Major Works Notices: The Hidden Bill on Auction Flats

The bill that doesn't show up in the guide price

A leasehold flat's guide price tells you nothing about what the building needs doing to it. If the freeholder or managing agent has served a Section 20 notice for major works — a new roof, lift replacement, external redecoration, fire safety remediation — that cost is usually split between every flat in the block, and it follows the lease, not the seller. Buy the flat, and in most cases you buy the liability.

This is a bigger risk at auction than on the open market, because auction completion is fast (typically 20 working days after exchange) and there's no lengthy conveyancing window to chase the freeholder for clarity. By the time you've read the legal pack properly, you may already be the highest bidder.

How Section 20 consultation actually works

Under the Landlord and Tenant Act 1985, a freeholder must consult leaseholders before carrying out major works above set thresholds (roughly £250 per leaseholder, or £100 per year for a long-term agreement). The notice sets out the proposed works, estimated cost and the leaseholder's right to nominate contractors. It doesn't need to be fully costed or started for the liability to exist — a notice of intention alone tells you a bill is coming.

The legal pack should include:

Any Section 20 notices served in the last three years
The management company's accounts and service charge budget
A list of outstanding or anticipated major works
The current service charge arrears position for the specific flat

If these documents are missing, that's not proof there's nothing to find — it usually means nobody has asked the managing agent yet. Our legal pack guide covers how to request missing enquiries before the auction date, which is the only reliable way to close this gap in the time you have.

Worked example

Say you're looking at a two-bed flat in a 1960s block of 12 units, guide price £82,000, no obvious red flags in the photos.

Dig into the legal pack and you find a Section 20 notice from eight months earlier: full re-roofing and parapet repairs, contractor quote £31,200, split evenly across 12 flats.

Your share: £31,200 ÷ 12 = £2,600
Existing service charge arrears on this specific flat: £1,150 (the current owner stopped paying once they decided to sell)
Section 20 doesn't cap the final cost — if the contractor finds rot once scaffolding goes up, the estimate can rise. Budget a 15–20% contingency: roughly £400–£520 extra

Total realistic exposure beyond the hammer price: around £4,150–£4,270, on top of the buyer's premium and legal fees. On an £82,000 purchase, that's a 5% addition to your real cost — easily enough to turn a decent-looking yield into a mediocre one once you run it through your numbers.

Who actually pays — buyer or seller?

This is where auction catalogues get vague, and it's worth getting a straight answer before bidding, not after:

Service charge arrears are a debt attached to the lease. Unless the special conditions of sale say otherwise, the buyer inherits them and chases the seller separately (often not worth the hassle for a few hundred pounds).
Major works costs already demanded (an actual invoice, not just a notice) sit with whoever owns the flat when the final account is issued — that could be you, even if the works started under the previous owner.
Future major works flagged but not yet costed are pure risk you're pricing in blind. Treat the contractor's estimate as a floor, not a ceiling.

Some auctioneers' special conditions state the seller will clear arrears up to completion, with the buyer taking on anything after. Read this clause specifically — don't assume it mirrors a normal residential sale, because auction contracts frequently shift more onto the buyer than you'd expect.

Protecting yourself before you bid

Call the managing agent directly before auction day and ask for a written statement of account and any Section 20 history — most will respond within 48 hours if you say you're a prospective buyer.
Check the reserve fund balance. A block with a healthy sinking fund absorbs major works costs more gracefully than one running on empty, even with the same bill.
Price the worst case, not the guide price. If a notice exists but the final figure isn't confirmed, model the higher end of the contractor's range.
Factor it into your bidding ceiling, the same way you'd budget refurb costs — see our auction finance guide for how lenders and bridging providers treat known service charge liabilities when assessing a deal.

A flat with a known £2,600 major works share isn't automatically a bad buy — it might already be reflected in a lower guide price. The mistake is bidding without knowing the number exists. Check current leasehold flats with legal packs already flagged on our deals page before they go under the hammer.