Section 20 explained: the major-works consultation every director must get right

If you are a director of an RTM company or RMC, Section 20 is the process you will encounter more than almost any other. Get it right and it is a structured, transparent way to carry out major works with leaseholder buy-in. Get it wrong and you may find you can only recover £250 per leaseholder from the service charge, no matter what the works actually cost.

That is not a worst-case scenario for extreme negligence — it is the statutory default for any material procedural failure. A roof replacement that costs say £150,000 across a 20-flat block works out at £7,500 per flat. If Section 20 is not followed correctly, each leaseholder's legally recoverable contribution drops to £250. The arithmetic is stark.

This article explains when Section 20 applies, what the three-stage process requires, and the practical steps that volunteer directors can take to get it right every time.

When Section 20 applies

Section 20 of the Landlord and Tenant Act 1985 (as amended) imposes a consultation requirement in two situations:

1. Qualifying works: works carried out on a building that will cost any one leaseholder more than £250 in service charge contributions. This is not £250 across the whole building — it is £250 for the leaseholder who will pay the most. If your block has 20 flats and a repair will cost £6,000 in total, but one leaseholder's share works out at £320, Section 20 applies to the whole project. In practice, the threshold catches almost any meaningful maintenance or repair project.

2. Qualifying long-term agreements: contracts for goods or services that last more than 12 months and will cost any one leaseholder more than £100 per year. This category catches things like multi-year cleaning contracts, lift maintenance agreements, and managed-service arrangements for communal utilities. If you are entering a three-year grounds maintenance contract that will cost individual leaseholders more than £100 per year through the service charge, you must follow the Section 20 procedure for long-term agreements.

The thresholds matter because they determine whether you need to consult at all. Keep them in mind when budgeting. If a planned project is close to the threshold, it is generally safer to assume Section 20 applies and follow the process — the cost of consultation is low compared to the cost of getting it wrong.

The penalty for non-compliance

If you fail to comply with the Section 20 consultation requirements and do not obtain dispensation from the tribunal, service charge recovery for each leaseholder is capped at:

• £250 for qualifying works
• £100 per year for a qualifying long-term agreement

Leaseholders can apply to the First-tier Tribunal (Property Chamber) to challenge charges that exceed these caps. The burden falls on the landlord or RTM company to demonstrate that consultation was properly carried out.

The one route out of this is tribunal dispensation — the tribunal can waive the consultation requirements where it is satisfied that doing so is reasonable. This is typically granted where the consultation was defective in a minor technical respect but no leaseholder was prejudiced in practice (for instance, where works were genuinely urgent). Dispensation is not a reliable safety net; it is not guaranteed, and applying for it adds time and cost to the process.

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The three-stage process for qualifying works

The process for consulting on major works is divided into three stages, each with specific content requirements and minimum notice periods.

Stage 1: Notice of Intention

The first stage puts leaseholders on notice that works are being contemplated and invites their input before any contractor is engaged.

The Notice of Intention must:

• Describe the proposed works — with enough detail that leaseholders can understand what is being considered. It does not need to be a full specification at this stage, but "general repairs and maintenance" is too vague. "External redecoration including render repairs and replacement of all window sills on the east elevation" is the right level of specificity.
• Invite written observations from leaseholders, with a minimum period of 30 days for responses. Observations must be submitted to the address stated in the notice.
• Invite leaseholders to nominate a contractor they would like to be considered. Any nomination received must be included in the estimates obtained at Stage 2 — you are not obliged to use a nominated contractor, but you are obliged to obtain a quote from them.

At this stage, no estimate has been obtained and no contractor has been selected. The purpose is genuinely consultative — to give leaseholders the opportunity to shape the specification, raise concerns, and suggest contractors before money is committed.

You must have regard to any observations received. "Having regard" does not mean agreeing with every comment, but it does mean reading them, considering them, and being able to show (if challenged) that you did so.

Stage 2: Notice of Estimates

Once the 30-day observation period has closed, you move on to obtaining estimates and notifying leaseholders of the results.

The requirements here are:

• At least two estimates must be obtained. One of those estimates must be from a contractor who is wholly unconnected with the landlord or RTM company. This is the independence requirement — it exists to prevent sweetheart arrangements with contractors who are connected to the building's management.
• If a leaseholder nominated a contractor in Stage 1, you must also obtain an estimate from them (subject to that contractor being able and willing to quote).
• The Notice of Estimates must be sent to all leaseholders and must include the estimates themselves (or a notice stating where they may be inspected), together with a further invitation to make written observations within at least 30 days.

This is the stage at which leaseholders can compare prices and raise concerns about specific contractors or specific estimates. Again, you must have regard to any observations received.

Stage 3: Notice of Award (and reasons where required)

Once the 30-day Stage 2 period has closed and you are ready to award the contract, there is a final notification requirement — but it is conditional.

If you award the contract to the lowest estimate or to a contractor nominated by a leaseholder, no further notice is technically required. The process is complete.

