Right To Manage, Our Managing Agent and Section 20

BeeRepellant

Hi All,

I was wondering if any body could share some experience of running their block of flats having acquired the Right To Manage from the freeholder and particularly going through a section 20 process.

We have recently acquired the Right To Manage from our freeholder and we appointed the same company as the agent who helped us acquire our Right To Manage.

Now we wanted to carry out some major roof works which falls under section 20 and I've checked the Leaseholder Advisory Service website on this which involves 3 steps:

1.A notice of intention
2.Notification of estimates
3.Notification of award of contract

We told the agent to send out the notice of intention to all leaseholders as we had already invited 3 contractors on site to give us a quote (one of our leaseholder is a surveyor who accessed the roof and wrote a brief spec). All contractors understood the job and quoted us appropriately.

However, the agent said that we have to go through their process which is outlined below. I even got the leaseholder who inspected the roof to write a more detailed spec (which I know needs to be sent to all leaseholders) but yet they said it wasn't enough for the tendering process.

As you may have gathered we are trying to avoid their service cost which amounts to almost 5K without the roof having been repaired. We don't mind paying costs (on top of this we pay standard yearly 5K for management e.g. organising buildings insurance, organising cleaners etc) however we certainly don't want to get fleeced or used.

An excerpt of the correspondence is below:

Dear XXXX

Thank you for these quotes.

The process that has to be followed is outlined below. Can you confirm we are to proceed and then we will commence with this - unfortunately, it does take 3 months before you will be able to start the collection of funds.

The first stage is that we must prepare a proper specification of the works suitable for tendering. To do this, we need to undertaken a detailed property inspection and the cost of this is £750, followed by the specification which we would charge £1500.
This is then used in the section 20 process. The process itself costs £1500 plus £30 per flat including VAT. We issue the specification for consultation and each resident has 30 days to comment.

We then tender - the standard process provides that 2 companies are used - our own building division and 1 other from those who the residents have selected.
If you require more than 2 companies to be issued with a tender, the cost is £500 for each further company for issuance and evaluation of their tenders.

The returned tenders are then issued again to everyone in a consultation lasting 30 days and then you are free to proceed with the cheapest quote.

If funds need collecting, we would then issue the bills and once funds are collected, there is a further fee of £500 for preparation of the JCT MW contract with the company.

Administration of the contract costs £175 per hour including VAT but we can fix that at a lower fee for these works.

Thanks

-PS I'm one of the directors of the RTM company

G_M

My guess is you have 2 choices:

* appoint agents and instruct them to manage the process. As they suggest, they will want to ensure they have properly undertaken all their professional responsibilities so will probobly not accept your inspection
of the property and your evaluation of what needs doing

* dismiss the agents and manage the process yourselves.

eddddy

The section 20 processes are intended to protect leaseholders from being exploited by freeholders.

i.e. the freeholder has to go through a torturous process to prove what they are doing is fair.

But if all the leaseholders agree, you can scrap the entire section 20 process - and all just agree to put, say, £2k each in the pot and use it to pay the roofing contractor.

But if one or more leaseholders doesn't agree you can't force them to pay their £2k.

You would have to go down the statutory section 20 route, if you want to force them to pay.

BeeRepellant

Ok thanks guys.

G_M I see your point where the agent might want to protect themselves from any professional liability in carrying out their duties.

eddddy: Getting all leaseholders to chip in is a nice idea but impossible with the the amount of leaseholders we have.

Another point. The agent said that we have to use their contractors as one of the 2 quotes. Is this true? Is this as per section 20 process?

eddddy

BeeRepellant wrote: »

The agent said that we have to use their contractors as one of the 2 quotes. Is this true? Is this as per section 20 process?

No, I don't think that's true.

If a leaseholder or 'recognised tenants association' proposes a contractor, you have to invite them to tender - but not one proposed the managing agent. You can invite more than two contractors to tender if you wish.

But realistically... why wouldn't you invite them to tender? If they're suitable and cheaper, presumably you'd use them. If they're more expensive or unsuitable, presumably you won't use them.

(If you don't ask them to tender and stroppy leaseholders hear about it, perhaps they may think you're being anti-competitive, and use it as ammunition to challenge the section 20.)

Have you checked out this site? : http://www.lease-advice.org/publications/documents/document.asp?item=19

eddddy

BeeRepellant wrote: »

eddddy: Getting all leaseholders to chip in is a nice idea but impossible with the the amount of leaseholders we have.

Incidentally. I'm not sure if you took my comment a little too literally.

What I meant was, you could write everyone a formal letter saying something like:

"We've had a quote for £x to repair the roof. If all leaseholders agree to pay £2k [or whatever their share would be] we can proceed immediately.

If we cannot get agreement, we will follow the statutory section 20 process and each leaseholder is likely to have to pay £2.3k to cover the additional admin and legal costs, and the work is likely to start in 6 months time."

G_M

BeeRepellant wrote: »

We have recently acquired the Right To Manage from our freeholder and we appointed the same company as the agent who helped us acquire our Right To Manage.

I just wonder what the point of this was, if you are going to allow this company to dictate what you do.

Surely the point of RTM is for you to take control, reduce overheads, and..... errr..... manage?

BeeRepellant

Hi eddddy,

We'll certainly consider this when writing correspondence to all leaseholders. At least it's worth trying. But our leaseholders are a lazy bunch. They are satisfied when rent income is uninterrupted.

Thanks

BeeRepellant

G_M wrote: »

I just wonder what the point of this was, if you are going to allow this company to dictate what you do.

Surely the point of RTM is for you to take control, reduce overheads, and..... errr..... manage?

We haven't gone for a full management of the block. We've just obtained the RTM and employed them to handle the administration such as collecting service charge, sorting out the insurance, payment of invoices etc.

Hence really as an RTM company that employs them, as you said, if they have to perform their duties properly they want to make sure they do it without any liabilities. Bearing in mind that the directors including myself have full time jobs we cannot possible manage everything by ourselves.

I'm just wondering whether the agent is trying to make money off us on all those professional fees or whether they really have to follow some section 20 prescribed inspection and specifications that can only be done one way.