Section 20 of the Landlord and Tenant Act 1985 exists to protect leaseholders from being presented with large bills they never knew were coming. As an RTM director, you are now on the other side of that obligation — and getting the process wrong can cost your building dearly.
What triggers a Section 20 consultation?
The short answer is: any qualifying works or long-term agreement above a certain cost per leaseholder. The long answer involves two separate thresholds, and it is essential to know both.
Qualifying works — any set of works to a building or its common parts: the consultation is triggered when the cost to any one leaseholder exceeds £250.
Long-term agreements — contracts lasting more than twelve months (a maintenance contract, a lift servicing agreement, a grounds care arrangement): the trigger is £100 per leaseholder per year.
These thresholds apply per leaseholder, not to the total contract. A block of twenty flats where the works cost £6,000 in total — £300 per flat — crosses the threshold and triggers the full Section 20 process. Many RTM directors are surprised by how quickly ordinary maintenance spend gets there.
If the consultation is not followed correctly, your RTM company can only recover the statutory cap from each leaseholder — £250 for qualifying works, £100 per year for long-term agreements — regardless of what the contractor actually charged. The excess falls on the RTM company, not the freeholder.
Stage one: notice of intention
Before you approach a single contractor, you must serve a notice of intention on every leaseholder and on any recognised residents' association. This notice must describe the works or agreement you are proposing, say why you intend to carry them out, and invite observations in writing.
Leaseholders then have 30 days to respond. During that window they may also nominate a contractor they would like you to obtain an estimate from. You are obliged to seek an estimate from any nominated contractor — unless they are unable or unwilling to tender, or doing so would be impractical.
Keep a record of every notice served, the method of service, and the date. If a leaseholder later challenges the process, your evidence that notices were properly served is your first line of defence.
Stage two: estimates and leaseholders' nominations
Once the 30-day observation period has closed, you must obtain at least two estimates: one from a nominated contractor (where one was put forward) and at least one from an arm's-length contractor with no connection to the RTM company or its directors.
You then serve a second notice — the notice of estimates — on each leaseholder and on any recognised residents' association. This notice must include a copy of at least two estimates, a summary of the observations received at stage one, your response to those observations, and an invitation to make further observations within another 30 days.
This is the stage where transparency matters most. Leaseholders are not entitled to veto a particular contractor, but they are entitled to understand why one estimate was preferred over another. Documenting your reasoning now saves you from having to reconstruct it later.
Stage three: notice of reasons for the choice
If you intend to award the contract to a contractor who was not nominated by a leaseholder, and whose estimate was not the lowest, you must serve a notice of reasons explaining why. This is the third and final formal step in the process.
A valid reason might be that the lowest bidder lacked adequate insurance, or that the nominated contractor's references were unsatisfactory. What is not a valid reason is simply preferring one contractor without being able to say why.
If the contractor you have chosen was either the one nominated by leaseholders or the one who submitted the lowest estimate, the notice of reasons is not required — though it is good practice to document your decision anyway.
What happens if you skip a step?
Omitting or rushing any of the three stages exposes the RTM company to a Tribunal ruling that it cannot recover costs above the statutory cap. That can mean the building — and its leaseholders — absorbs the shortfall. It also undermines the trust you have worked to build since taking over management.
There is a dispensation process: an application to the First-tier Tribunal asking it to waive the consultation requirement in whole or in part, typically used in genuine emergencies (a roof failure, a fire-safety risk requiring immediate action). Dispensation is not a workaround for a missed deadline; the Tribunal takes seriously whether leaseholders have been prejudiced by the failure to consult.
If you are managing ongoing compliance obligations like this alongside everything else a director must track, the Managing Your RTM Company section of this site explains how RightToManage.ai keeps deadline reminders and compliance prompts in one place, so nothing falls through the cracks. For finding contractors who understand the Section 20 process, our vetted professional partners include managing agents and surveyors experienced in qualifying works.
Section 20 is one of the areas where being an RTM director feels most like being handed a legal obligation with no instruction manual. The process is methodical once you understand it — but the order matters, the deadlines are fixed, and the consequences of getting it wrong are real. If you are earlier in your journey and still working out whether right to manage is right for your building, the How Right to Manage Works guide is the place to start.