Long Term Agreements

Since the Commonhold and Leasehold Reform Act 2002 came into effect in October 2003, landlords have been obliged to consult with leaseholders whenever a long term agreement for a service charge element has needed to be renewed.

There are conditions to that requirement:

1. The new agreement must be a long-term agreement – i.e. over one year in
   Length
2. It must be estimated that at least one leaseholder affected by the contract will be expected to be charged a minimum of £100 in any one year of the contract’s life.
3. Contracts of employment for individual staff and for organisations such as the TMO are exempt from consultation

If either of these first two conditions are not met, consultation is not required.

The consultation covers two stages, each allowing a 30 day period in which leaseholders may submit written observations (comments or queries) on the proposed contract and its contents.

The first stage describes the contract and invites leaseholders and Tenants’ Associations to submit contractors for inclusion in the tendering process associated with the contract. If contractors are proposed, one will be chosen to be included on the list of contractors invited to tender for the works. If more than one contractor is proposed, the one proposed by the majority of leaseholders will normally be chosen for the list.

In order to comply with financial regulations and standing orders any proposed contractor will normally be required to be registered with Construction line, the Department of Trade and Industry (DTI) register of pre-qualified construction contractors and consultants. The Landlord uses Constructionline for these types of projects because it streamlines procedures by supplying the construction industry with a single national qualifying scheme.

Alternatively, if the Contractor is not Constructionline registered, any proposed contractor will be required to provide, as a minimum depending on the size and complexity of the scheme, the following documents for vetting:

1. Evidence of Public Liability to the value of £5,000,000 and Employer’s Liability of £10,000,000.
2. A copy of the Contractor’s latest annual report, audited accounts and balance sheet for the last three years.
3. VAT registration number (if applicable).

The Contractor will also be asked to provide:

1. Evidence of experience of working in occupied premises.
2. Details of contracts of a similar nature over the past three years where the contract sum was in excess of certain limits depending on the size of the contract in question.
3. Contact details for three references.
4. Detail’s of the company’s health and safety policy.
5. Details of out of hours/emergency maintenance services and contact numbers.

Prior to inclusion on the tender list, our selection procedure currently includes an interview before a panel of officers and resident representatives, where the contractor is given the opportunity to demonstrate his experience and ability to manage the scheme on site.

However, with long-term agreements, if the contract is to be advertised via the Official Journal of the European Communities (OJEC) then the landlord is not obliged to invite contractors from leaseholders and Tenants’ Associations. If this is the case with any contact being consulted with you, the S20 Notice will inform you so.

The second stage happens once the contract has been tendered to a list of contractors, and informs leaseholders and Tenants’ Associations affected by the works of the prices that have been tendered, and recommends a contractor for the list to be appointed to the contract. That appointment cannot be made though, until this consultation stage has been completed and the TMO Board have approved the contract and contractor.

This stage also provides leaseholders with the share of the prices tendered that they will be expected to pay, should the contract be awarded to the recommended contractor, plus details of when invoices will be sent to them for that payment.

The Notice should include a brief description of the works, which the TMO often expands on. It should list the contractors who have been asked to competitively tender for the works, together with the prices they have tendered, and should indicate which one it is proposed to accept for the contract. This does not mean that the contract will be (or has been) accepted at that stage.

The Notice should also explain to each individual leaseholder what the share of costs relating to that individual property amounts to, and when it will be invoiced to the leaseholders. Long-term agreements are usually used to provide services which are included in the annual service charge and so will be invoiced to leaseholders as part of their normal service charges. Some of these are known as Schedule Of Rates repairs and will be covered by the repair elements of the service charge.

A copy of each “Form Of Tender” received as part of the competitive tendering process, or a suitable estimate/invoice as a replacement, is also attached to the Notice. This gives evidence that the costs have been tendered properly. The legislation states that at least two estimates are obtained for the works, except in exceptional circumstances, but the TMO has separate limits and procedures that ensure that more are received (or at least invited) for more expensive contracts.

Both stages of this statutory consultation process are carried out under the Landlord and Tenant Act 1985 (as amended) by way of a Section 20 Notice (S20), which for long term agreements will normally be delivered to leaseholders’ flats by first class, post or to their contact addresses if they do not reside at their leasehold flats and have asked us to correspond with them at alternative addresses.

All observations received will be reported to the TMO Board together with any observations received, and replies will be sent to those observations within 21 days of the TMO Board decision. Confirmation of receipt of each letter of observation will be sent within 21 days of receipt, assuming that the observations have been sent to the staff member indicated in the Notices.