If you are a Residents Management Company, a Managing Agent or even a Landlord, then statistically, service charge arrears are the main causes of disputes between freeholders and leaseholders.
A service charge is the cost of providing services for a property which usually contains multiple dwellings.
In the vast number of cases these charges are 'fair and reasonable' and expected by the leaseholder and usually include some or all of the following:
The leaseholder is required by the terms of the lease to pay these charges and any non-payment will result in a breach of that lease.
In law, there is a lot of protection for the leaseholder over the fairness and reasonableness of these charges, as well as strict procedure which need to be followed in levying them.
All this being said, it is a fact that service charge demands are not paid and it is imperative that these are recovered in a timely manner to ensure cash flow remains healthy and for the benefit of the other leaseholders who have paid.
A Service Charge Demand must comply strictly with the law. The demand must be:
* Please note that it is very important that the address supplied is the landlords and not the managing agents. If the landlord lives outside of the country, then an additional address within England and Wales, must also be included.
Leaseholders must be consulted over charges that are over:
A Service Charge Demand must be made within 18 months of the incurred expense. Within that period, the leaseholder must either:
If a service charge is unpaid, modern leases typically allow for collection to be undertaken by third parties, whose fees would then be incurred by the leaseholder. It is very important however, that third party fees are seen to be fair and reasonable.
It is also very important that there is a zero tolerance to late payment of service charges, and that it is explained to all leaseholders, in very clear terms, why payment is so crucial to the running of their property, its upkeep and with that the individual market value of their home.
Where individual properties are subject to mortgages, the leaseholder will not only be breaching the terms of their lease but also the mortgage companies requirements. Mortgage companies can be made aware of the debt, as they will be keen to protect their investment to avoid any possible forfeiture of the lease and the loss of their security. They may even offer to add the debt, including costs, to their clients' mortgage with or without a leaseholder’s consent. Predominately, they will usually only agree to this once legal action has been taken.
Prior to any legal action, a procedure of fair and reasonable reminders should be issued to the leaseholder. The letters and emails provided to the defaulting leaseholder must be clear and concise, refer the leaseholder to the availability of legal advice, provide a reasonable time for the leaseholder to respond and state what will happen if the date passes and the debt remains unpaid.
If further information is requested from the leaseholder, sufficient time should be allowed to provide the information.
Legal action is usually sought by seeking a judgment by the court which may award the monies owed plus fixed costs (for claims under £5,000) and late payment interest to be paid by the defaulting leaseholder.
If after all this, payment is not forthcoming, then a number of enforcement measures are available:
Most claims under £5000 are dealt with as small claims in a county court.
A final and somewhat extreme option is legal action to forfeit the lease and repossess the property.
So if you are a Residents Management Company, a Managing Agent or even a Landlord, Service Charge Demand arrears should not be a headache. If the lease allows, all costs are recoverable and employing a third party with expertise and a proven track record in this area makes good financial sense.
Listed below are some of the reasons that Residents Management Companies, Managing Agents and Landlords use third parties to collect their Service Charge arrears:
Town and Country Legal Services LLP has a proven track record of successfully collecting Service Charge arrears for a number of Management Companies.
Town and Country Legal Services LLP has a proven track record of successfully collecting Service Charge arrears for a number of Management Companies. If you would like any further information on any of the points above or if you have Service Charge arrears you have need of collecting, then please do not hesitate to contact us on 01883 212121 or firstname.lastname@example.org