Do you need to go through a consultation process with your tenants before you carry out works or enter into contract to provide services at the property?

Landlords or management companies must consult tenants who pay variable service charges in the following circumstances:

  1. When they are proposing to carry out repair, maintenance or improvement works where each tenant is going to have to contribute more than £250;
  2. Where they are proposing to enter into an agreement with an independent organisation (such as a cleaning or gardening company) for a period of more than 12 months where each tenant will have to contribute more than £100 (“a Qualifying Long Term Agreement”). This includes any ongoing agreements that do not have specific termination dates in them; and
  3. Where they are proposing to enter into a Qualifying Long Term Agreement to carry out works to the property and those works result in each tenant being charged more than £250.

In the above circumstances, the landlord or management company must consult with the tenants and any recognised tenant’s association. This involves sending consultation notices to them.

There are three stages in the consultation process that notices need to be served (1) the pre-tender stage (2) the tender stage and (3) in certain cases a notice stating the reasons for awarding the contract.

Failure to comply can have dire consequences for the landlord or management company because they may not be able to recover any more than £250 per tenant for works to the building and £100 per tenant for any Qualifying Long Term Agreement. The result being that the landlord or management company will have to pay the shortfall themselves which depending upon the works or contract can be very expensive.

A very useful tactic for the landlord or management company is to apply to the Tribunal for either confirmation that the sums can be recovered under the service charge prior to entering into the process or for an Order than the consultation requirements be dispensed with.

The purpose of the legislation is to ensure that tenants do not have to pay for more than is reasonable. It is very important that landlords or management companies are aware of the consultation process and ensure that the process is followed.