How to Read a Section 20 Statement of Estimates

The short answer

Under the ordinary Section 20 procedure, a statement of estimates normally follows the notice of intention. It sets out at least two estimates for the works, at least one from a contractor wholly unconnected with the landlord, summarises observations already made and the landlord’s responses, and says where all the estimates can be inspected. It invites written observations within 30 days beginning with the date of the notice. It isn’t a bill.

Where it fits

For privately arranged qualifying works where public notice isn’t required, the Service Charges (Consultation Requirements) (England) Regulations 2003 normally set out three stages: a notice of intention, then a statement of estimates, then (in some cases) a notice of reasons. You can see a fictional version of the first two in what a Section 20 notice looks like.

Other procedures look different. Under a qualifying long-term agreement the landlord normally sends a notice of proposals instead, and where public notice of the contract is required (often for councils and some housing associations) both the documents and leaseholders’ nomination rights change. If your document doesn’t look like the one below, that may be why.

What it normally contains

Under the ordinary procedure, Schedule 4 Part 2 of the 2003 Regulations normally requires:

• At least two estimates, each showing the estimated cost of the works. At least one must come from a person wholly unconnected with the landlord.
• A nominee’s estimate, where a leaseholder or recognised tenants’ association nominated a contractor during the first period and the landlord obtained an estimate from them. Where several nominations are made, the Regulations set out which nominees the landlord should approach.
• A summary of observations made on the notice of intention, with the landlord’s responses.
• Where and when all the estimates can be inspected, not only the ones set out in the statement.
• An invitation to send written observations on the estimates, with the address to send them to and the date the 30-day period ends.

A fictional example

Questions worth asking

None of these mean something is wrong. They are the kind of questions leaseholders often put in writing during the observation period.

• Do the estimates cover the same work? In the example, one includes scaffolding and one prices it separately, so the headline figures may not compare directly. You can ask for a like-for-like breakdown.
• What will be added on top? Fees for a surveyor, contract administrator or managing agent, contingencies and provisional sums can sit outside the estimate figures. Worth checking which apply and how they’re worked out.
• How will your own share be worked out? The estimates are usually for the whole building. Your lease normally sets how costs are divided, so you can ask how your contribution has been calculated.
• Was a nominee’s estimate obtained? If you or a neighbour nominated a contractor, worth checking their estimate appears or is explained.
• Is any contractor connected with the landlord? The Regulations treat some relationships as a connection, such as a shared director or manager. You can ask.
• Can you see the full estimates? The statement normally says where all the estimates can be inspected. Seeing the full documents, rather than a summary, is often the most useful step.
• Have earlier observations been answered? Worth checking your own observation on the notice of intention is summarised and responded to.

What normally happens next

The landlord must have regard to observations on the estimates made within the period. If it then awards the contract to someone who is neither a nominee nor the lowest estimate, it normally has to send a notice of reasons within 21 days of entering into the contract, explaining why and responding to the observations.

A statement of estimates isn’t a demand for payment. Any demand comes separately, and raising questions doesn’t by itself pause a payment deadline on a demand, so get advice before withholding anything. Free, independent advice is available from LEASE.

Getting your observations in on time

The end date printed on the statement is the one that counts. Our deadline calculator gives a cross-check and can add calendar reminders, our observation letter guide covers how to write one, and a Defence Pack can organise the estimates, your notice and your other documents into a cost table and draft letter.