Section 20 Major Works

das1969

I'm a leaseholder in a block of 80 or so flats, where we have joint ownership of the freehold, a leaseholder management company with 3 directors, and a managing agent, The roof of the block of flats is need of repair, with some flats suffering leak damage, and the agent started a Section 20 Major Works process, which has now reached the stage where the 2nd notice has expired, and the cheapest tender for the works has been accepted.

The cost of the works totals several hundred thousand pounds with each leaseholder paying a share each. I'm in the lucky position of being able to pay and have already done so.

One of the residents has now posted a leaflet through my flat door saying that a lot of the residents are unable/unwilling to pay and that they are canvassing interest in appointing a solicitor and pursuing an instruction of right-to-manage RTM replacing the management company and halting the works.

I have a few questions. Would they be able to pursue a RTM against a landlord that already consists of leaseholders? I'd have thought this process would only be used where the landlord is a single person or body such as a local council.

I'd have thought the concerned leaseholders would be better off attempting to appoint directors who would be prepared to address their concerns.

Would the Section 20 works then be able to be stopped?

It's all a bit of a mess, and I do feel for people who are unable to pay and face having county court judgements, potentials interest charges and fees, and potentially have the money added on to their mortgage by the lender.

NameUnavailable

RTM is what you do when a sufficient amount of leaseholders apply to take over management of the block from the freeholder. If these other leaseholders also own a share of freehold then they already effectively have the RTM.

They need to look at challenging the works and appointing new directors of the freehold company, who in turn could appoint a new management company.

BUT......if the roof needs repairs and the cheapest tender has already been selected, and is reasonable in terms of the scope of works, what are they hoping to acheive?

das1969

I think they're hoping to pursue the roof replacement piecemeal. There a series of sub-blocks of three flats on three floors that are connected together by common area staircases in between. The roof stretches across the whole block.
I don't think  a sub-block could be reasonably argued to constitute a separate building and seek to separate away and set up their own management company.

I don't think they've thought through that this could well end up being more costly, rather than having all the roof done in one go.

I agree they'd have been better trying to appoint directors who could instruct the managing agent, But given the progress in the Section 20 process, and I'm not sure they could do anything.

eddddy

das1969 said:

Would they be able to pursue a RTM against a landlord that already consists of leaseholders? 

Yes - they can do an RTM.

Presumably they plan to form a new company and vote in new directors.

But as you say, it would probably be much easier (and cheaper) to vote for different directors onto the current freehold company.


Unless...

• ...typically, only people who put money towards buying the freehold would be members of the freehold company - so that might be, say, 50, 60 or 70 of the 80 leaseholders.

• ...but all 80 of the leaseholders would be eligible to be members of the RTM company (whether they put money towards buying the freehold or not) 

Could that be an issue?

das1969 said:

Would the Section 20 works then be able to be stopped?

Not automatically. 

But if the freehold company tried to carry on with the works regardless of a RTM application, a tribunal might not be too impressed, and be more sympathetic towards leaseholders, if they challenged it.

das1969 said:

One of the residents has now posted a leaflet through my flat door saying that a lot of the residents are unable/unwilling to pay and that they are canvassing interest in appointing a solicitor and pursuing an instruction of right-to-manage RTM replacing the management company and halting the works.

What is the complaint of the resident(s)?

For example, are they saying...

• The roof repairs aren't required
• The roof could be repaired in a different way more cheaply
• The roof could be repaired more cheaply if a different contractor did it

If any of the above are correct, they can challenge the proposed service charge at a tribunal. 


Put another way, why do they think they can deal with the roof more cheaply if they form a RTM company?

eddddy

das1969 said:

I think they're hoping to pursue the roof replacement piecemeal. There a series of sub-blocks of three flats on three floors that are connected together by common area staircases in between. The roof stretches across the whole block.
I don't think  a sub-block could be reasonably argued to constitute a separate building and seek to separate away and set up their own management company.

I don't think they've thought through that this could well end up being more costly, rather than having all the roof done in one go.

I agree they'd have been better trying to appoint directors who could instruct the managing agent, But given the progress in the Section 20 process, and I'm not sure they could do anything.

I was typing my reply when you posted this.

Based on what you say, it sounds likely that a RTM application could be made for just one a sub-block.

Here's how the legislation defines a "premises" (a part of a building) that's suitable for an RTM application (see the bits in bold)...

(1)This Chapter applies to premises if—

• (a) they consist of a self-contained building or part of a building, with or without appurtenant property,

• (b) they contain two or more flats held by qualifying tenants, and

• (c) the total number of flats held by such tenants is not less than two-thirds of the total number of flats contained in the premises.

(2) A building is a self-contained building if it is structurally detached.

(3) A part of a building is a self-contained part of the building if—

• (a) it constitutes a vertical division of the building,

• (b) the structure of the building is such that it could be redeveloped independently of the rest of the building, and

• (c) subsection (4) applies in relation to it.

(4)This subsection applies in relation to a part of a building if the relevant services provided for occupiers of it—

• (a) are provided independently of the relevant services provided for occupiers of the rest of the building, or

• b) could be so provided without involving the carrying out of works likely to result in a significant interruption in the provision of any relevant services for occupiers of the rest of the building.

