The Commonhold and Leasehold Reform Act 2002 has inserted new service charge consultation procedures into LTA 1985.

Consultation is required in respect of ‘qualifying works’ (ie ‘works on a building or any other premises’), or ‘a qualifying long-term agreement’ (ie an agreement that will last more than 12 months). If the works will require a contribution from any one T which exceeds the relevant threshold (£250 for qualifying works; £100 for qualifying long-term agreements) then the consultation provisions apply. There are three separate procedures:

qualifying works: notice of intention must be served by L on the Ts and any recognised tenants associations. L must invite observations and nominations of people from whom estimates can be sought (Ts have 30 days to respond). L must then obtain a minimum of two estimates, including one from the tenants association and one from the Ts. At least one estimate must be from a contractor wholly unconnected with L. The next stage is for L to serve on Ts (and the residents association) a statement (the ‘paragraph B statement’) giving details of at least two of the estimates obtained, and summarising the observations received and L’s response. The Ts then have another 30 days in which to make observations. The final stage is for L to chose an estimate. If this is not one of the T’s nominees, and is not the cheapest quote, then L must give a statement of reasons within 21 days of entering into the contract;

qualifying long-term agreements: the procedure is very similar to that for qualifying works, but instead of a ‘paragraph B statement’ L must serve at least two ‘proposals’ (at least one of which must relate to a contractor wholly unconnected with L, and one of which must be based on an estimate from a nominated person);

qualifying works carried out under long-term agreements: if a long-term agreement has been entered into, there is a limited consultation procedure for works carried out under the terms of the agreement. L must serve a notice of intention on the Ts and the residents association, describing the proposed works and inviting observations. But L does not have to invite nominations for contractors (since a contract has already been entered into). The Ts have 30 days to respond; within 21 days of receiving any observation, L must give a response directly to the T concerned, but is otherwise free to carry out the works.

Needless to say, these requirements are highly formalistic and it is easy for L to make a mistake. The rules are complex and need to be followed carefully. Failure to comply with all requirements will usually mean that recoverable costs will be capped at £250 per T for works, and £100 per T for long-term agreements. If consultation is not possible, then it may be worth applying to the LVT for ‘dispensation’ before carrying out the works. Ls should only proceed with qualifying works without prior consultation or dispensation if it is an absolute emergency. Then, any follow-up works which are necessary should be consulted over. For an excellent introduction see [2009] 235 PLJ 2.