If you award the contract to any other contractor — for instance, because you are not satisfied with the lowest-bidder's track record, or because you have good reason to prefer a different approach — you must, within 21 days of entering the contract, write to leaseholders explaining why you did not choose the lowest or nominated option.

This explanation must be genuine and substantive. "We felt they were the best option" is not sufficient. A proper reason might refer to the contractor's relevant experience, references from comparable projects, concerns about the capacity of the lower bidder to complete on schedule, or similar.

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Proposed changes to the thresholds

A government consultation published on 4 July 2025 (which closed on 26 September 2025) proposed raising the Section 20 thresholds:

• Qualifying works threshold: from £250 to £600 per leaseholder
• Long-term agreement threshold: from £100 to £300 per leaseholder per year

The rationale is that the existing thresholds have not kept pace with inflation and now capture relatively minor works, adding administrative burden to RMCs and RTM companies for projects that leaseholders may not feel warrant full consultation.

These are proposals only. They are not yet law, and the government is still analysing responses to the consultation. Directors should continue to comply with the existing £250/£100 thresholds until any change is formally enacted and in force. Do not act on the proposed figures.

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Practical guidance for volunteer directors

Section 20 trips up even experienced managers. Here are the practical habits that reduce the risk of getting it wrong.

Keep a consultation log. For every qualifying works project, maintain a simple record: when each stage notice was issued, to whom it was sent, the date the 30-day period expired, what observations were received, how they were considered, which estimates were obtained, and why a particular contractor was chosen. If you are ever challenged, this log is your evidence.

Send notices to the correct addresses. Service charge consultation notices must be served on leaseholders at the address stated in their lease or, if different, at their last known address. If a leaseholder's flat is let out and you know their correspondence address is elsewhere, use it. Failed service does not excuse non-compliance.

Do not split projects to fall below the threshold. Splitting a single project into smaller tranches to avoid the £250 threshold is not a legitimate approach and will not protect you if challenged. The question is whether the works are part of a single scheme — not whether any individual invoice is below the limit.

Build time into your programme. Each stage requires a minimum 30-day observation period. Between Stage 1 and Stage 2 you also need time to obtain estimates. A realistic timeline from beginning Stage 1 to appointing a contractor runs to at least 70–90 days in a straightforward case. Projects that need to start urgently can be a problem — seek advice if works cannot wait, since the dispensation route exists but is not guaranteed.

Urgent works. Genuinely urgent works — emergency structural repairs, an immediate health and safety risk — may need to proceed before consultation is possible. In those cases, document the urgency carefully and apply to the tribunal for dispensation promptly afterwards. Tribunals have generally been sympathetic where there was a real emergency, but you need to make the application rather than hoping the issue never surfaces.

Who holds the money? Service charge contributions collected for major works are held on a statutory trust for the leaseholders under Section 42 of the Landlord and Tenant Act 1987. The funds must sit in a designated client account, separate from any other money. Whether your block uses Reeve OS or any other system, the money is always the leaseholders' — held in the block's own account, not co-mingled with a managing agent's funds or any platform's balance.

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Reeve OS includes a Section 20 consultation runner that drafts each stage notice for director review and keeps a timestamped log of the process. As with all statutory notices in Reeve, it is draft-for-approval — nothing is filed without the director's sign-off, and the system does not represent you at tribunal.

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FAQ

Does Section 20 apply to routine annual maintenance, like cleaning or gardening?

If the contract runs for more than 12 months and will cost any one leaseholder more than £100 per year, yes — the long-term agreement limb applies. Many blocks renew contracts annually specifically to stay within the threshold, though this can disrupt relationships with reliable contractors. If you plan to enter a multi-year agreement, factor in the consultation timeline.

We got the Stage 1 notice slightly wrong — we forgot to mention contractor nominations. What should we do?

Do not proceed as if nothing happened. The safest course is to reissue the Stage 1 notice correctly, restart the 30-day period, and document why. If works are already under way because of the error, take legal advice and consider an application for tribunal dispensation.

Can leaseholders object to the works altogether during the Section 20 process?

Observations must be considered, but leaseholders cannot block necessary works simply by objecting. Where works are required under the lease or for statutory compliance, the RTM company or RMC has a duty to carry them out. However, if leaseholders make substantive points about the scope, specification, or cost, those should be genuinely considered — and if they reveal that the proposed works are unreasonable or unnecessary, those points deserve a proper response.

What if we get dispensation — does that mean we can recover the full cost?

If the tribunal grants dispensation from the consultation requirements, it can permit recovery of the full cost. Dispensation is not automatic: the tribunal will consider whether leaseholders were prejudiced by the failure to consult and whether it is just to dispense with the requirement in the circumstances.

Are the £250/£600 proposed thresholds now in force?

No. The £600/£300 thresholds were proposals in the government's July 2025 consultation. They are not yet law. The current operative thresholds remain £250 for qualifying works and £100 per year for long-term agreements.