Link: https://www.legislation.gov.uk/ukpga/2002/15/section/72

• 
  

das1969

I think they hoping to take control through a new management company, appoint a new managing agent and only replace sections of the roof as leaks start to occur, and to take into account people's ability to pay, by not forcing payment unless that particular section has developed leaks or is due to imminently. The leaflet specifically mentions interest on late fees and eventually having the cost added to their mortgage by their lender. I'm assuming people who have paid for their lease and refuse to pay would end up with a CCJ.

The leaflet acknowledges that the roof needs replacing, and I don't think they have an issue with the cost for the whole roof per se, they just don't want the whole roof done in one go.

I'd have thought they'd a need a quote from a roofing company to replace each proposed section separately and demonstrate that this is not prohibitively more expensive, Which I doubt they could. There would surely be significant savings in having one large project.

NameUnavailable

OK in theory the leaseholders (who are apparently also party to the freehold) could apply for RTM to take control away from the freeholder (themselves!) but as all leaseholders, including those already running the management company would be able to be part of the RTM company, it doesn't make much sense. Are those neighbours talking about RTM putting themselves forward to run it and organise the 'new' works?

Presumably the correct process was followed in terms of advising of the planned works and obtaining quotes etc., so leaseholders had the opportunity to raise queries or propose alternative companies for quotes etc.

I would expect that a major part of the cost of works will be scaffolding and it's likely to be even more expensive to keep putting scaffolding up for each ad hoc repair over the coming years rather than just doing the whole job in one go.

pinkshoes

das1969 said:

I think they hoping to take control through a new management company, appoint a new managing agent and only replace sections of the roof as leaks start to occur, and to take into account people's ability to pay, by not forcing payment unless that particular section has developed leaks or is due to imminently. The leaflet specifically mentions interest on late fees and eventually having the cost added to their mortgage by their lender. I'm assuming people who have paid for their lease and refuse to pay would end up with a CCJ.

The leaflet acknowledges that the roof needs replacing, and I don't think they have an issue with the cost for the whole roof per se, they just don't want the whole roof done in one go.

I'd have thought they'd a need a quote from a roofing company to replace each proposed section separately and demonstrate that this is not prohibitively more expensive, Which I doubt they could. There would surely be significant savings in having one large project.

It's a very naïve way to look at it though.

If the roof needs replacing, then doing it in "bits" as and when more leaks occur isn't a good idea. For starters, one of the bigger costs is scaffolding or hiring of equipment to work at height. If the roof repair is therefore done over stages, the overall cost could be MUCH higher than the current cheaper quote. Also, with every leak is a bill for repair. Is it the insurance that pays this? Again, lots of claims will increase the insurance.

It would be interesting to see if those on the top floor are the ones happy to pay as it's their flats that are potentially suffering water damage. 

It's unfortunately that some residents are not able to pay this amount, but that's what owning a leasehold property entails, so they need to either find the money, re-mortgage, sell and move, or be taken to court for their share. 

Tucosalamanca

I find this thread interesting, as I've recently priced for a very similar block.

The management company have been pushing to have it done in sections.
It's simply not practical. Other than the cost of scaffolding being repeatedly erected (four/five figure sums each time) you can't possibly warranty the works.
You renew one section, but the adjacent section continues to allow water to penetrate. This water tracks under your new section of roof and nobody's happy.

I'm so tired of looking at leasehold roofs where the management companies refuse to spend money, it's endemic.
They go cheap at the point of installation, then spend even less on repairs over the next twenty plus years.
I quote for a roof, they ask for repairs. I say no longer possible because the roof has failed or is of terrible quality (you can't polish a turd).
They find some chancer to do repairs, which don't last and the problems continue. Top floor residents have a miserable time of it.
Five years later when the roof is hanging off, they come back and are horrified that costs have gone up by 30-50% in the meantime. They go cheap again and the cycle continues...

It's ludicrous, the smart management companies have twenty year plans. I survey a number of blocks annually.
We report, carry out cleaning and repairs and give them an estimated cost for refurbishment at today's prices.
They can see what's happening each year and budget to replace every twenty years.
This works well but is certainly a small minority of leaseholds in my experience.
Most seem to fight like rats in a sack, as OP has alluded to. 

das1969

Yes I think the idea of doing the roof in sections is spurious due to obvious extra costs. Thanks to 

Tucosalamanca who has pointed out that repairing in sections can lead to leaks spreading from old to renewed sections anyway. There are some shared walls between sub-blocks, it's entirely possible one sub-block could have its roof renewed and still have water ingress occurring from a leak in the roof on a neighbouring area.

I'm going to suggest to the managing agent that the fees start to include a payment plan for a new future roof in 20-25 years time so this doesn't happen again. The current agent was only appointed four years ago, and the sinking fund was allowed to dwindle away under the previous agent has not been able to be built up again due to inflation etc.

I've already paid for mine, I'm in the lucky position of being able to do so. I'm on the top floor, and there hasn't been any leaks so far. Being on the top floor I'll also get the benefit of much improved roof insulation, so there should be significant savings on energy costs in the future.

Redwood1990

Hi there, really useful thread thanks. What happened in the end? Did the works get completed in one go or phased? It sounds much more sensible to get it done in one go, vs risk of damage to a fixed area and costs going up as others have suggested above. For those who could not contribute, could a payment plan be set up? Majority of freeholders cover the cost and the minority who cannot then pay back the owed amount over x time frame?

A slight variation to the above, can one freeholder trigger a section 20 to all owners or must all freeholders align before a section 20 is issued? It seems that a section 20 is the best way to ensure and secure sink funds for a roof replacement vs a less formal saving period for sink fund. Appreciate views. Thanks