2014. The reason for entering into the agreements is stated as:

"the landlord considers it necessary to enter into the agreements because the previous contractors frameworks tendered by newham homes have expired and it is considered that a long term agreement with a number of suppliers will offer better economies of scale and speed of delivery not obtainable with individual tenders for each project"

I'm currently trying to get hold of the lease and service charge accounts to see what has been done and charged previously.

I've been trying to research this myself but I'm unclear as to the difference between a qualifying long term agreement and qualifying works. It seems like the notices may just be for new general contracts that have expired but my fear is there could be some big bills around the corner for some major works. The flat and building is in very good condition, there is no lift and windows have been replaced already.

Should I be backing out of this sale? Would appreciate any advice on this.

Thanks.

eddddy

I suspect that if you read the long term agreements, they will be self explanatory.

At a guess, what they are saying is something like:

"When a major maintenance job comes up (like refurbing the lifts), they could go through an s20 consultation process and put the individual job out to tender. (This would mean lots of s20s.)

But they would prefer to just do a few s20s to find suppliers to sign long term contracts.

e.g. Do one s20 to find a lift maintenance company, who would then do all lift refurbs, let's say for the next 5 years.

Newham are saying that this would be cheaper than doing an s20 for each individual job. (Maybe because it's less admin, and/or the firms will quote better prices if the contract is bigger.)"

You have to decide whether you agree with Newham.

And more importantly, take a look at the planned maintenance schedule for the next few years, for the block you are buying into.

ryngo

Thanks Edddddy.

I'm trying to find out that information at the moment.

Missme

Useful guide to section 20: http://www.lease-advice.org/publications/documents/document.asp?item=20 (sorry having trouble with inserting hyperlinks).


Long Term Agreements (LTAs) are supposed to bring about economies of scale. In itself a LTA is not a bad thing - a contractor needs to be in place and there is probably no direct labour anymore. In reality, they allow contractors to charge what they like with the benefit of having their profits secured for years to come.


Because LTAs are often let with the same duration (3 years, 5 years, whatever) they tend to come up for renewal at the same time. This is especially useful for Councils as leaseholders are inundated with reams of paper with which to obscure their shambolic contracts.


You will really need to pore over the documentation during the Notice of Proposals stage of consultation. If you understand contracts and schedules of rates, you'll be in a better position than 99.9% of leaseholders. Make sure you do it early enough in the observation period to ask any questions that you may have and then challenge/ask for clarification of the nonsensical reply.


Fortunately, renewals of major structural elements and services (roof, windows, lifts etc.) may have taken place under Decent Homes. However, not all Councils or the ALMOs they created managed to allocate funds appropriately so there may be costly works in the pipeline. As eddddy says, check planned maintenance and additionally ask for information on what works were carried out under Decent Homes (including details of guarantees for new roof or windows etc.) and capital expenditure on mechanical and electrical works. The reason I say this is because if a bill has been paid more than 3 years ago, it may not show in the service charge accounts that will be provided.


I'm curious why the leaseholder has been consulted on lifts if there isn't one. That's supremely lazy, unnecessary(and costly) consultation.